<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1997
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-24358
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ML BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 23-2752439
- ------------ -----------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
TWO ALDWYN CENTER
VILLANOVA, PENNSYLVANIA 19085
- ----------------------- -----
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (610) 526-6460
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based on the closing prices of the registrant's common stock as
quoted on the National Association of Securities Dealers Automated Quotation
System as of June 20, 1997 was $195.7 million. For purposes of this
calculation only, affiliates are deemed to be directors, executive officers and
certain beneficial owners.
As of June 20, 1997, there were 14,547,600 shares issued and 11,276,054 shares
outstanding of the registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<S> <C>
Documents Where Incorporated
- ----------------------------------------- ----------------------------------------
1) 1997 Annual Report Part II - Items 5, 6, 7 and 8;
Part IV - Item 14
2) Proxy Statement for 1997 Annual Meeting of Stockholders Part III - Items 10, 11, 12 and 13
</TABLE>
<PAGE> 2
ML BANCORP, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
------
Item 1 Business.............................................................................1
Item 2 Properties..........................................................................36
Item 3 Legal Proceedings...................................................................38
Item 4 Submission of Matters To A Vote of Security Holders.................................38
PART II
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Item 5 Market for Registrant's Common
Equity and Related Stockholder Matters..............................................38
Item 6 Selected Financial Data.............................................................38
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................................39
Item 8 Financial Statements & Supplementary Data...........................................39
Item 9 Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure..............................................................39
PART III
--------
Item 10 Directors and Executive Officers of the Registrant..................................39
Item 11 Executive Compensation..............................................................39
Item 12 Security Ownership of Certain Beneficial Owners and Management......................39
Item 13 Certain Relationships and Related Transactions......................................39
PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................40
</TABLE>
<PAGE> 3
ITEM 1: BUSINESS
ML BANCORP, INC.
ML Bancorp, Inc. (the "Company" or "Bancorp") is a Pennsylvania corporation
organized in March 1994 by Main Line Bank (the "Bank") for the purpose of
acquiring all of the capital stock of the Bank issued in the Bank's mutual to
stock conversion which occurred on August 11, 1994. At March 31, 1997, the
only significant asset of the Company is the capital stock of the Bank. At
March 31, 1997, Bancorp had $2.0 billion of total assets, $873.4 million of
total customer accounts and $135.7 million of equity.
MAIN LINE BANK
The Bank is a federally-chartered stock savings bank conducting business from
its executive offices located in Villanova, Pennsylvania, 24 full service
offices located in Bucks, Chester, Delaware and Montgomery counties,
Pennsylvania and ten mortgage loan production offices which are located in
Delaware, Florida, New Jersey and Pennsylvania. The Bank's market area, which
includes the affluent western suburbs of Philadelphia, has experienced
reasonable growth in total population and employment in recent years. The
Bank's customer accounts are insured by the Savings Association Insurance Fund
("SAIF"), which is administered by the Federal Deposit Insurance Corporation
("FDIC"), to the maximum extent permitted by law. The Bank is endeavoring to
become a full service community bank, and offers a wide variety of savings
products, real estate loans secured by 1-4 family residential properties,
residential construction loans and consumer and small business commercial
loans.
On April 1, 1996, the Company completed its acquisition of Philadelphia
Mortgage Corporation ("PMC"), a privately-held mortgage banking company.
On February 4, 1997, the Company entered into a definitive agreement to acquire
Penncore Financial Services Corporation ("Penncore") the holding company for
Commonwealth State Bank ("Commonwealth"). Commonwealth is a $138.0 million,
state-chartered bank with two branches in Newtown and Yardley, Bucks County,
Pennsylvania. The transaction, which has a total value of $14.1 million, will
be accounted for as a purchase and is subject to regulatory and Penncore
shareholder approvals.
LENDING ACTIVITIES
GENERAL. The Company's lending operations are organized into four areas:
mortgage banking, real estate financing, consumer lending and commercial
business lending.
The Company's mortgage banking operation originates single-family residential
loans primarily for sale into the secondary market and to a limited degree, for
portfolio retention. The bulk of such loans are packaged and sold to either
the Federal Home Loan Mortgage Corporation ("FHLMC") or the Federal National
Mortgage Association ("FNMA"). A portion of such loans are sold pursuant to
commitments
1
<PAGE> 4
to purchase obtained from private investors concurrent with the origination of
the loans. During the fiscal years ended March 31, 1997 and 1996, the Company
originated $471.1 million and $161.6 million and sold $412.1 million and $134.7
million, respectively, of first mortgage loans. In addition, as of March 31,
1997, the Company services $4.4 billion of loans for others, including $3.6
billion of loans as to which it has purchased mortgage servicing rights
("PMSRs"). See "- Mortgage Banking Activities."
Real estate financing consists of construction lending on residential and
commercial properties and commercial and multi-family real estate lending. As
of March 31, 1997, commercial/multi-family real estate and total construction
loans amounted to $272.0 million or 33.6% of the total loan portfolio, an
increase of 10.6% from March 31, 1996.
The Company's involvement in consumer lending has continued to increase as a
result of the Company's emphasis on expanding the retail franchise (number of
business centers). Consumer loans, which consist primarily of home equity
loans, home equity lines of credit and lines of credit amounted to $142.7
million or 17.6% of the total loan portfolio at March 31, 1997, an 29.4%
increase from March 31, 1996. The Company has also selectively entered the
non-conforming as well as B & C credit consumer markets which only represents
an insignificant portion of the total consumer loan portfolio. The development
and expansion of a small business lending program was instituted in fiscal 1996
and this line of business has received greater strategic emphasis on fiscal
1997. Small businesses will continue to be an important part of the Bank's
growth strategy for the foreseeable future.
In conjunction with the determination to diversify its loan portfolio and
develop banking relationships with small and medium-sized businesses in the
greater Philadelphia metropolitan area, the Company offers commercial business
loans, including lines and letters of credit, equipment loans and term loans.
Such loans comprised $84.0 million or 10.4% of the total loan portfolio at
March 31, 1997, more than double that of the March 31, 1995 portfolio. The
Company expects to continue significant expansion and diversification of this
loan portfolio in fiscal 1998 and future years. The commercial business
strategy is to provide credit and non-credit services to entities primarily
within the Delaware Valley areas (PMSA). In fiscal 1997 the Credit Policy
department was expanded to manage the loan risk analysis activities and to
provide ongoing credit policy risk management strategies to all the Bank's
credit lines of business. The asset workout function of the Company continues
under the management of the Company's Chief Credit Policy Officer.
The maximum amount of any loan(s) to one borrower cannot exceed the lesser of
$19.6 million or 100% of the Company's regulatory imposed loans-to-one borrower
limitation as of March 31, 1997. As of March 31, 1997, the largest
loan-to-one-borrower totaled $10.2 million and consisted of one commercial
construction loan. These loans are current as to payments of principal and
interest and are performing according to the terms of the loan documents as of
March 31, 1997.
The Company's primary market area consists of the greater Delaware Valley area
(PMSA) for its retail and commercial business product lines. However, consumer
home equity loans/lines can be granted outside the Company's primary market
area consistent with the 1-4 family first mortgage line of business. The
Company's mortgage banking and commercial real estate lines of business lend to
2
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borrowers located outside of this area, but generally within approximately 150
miles of the Company's headquarters. As a strategic initiative the Company has
also extended its mortgage banking activities to Southwestern Florida by
establishing an office in Naples.
3
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LOAN PORTFOLIO COMPOSITION. The following table sets forth the composition of
the Company's loan portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
March 31,
----------------------------------------------------------------------
1997 1996 1995
----------------------- --------------------- ----------------------
Amount % Amount % Amount %
------ - ------ - ------ -
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family $310,456 38.37 % $344,713 44.74 % $326,029 53.59 %
Multi-family 12,411 1.53 11,348 1.47 10,812 1.78
Commercial 130,017 16.07 109,135 14.17 69,779 11.47
Construction and land:
Residential 90,618 11.20 110,693 14.37 59,112 9.72
Commercial 38,913 4.81 14,625 1.90 15,891 2.61
--------- ------- ---------- ------- --------- --------
Total real estate loans 582,415 71.98 590,514 76.65 481,623 79.17
--------- ------- ---------- ------- --------- --------
Other Loans:
Consumer:
Home equity loans and lines of credit 131,699 16.28 92,139 11.96 76,393 12.56
Other 10,990 1.36 18,115 2.35 16,971 2.79
Commercial loans 84,034 10.38 69,647 9.04 33,328 5.48
--------- ------- ---------- ------- --------- --------
Total other loans 226,723 28.02 179,901 23.35 126,692 20.83
--------- ------- ---------- ------- --------- --------
Total loans receivable $809,138 100.00 % $770,415 100.00 % $608,315 100.00 %
--------- ======= ---------- ======= --------- ========
Less:
Loans in process (construction and land) 59,916 61,389 61,389
Deferred loan origination fees and discounts 3,954 4,111 3,578
Allowance for loan losses 14,733 13,124 9,111
--------- ---------- ---------
78,603 78,624 74,078
--------- ---------- ---------
Total loans receivable, net $730,535 $691,791 $534,237
========= ========== =========
<CAPTION>
March 31,
------------------------------------------------
1994 1993
------------------------ ----------------------
Amount % Amount %
------ - ------ -
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate loans:
Single-family $106,350 36.53 % $136,630 44.36 %
Multi-family 10,297 3.54 14,871 4.83
Commercial 47,671 16.37 35,381 11.49
Construction and land:
Residential 33,794 11.61 27,605 8.96
Commercial 2,018 0.69 1,540 0.50
--------- ------- --------- --------
Total real estate loans 200,130 68.74 216,027 70.14
--------- ------- --------- --------
Other Loans:
Consumer:
Home equity loans and lines of credit 64,417 22.12 66,489 21.59
Other 18,375 6.31 18,383 5.96
Commercial loans 8,238 2.83 7,114 2.31
--------- ------- --------- --------
Total other loans 91,030 31.26 91,986 29.86
--------- ------- --------- --------
Total loans receivable $291,160 100.00 % $308,013 100.00 %
--------- ======= --------- ========
Less:
Loans in process (construction and land) 45,613 11,229
Deferred loan origination fees and discounts 3,578 2,473
Allowance for loan losses 9,111 7,488
--------- ---------
58,302 21,190
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Total loans receivable, net $232,858 $286,823
========= =========
</TABLE>
4
<PAGE> 7
CONTRACTUAL MATURITIES. The following table sets forth the scheduled
contractual maturities of the Company's construction and commercial loans at
March 31, 1997. Demand loans, loans having no stated schedule of repayments
and no stated maturity are reported as due in one year or less. The amounts
shown for each period do not take into account loan prepayments and normal
amortization of the Company's loan portfolio held to maturity.
<TABLE>
<CAPTION>
Real Estate Loans
------------------------------------------------------------------------
Single- Multi-
family family Commercial Construction Total
------ ------ ---------- ------------ -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Amounts due in:
One year or less $82 $12 $965 $89,503 $90,562
After one year through five years 991 733 3,609 40,028 $45,361
After five years 309,383 11,666 125,443 - 446,492
-------- ------- -------- --------- --------
Total(1) $310,456 $12,411 $130,017 $129,531 $582,415
======== ======= ======== ========= ========
Interest rate terms on amounts due after one year:
Fixed 109,113
Adjustable 382,752
--------
$491,865
========
<CAPTION>
Consumer Commercial
Loans Loans Total
----- ----- -----
(In Thousands)
<S> <C> <C> <C>
Amounts due in:
One year or less $53,275 $25,878 $169,715
After one year through five years 24,546 19,258 89,165
After five years 64,868 38,898 550,258
-------- ------- --------
Total(1) $142,689 $84,034 $809,138
======== ======= ========
Interest rate terms on amounts due after one year:
Fixed 89,414 36,978 235,505
Adjustable - 21,178 403,930
-------- ------- --------
$ 89,414 $58,156 $639,435
======== ======= ========
</TABLE>
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(1) Does not include adjustments relating to loans in process, allowance for
loan losses and deferred fee income.
Scheduled contractual repayment of loans does not reflect the expected term of
the Company's loan portfolio. The expected average life of loans is
substantially less than their contractual terms because of prepayments and
due-on-sale clauses. The average life of mortgage loans tends to increase when
current mortgage loan rates are higher than rates on existing mortgage loans
and, conversely, decrease when rates on existing mortgage loans are lower than
current mortgage loan rates (due to refinancings of adjustable-rate and
fixed-rate loans at lower rates). Under the latter circumstance, the weighted
average yield on loans decreases as higher-yielding loans are repaid or
refinanced at lower rates.
5
<PAGE> 8
The Company also occasionally purchases whole loans and participation interests
therein. During the past few years, the purchases involved the acquisition of
residential whole loans. In addition, the Bank is willing to entertain
participation from financial institutions within a general market area and
where the credit calling is satisfactory to the bank's loan and credit
management.
MORTGAGE BANKING ACTIVITIES. Mortgage loan originations are generated through
a variety of distribution channels including retail bank business centers, real
estate brokers, builders, and a small correspondent network of mortgage brokers
and mortgage bankers. The mix of business is 85% retail and 15% wholesale.
The Company originates conventional, FHA-insured and VA -guaranteed government
loan production. The vast majority of the product originated by the mortgage
banking division qualify as conforming loans which are eligible for sale into
the secondary market via agency or private investor relationships. For
conventional residential loans, the Company offers a variety of first-time
homebuyer loans offering agency and portfolio products for as little as a 3%
down payment (FNMA 97) in addition to the Company's own Homeward Bound
portfolio product. The conventional financing products combined with the
FHA-insured and VA guaranteed product enable the Company to extend home
ownership opportunities to a wide range of first time homebuyers. The Mortgage
Banking Division also offers alternative financing options through its
non-conforming (B through D Paper) loan unit.
The ability of the Mortgage Banking operation to originate loans is dependent
in part on prevailing interest rate levels, demographic trends, and the climate
of the local economic landscape. For fiscal 1998, the outlook is for low to
steady interest rates which are expected to generate adequate homebuying
opportunities and ample debt consolidation (refinance) opportunities for most
consumers. Other factors affecting origination capabilities include
competitive pricing pressures, various strategically aligned controlled
business arrangements between realtors and mortgage bankers, and the
implementation and utilization of technology.
The Company sells loans originated by it to private investors in the secondary
market or to FNMA or FHLMC with servicing rights retained. The Company's
mortgage loans sold to others generally are sold in groups through
mortgage-related securities issued by FNMA or FHLMC or on a loan-by-loan basis
to these agencies or other private investors. All FHA-insured or VA guaranteed
mortgages are sold with the servicing rights released to the investor. During
the fiscal years ended March 31, 1997, 1996 and 1995, gain on sale of loans
resulting from the Mortgage Banking division's origination and sale activities
amounted to $7.3 million, $2.1 million, and $87,000, respectively.
The Company currently employs forward commitments, described below, as a
hedging technique to protect the value of its mortgage production from
"pipeline risk" (the risk created by offering loan applicants agreed upon
interest rates for a future closing). The Company will also consider other
hedging techniques. Mortgages with established interest rates generally will
decrease in value during periods of increasing interest rates and increase in
value during periods of decreasing interest rates. Accordingly, fluctuations in
prevailing interest rates may result in a gain or loss to the Company as a
result of adjustments to the carrying value of loans held for sale or otherwise
on sale of loans to the extent that the Company has not obtained prior
commitments by investors to purchase such loans or otherwise hedged the value
of the loans against changes in interest rates. Pursuant to Company policy,
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<PAGE> 9
the Mortgage Banking division cannot have more than $20.0 million of loans
which are not covered by purchase commitments.
OTHER MORTGAGE BANKING ACTIVITIES. The Company also purchases from approved
mortgage originators single-family residential loans which already have
commitments for sale within 90 days in the secondary mortgage market to FNMA,
FHLMC, Government National Mortgage Association ("GNMA") or other private
investors. The Company generally creates a minimum spread between the cost of
funds and the yield on the participation purchased. Company personnel visit the
originator under this program to review, among other things, its business
organization, management, quality control, funding sources, risk management,
loan volume and historical delinquency rate, financial condition, contingent
obligations and regulatory compliance. Upon conclusion of such review, the
Company establishes a maximum dollar amount of loans which it will be willing
to purchase from the mortgage loan originator at any given time. At March 31,
1997, the Company had extended commitments totaling $87.5 million to 10
mortgage loan originators, and had loan participation purchases outstanding of
which $30.9 million are included in assets available for sale.
LOAN SERVICING. The Company services residential real estate loans owned by
the Company and by others, including FNMA, FHLMC and other private mortgage
investors. Loan servicing includes collecting and remitting loan payments,
accounting for principal and interest, making advances to cover delinquent tax
payments, inspecting mortgaged premises, supervising foreclosures and property
dispositions and generally administering the loans. Funds that have been
escrowed by borrowers for the payment of mortgage-related expenses, such as
property taxes and hazard and mortgage insurance premiums, are maintained in
mostly non-interest-bearing deposit accounts at the Company. At March 31,
1997, the Company had $39.2 million deposited in such escrow accounts.
The following table presents information regarding the loans serviced by the
Company for others at the dates indicated.
<TABLE>
<CAPTION>
March 31,
-----------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Loans originated by the Company and
serviced for:
FNMA $86,187 $69,308 $77,942
FHLMC 646,770 594,106 582,000
Others 63,744 69,639 74,562
---------- ---------- ----------
796,701 733,053 734,504
---------- ---------- ----------
Purchased mortgage loan servicing
rights serviced for:
FNMA 1,236,819 723,535 399,155
FHLMC 1,673,200 952,932 546,481
Others 654,888 2,165 2,949
---------- ---------- ----------
3,564,907 1,678,632 948,585
---------- ---------- ----------
Total loans serviced for others $4,361,608 $2,411,685 $1,683,089
========== ========== ==========
</TABLE>
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<PAGE> 10
The Company receives fees for servicing mortgage loans. Other sources of loan
servicing revenues include late charges and other ancillary fees. For fiscal
years ended March 31, 1997, 1996 and 1995, the Company earned gross fees from
loan servicing of $12.9 million, $6.0 million, and $3.7 million, respectively,
which does not take into consideration the amortization of mortgage servicing
rights ("MSRs") as shown in the table below. The Company's gross servicing fee
income as a percent of interest income and other income was 8.5%, 4.7% and 4.0%
for the same respective periods. Servicing fees are collected by the Company
out of the monthly mortgage payments made by borrowers.
In recent years, the Company has sought to expand its mortgage servicing
portfolio through the acquisition of MSRs. During the fiscal years ended March
31, 1997, 1996 and 1995, the Company paid $32.8 million, $12.0 million and
$12.3 million to acquire the servicing rights related to $2.2 billion, $858.4
million and $801.9 million of loans, respectively
The amounts paid to acquire MSRs are capitalized and amortized over the
estimated servicing life of the related loans, using a level yield method over
the estimated life of the loan. Amortization of MSRs amounted to $8.0 million,
$3.7 million and $1.5 million in fiscal years ended March 31, 1997, 1996 and
1995, respectively.
The following table sets forth an analysis of the Company's MSRs during the
periods indicated.
<TABLE>
<CAPTION>
Carrying Value of MSRs
------------------------------------
Year ended March 31,
------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Amortized cost, beginning of period $21,865 $12,823 $2,042
Purchases 32,780 11,985 12,316
Originated servicing rights 3,061 760 0
Amortization (7,985) (3,703) (1,535)
------- -------- --------
Amortized cost, end of period $49,721 $21,865 $12,823
======= ======== ========
</TABLE>
As part of a servicer's responsibilities to investors of certain
mortgage-related securities, the Company is required to remit to the investors
the scheduled monthly principal and scheduled interest payments on most loans,
including those for which no principal and interest payments have been received
due to delinquency. At March 31, 1997, the principal amount of loans serviced
by the Company for others subject to this condition aggregated $2.3 billion, of
which $11.5 million or 0.50% were more than 30 days delinquent. At March 31,
1997, the Company had advanced principal and interest payments of $470,000 with
respect to such loans. Substantially all of these loans were sold without
recourse and are guaranteed by the FNMA or the FHLMC.
CONSUMER LENDING ACTIVITIES. A wide variety of consumer loan products and
services are offered to accommodate customer needs within the Company's
delineated community. At March 31, 1997, $142.7
8
<PAGE> 11
million or 17.6% of the Company's total loan portfolio was comprised of
consumer loans. Consumer loans are originated through the Company's business
centers, customer service department, indirect sources and the mortgage banking
division.
The largest component of the consumer loan portfolio is the home equity product
which is secured by the underlying equity in the borrower's home or second
residence. The home equity product consists of fixed rate amortizing home
equity loans and equity lines of credit with variable interest rates floating
with changes in the prime rate. The total home equity portfolio amounted to
$131.7 million or 16.3% of the Company's total loan portfolio, unused
commitments for the equity lines of credit totaled $55.5 million. The Company
has introduced alternative financing programs: 80%-100% home equity products
and real estate secured B & C Credits. The combined balances of these
alternative financing programs totaled $4.7 million at March 31, 1997.
Indirect second mortgages are originated by approved originators and aggregate
$26.5 million at March 31, 1997.
The consumer portfolio also contains small business loans. Small business
loans are subject to a maximum commitment amount of $300,000. These are
classified as other consumer loans on the balance sheet and totaled $15.8
million or 10.2% of the Company's total consumer loan portfolio at March 31,
1997.
The consumer loan department originates education loans which are sold at the
commencement of the repayment period to the Student Loan Marketing Association
and are underwritten to conform to the standards of the Pennsylvania Higher
Education Assistance Agency. At March 31, 1997, the Company had $11.6 million
of such loans classified as loans available for sale.
At March 31, 1997, the Company's remaining consumer loan portfolio was
comprised of automobile loans, personal loans and other consumer products. The
total outstanding for these products was $11.0 million at March 31, 1997.
Consumer loans generally have shorter terms and higher interest rates than
mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. These risks are not as prevalent in the case of the
Company's consumer loan portfolio, however, because a high percentage of the
portfolio is comprised of home equity loans and home equity lines of credit
which are secured by real estate and underwritten in a manner such that they
result in a lending risk which is substantially similar to single-family
residential loans.
MULTI-FAMILY/COMMERCIAL REAL ESTATE LENDING ACTIVITIES. The Company has
maintained an active role in commercial and multi-family lending for many years
with the majority of its portfolio secured by properties consisting primarily
of owner-occupied, multi-use commercial buildings, apartment buildings and
retail operations. The loans are originated for no more than 80% of the
appraised market value of the property, generally with a term of between five
to ten years, amortization periods of 15 to 25 years and have floating rates of
interest set at the Company's prime rate or the Constant Maturing Treasury Rate
plus a margin or have fixed interest. With respect to fixed-rate loans, the
interest rates on such
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<PAGE> 12
loans generally are fixed for three to five years at which time they reprice.
At March 31, 1997, commercial and multi-family real estate loans totaled $142.4
million or 17.6% of the total loan portfolio, a $21.9 million or 18.2% increase
over the prior year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Changes in Financial Condition,"
incorporated by reference in Item 7 hereof. The Company expects to continue
its involvement in such lending.
The Company evaluates all aspects of commercial and multi-family residential
real estate loan transactions in order to understand and mitigate risk to the
extent possible. In underwriting these loans, consideration is given to the
stability of the property's cash flow history, future operating projections,
current and projected occupancy, position in the local and regional market, as
well as location and physical condition. The Company also generally imposes a
debt coverage ratio (the ratio of net cash from operations before payment of
debt service to debt service) of not less than 115%. The underwriting analysis
also includes credit checks and a review of the financial condition of the
borrower and guarantor, if applicable. A appraisal report is prepared by
either a state-certified or a Member of Appraisal Institute ("MAI") appraiser
commissioned or pre-approved by the Company to substantiate property values for
every commercial real estate loan transaction. The Company also obtains
recourse from the borrower or principals of the borrowers whenever possible.
Multi-family and commercial lending entails different and significant risks
when compared to single-family residential lending because such loans typically
involve large loan balances to single borrowers and because the payment
experience on such loans is typically dependent on the successful operation of
the project or the borrower's business. These risks can also be significantly
affected by supply and demand conditions in the local market for apartments,
offices, warehouses or other commercial space. The Company attempts to minimize
its risk exposure by limiting such lending to proven developers/owners, only
considering properties with existing operating performance which can be
analyzed, requiring conservative debt coverage ratios, and continually
monitoring the operation and physical condition of the collateral.
CONSTRUCTION LENDING ACTIVITIES. Substantially all of the construction loans
originated by the Company are for the construction of owner-occupied,
single-family dwellings in the Company's primary market area. Such loans
generally have terms not exceeding 18 months, with the ability of the Company
to extend the term up to 12 additional months, have loan-to-value ratios of
80% or less of the appraised market value upon completion and generally do not
require the amortization of the principal during the term. The loans are made
with floating rates of interest based on the Company's prime rate plus a
margin. The Company also receives fees upon issuance of the commitment, which
generally range from 1.0% to 1.5% of the commitment. The majority of such
loans consist of loans to selected local developers with whom the Company is
familiar to build single-family dwellings on both a pre-sold or limited
speculative basis. However, the Company generally will not allow a developer
to have more than one speculative property and one model home at any given
time. The developer may qualify for additional speculative units with the
contribution of additional equity. The borrower is required to fund at least
25% of the unit cost. All other units must be pre-sold before construction
financing on those units commences. Loan proceeds are disbursed in stages or
on a line item basis after inspections of the project indicate that such
disbursements are for costs already incurred and added to the value of the
project. Only interest payments are due during the construction phase and
often the loans include a reserve for paying the stated interest due thereon.
The Company also will originate construction loans
10
<PAGE> 13
which convert upon the completion of construction to permanent commercial real
estate mortgage loans. At March 31, 1997, residential construction loans
totaled $90.6 million or 11.2% of the total loan portfolio, a decrease of $20.1
million or 18.1% from March 31, 1996 primarily due to a decrease in lending to
local developers. Commercial construction loans totaled $38.9 million or 4.8%
of the total loan portfolio, an increase of $24.3 million from March 31, 1996.
Prior to making a commitment to fund a construction loan, the Company requires
an appraisal of the property by independent appraisers approved by the Board of
Directors. The Company uses MAI qualified appraisers on all of its
construction loans. Loan officers of the Company also review and inspect each
project at the commencement of construction. In addition, the project is
inspected by a salaried inspection officer of the Company prior to every
disbursement of funds during the term of the construction loan. Such
inspection includes a review for compliance with the construction plan,
including materials specifications.
Construction financing is generally considered to involve a higher degree of
risk of loss than long-term financing on improved, owner-occupied real estate.
Risk of loss on a construction loan is dependent largely upon the accuracy of
the initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction.
During the construction phase, a number of factors could result in delays and
cost overruns. If the estimate of value proves to be inaccurate, the
property's value may be insufficient to assure full repayment. The Company
believes that these risks are mitigated by its experienced senior lending
personnel and its underwriting standards and procedures which focus on the
credit quality and cash flow of the sponsors and guarantors.
COMMERCIAL BUSINESS LENDING ACTIVITIES. The Company offers commercial business
loans, including working capital lines of credit and term loans to facilitate
the financing of inventory, accounts receivable, equipment and real property.
Depending on the collateral pledged to secure the extension of credit, maximum
loan to value ratios range from 50% (if used equipment is pledged) to 100% (if
customer accounts at the Company are pledged). Loan terms vary from one year
for lines of credit to 10 years for equipment, real property and business
acquisition loans. The interest rates on such loans can be fixed or variable.
The Company also generally obtains personal guarantees from the principals of
the borrowers. At March 31, 1997, commercial business loans amounted to $84.0
million or 10.4% of the total portfolio, as compared to $69.6 million or 9.0%
at March 31, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Changes in Financial Condition,"
incorporated by reference in Item 7 hereof.
ASSET QUALITY
When a borrower fails to make a required payment on a loan, the Company
attempts to cure the deficiency by contacting the borrower and seeking the
payment. When a mortgage loan becomes 90 days delinquent, the Company
institutes foreclosure or other proceedings, as necessary, to minimize any
potential loss.
Loans are placed on non-accrual status when, in the judgment of management, the
probability of collection of interest is deemed to be insufficient to warrant
further accrual. When a loan is placed on non-accrual status, previously
accrued but unpaid interest is deducted from interest income. The
11
<PAGE> 14
Company does not accrue interest on loans past due 90 days or more. Payments
received on nonaccrual and impaired loans are applied to the outstanding
principal balance.
Real estate acquired by the Company as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as other real estate owned until it
is sold. When a property is acquired, it is recorded at the lower of cost or
fair value, less estimated selling costs. Fair value is generally determined
through the use of independent appraisals. In certain cases, internal cash
flow analyses are used as the basis for fair value if such amounts are lower
than appraised values. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Recent Accounting Pronouncements,"
incorporated by reference in Item 7 hereof.
The Company's Asset Workout Group manages the disposition of all real estate
owned projects, and other impaired assets that are transferred to that
department for resolution. The transfer of a loan to the Asset Workout Group
for resolution is made when the normal payment of a loan becomes doubtful and
usual methods of collection have been exhausted and/or a loan has to be
restructured in a manner that would significantly alter the original terms of
the loan beyond what the Company would be willing to accept in a normal
situation.
NON-PERFORMING ASSETS. The following table sets forth the amounts and
categories of the Company's non-performing assets and troubled debt
restructurings at the dates indicated.
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
------ ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
Single-family residential $4,451 $4,039 $1,670 $1,521 $2,738
Construction 255 3,275 2,130 2,018 7,311
Commercial real estate - 526 2,733 1,385 2,689
Commercial 3,408 - - - -
Consumer 1,278 562 224 392 795
------- ------- ------ ------- -------
Total non-accruing loans 9,392 8,402 6,757 5,316 13,533
------- ------- ------ ------- -------
Accruing loans greater than 90 days delinquent - - 5 23 43
------- ------- ------ ------- -------
Total non-performing loans 9,392 8,402 6,762 5,339 13,576
------- ------- ------ ------- -------
Other real estate owned ("OREO") 1,332 2,043 1,010 3,075 3,404
Real estate held for development or resale - - 1,159 3,949 7,678
------- ------- ------ ------- -------
Total non-performing assets $10,724 $10,445 $8,931 $12,363 $24,658
======= ======= ====== ======= =======
Total non-performing loans as a percentage
of gross loans receivable (1) 1.10% 1.05% 1.23% 1.77% 4.25%
======= ======= ====== ======= =======
Total non-performing assets
as a percentage of total assets 0.55% 0.59% 0.57% 1.23% 3.72%
======= ======= ====== ======= =======
</TABLE>
- ----------------
(1) Includes loans receivable and loans available for sale, less construction
and land loans in process and deferred loan origination fees and discounts.
12
<PAGE> 15
The Company's total non-performing assets have declined from $24.7 million or
3.72% of total assets at March 31, 1993 to $10.7 million or 0.55% of total
assets at March 31, 1997. During the fiscal year ended March 31, 1997, total
non-performing assets increased by $279,000 or 2.7%.
The $4.5 million of non-performing single-family residential loans at March 31,
1997 consisted of 53 loans, the largest of which had a balance of $372,000.
The $3.4 million of the Company's non-performing commercial loans at March 31,
1997 consisted of 4 loans. The largest of these loans had a balance of $1.8
million, and is unsecured.
During fiscal 1997, 1996 and 1995 approximately $583,000, $1.1 million and
$642,000 in interest income, respectively, would have been recorded on loans
accounted for on a non-accrual basis if such loans had been current in such
periods according to their original terms and had been outstanding throughout
the period or since origination if held for part of the period. These amounts
were not included in the Company's interest income for the respective periods.
The amount of interest income on loans accounted for on a non-accrual basis and
loans greater than 90 days past due and still accruing that was included in
income during the same respective periods amounted to approximately $132,000,
$96,000 and $227,000.
OTHER CLASSIFIED ASSETS. In addition to the non-performing assets discussed
above, at March 31, 1997, the Company had classified for regulatory and
internal purposes an additional $13.6 million of assets as "substandard."
Under applicable regulations, substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility that an
institution will sustain some loss if the deficiencies are not corrected. See
generally " - Allowance for Loan Losses." Of the $13.6 million of substandard
assets at March 31, 1997 which were not included under non-performing assets,
an aggregate of $1.9 million were commercial real estate loans and $6.6 million
were commercial business loans.
The $1.9 million of classified commercial real estate loans not included in
non-performing assets at March 31, 1997 consisted of seven loans, the largest
of which had a balance of $794,000.
The $6.6 million of the Company's classified commercial business loans not
included in non-performing assets at March 31, 1997 consisted of twelve loans,
of which the largest had a balance of $1.8 million.
ALLOWANCE FOR POSSIBLE LOAN LOSSES. An allowance for possible loan losses is
maintained at a level that management considers adequate to provide for
potential losses based upon an evaluation of known and inherent risks in the
loan portfolio. Management's periodic evaluation is based upon examination of
the portfolio, past loss experience, current economic conditions, the results
of the most recent regulatory examinations, and other relevant factors. While
management uses the best information available to make such evaluations, future
adjustments to the allowance may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluations.
13
<PAGE> 16
The following table summarizes changes in the allowance for loan losses and
other selected statistics for the periods presented.
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning of year $13,124 $9,111 $7,337 $7,488 $6,996
Charged-off loans:
Single-family residential - - - - (7)
Construction (250) - (1,350) (184) (1,346)
Commercial real estate - (485) (162) (584) (1,241)
Commercial business (3,000) (422) - - -
Consumer and other (541) (281) (249) (550) (157)
-------- -------- ------- ------- -------
Total charged-off loans (3,791) (1,188) (1,761) (1,318) (2,751)
-------- -------- ------- ------- -------
Recoveries on loans previously charged-off:
Commercial real estate - 125 - - -
Consumer and other 90 56 135 54 74
Total recoveries 90 181 135 54 74
Net loans charged-off (3,701) (1,007) (1,626) (1,264) (2,677)
Provisions for loan losses 5,310 4,000 3,400 1,113 3,169
Allowance acquired from Suburban - 1,020 - - -
-------- -------- ------- ------- -------
Allowance for loan losses, end of year $14,733 $13,124 $9,111 $7,337 $7,488
======== ======== ======= ======= =======
Net loans charged-off to average
interest-earning loans (1) 0.46% 0.15% 0.39% 0.41% 0.75%
======== ======== ======= ======= =======
Allowance for loan losses to gross
loans receivable (1) 1.73% 1.64% 1.56% 2.43% 2.34%
======== ======== ======= ======= =======
Allowance for loan losses to non-performing loans 156.86% 156.20% 134.74% 137.50% 55.16%
======== ======== ======= ======= =======
Net loans charged-off to allowance for loan losses 25.12% 7.67% 17.85% 17.23% 35.75%
======== ======== ======= ======= =======
Recoveries to charge-offs 2.37% 15.24% 7.67% 4.10% 2.69%
======== ======== ======= ======= =======
</TABLE>
- ----------------
(1) Gross loans receivable and average interest-earning loans receivable
include loans receivable and loans available for sale, less construction and
land loans in process and deferred loan origination fees and discounts.
14
<PAGE> 17
The following table presents the allocation of the allowance for loan losses to
the total amount of loans in each category listed at the dates indicated.
<TABLE>
<CAPTION>
March 31,
--------------------------------------------------------------------------
1997 1996 1995
------------------------- ----------------------- ----------------------
% of Loans % of Loans % of Loans
in Each in Each in Each
Catagory to Catagory to Catagory to
Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Single-family residential $1,669 38.37 % $1,564 44.74 % $595 53.59 %
Multi-family residential 124 1.53 113 1.47 108 1.78
Construction 2,214 16.01 3,083 16.27 1,738 12.33
Commercial real estate 2,870 16.07 2,635 14.17 2,484 11.47
Consumer 937 17.64 737 14.31 370 15.35
Commercial business 2,885 10.38 2,011 9.04 763 5.48
Unallocated 4,034 - 2,981 - 3,053 -
------- ------- ------- ------- ------ -------
Total allowance for loan losses $14,733 100.00 % $13,124 100.00 % $9,111 100.00 %
======= ======= ======= ======= ====== =======
<CAPTION>
March 31,
--------------------------------------------
1994 1993
---------------------- --------------------
% of Loans % of Loans
in Each in Each
Catagory to Catagory to
Amount Total Loans Amount Total Loans
------ ----------- ------ ------------
<S> <C> <C> <C> <C>
Single-family residential $322 36.53 % $328 44.36 %
Multi-family residential 26 3.54 37 4.83
Construction 1,906 12.30 866 9.46
Commercial real estate 1,342 16.37 1,295 11.49
Consumer 384 28.43 398 27.55
Commercial business 223 2.83 758 2.31
Unallocated 3,134 - 3,806 -
------ ------- ------ -------
Total allowance for loan losses $7,337 100.00 % $7,488 100.00 %
====== ======= ====== =======
</TABLE>
15
<PAGE> 18
MORTGAGE-RELATED SECURITIES AND INVESTMENTS
Mortgage-Related Securities. The Company's mortgage-related securities and
investment portfolio is managed by investment officers in accordance with a
comprehensive written investment policy which addresses strategies, types and
levels of allowable investments and which is reviewed and approved by the Board
of Directors on an annual basis. As set forth in the current Board-approved
policy statement, investments in the aggregate cannot exceed 65% of total
assets of the Company.
The Company maintains a significant portfolio of mortgage-related securities as
a means of investing in housing-related mortgage instruments without the costs
associated with originating mortgage loans for portfolio retention and with
limited credit risk of default which arises in holding a portfolio of loans to
maturity. Mortgage-related securities (which also are known as mortgage
participation certificates or pass-through certificates) represent a
participation interest in a pool of single-family or multi-family mortgages,
the principal and interest payments on which are passed from the mortgage
originators, through intermediaries (generally U.S. Government agencies and
government sponsored enterprises) that pool and repackage the participation
interests in the form of securities, to investors such as the Company. Such
U.S. Government agencies and government sponsored enterprises, which guarantee
the payment of principal and interest to investors, primarily include FHLMC,
FNMA and GNMA. The Company also invests in certain privately issued, credit
enhanced mortgage-related securities rated "AA" or better by national
securities rating agencies.
Mortgage-related securities typically are issued with stated principal amounts,
and the securities are backed by pools of mortgages that have loans with
interest rates that are within a certain range and have varying maturities.
The underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well
as prepayment risk, are passed on to the certificate holder. The life of a
mortgage-related pass-through security thus approximates the life of the
underlying mortgages.
The Company's mortgage-related securities include collateralized mortgage
obligations ("CMOs"). A CMO can be collateralized by loans or securities which
are insured or guaranteed by FNMA, FHLMC or GNMA. In contrast to pass-through
mortgage-related securities, in which cash flow is received pro rata by all
security holders, the cash flow from the mortgages underlying a CMO is
segmented and paid in accordance with a predetermined priority to investors
holding various CMO classes. By allocating the principal and interest cash
flows from the underlying collateral among the separate CMO classes, different
classes of bonds are created, each with its own stated maturity, estimated
average life, coupon rate and prepayment characteristics.
Mortgage-related securities generally yield less than the loans which underlie
such securities because of their payment guarantees or credit enhancements. In
addition, mortgage-related securities are more liquid than individual mortgage
loans and may be used to collateralize certain obligations of the Company. At
March 31, 1997, $574.9 million or 62.4% of the Company's mortgage-related
securities were pledged to secure various obligations of the Company.
Mortgage-related securities issued or guaranteed by FNMA or FHLMC (except
interest-only securities or the residual interests in CMOs) are weighted at no
more than 20.0% for risk-based capital purposes, compared to a weight of 50.0%
for residential loans. See "Regulation - The Company - Capital Requirements."
16
<PAGE> 19
The Company's mortgage-related securities are classified as either "held to
maturity" or "available for sale" based upon the Company's intent and ability
to hold such securities to maturity at the time of purchase, in accordance with
generally accepted accounting principles. The Company's mortgage-backed
securities which are classified as available for sale include shorter duration
instruments which are used to assist the Company in its management of liquidity
and interest rate risk. These securities generally have less price volatility
than securities with longer durations. Examples of these securities include
adjustable-rate instruments, instruments with balloon payment requirements and
instruments with generally higher than current market fixed interest rates. As
of March 31, 1997, the Company held an aggregate of $921.2 million or 47.0% of
total assets invested in mortgage-related securities, net, of which $385.3
million was held to maturity and $535.9 million was available for sale. The
tables below present the Company's mortgage-related securities on the basis of
these classifications.
The following table sets forth the composition of the Company's
mortgage-related securities that were available for sale at the dates
indicated.
<TABLE>
<CAPTION>
Fair Value at March 31,
------------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Mortgage-related securities available
for sale:
FHLMC $303,705 $234,800 $203,387
FNMA 80,454 115,518 140,374
GNMA 130,597 40,879 8,801
Privately issued 21,185 39,358 21,871
--------- --------- ---------
Total $535,941 (1) $430,555 (1) $374,433 (1)
========= ========= =========
</TABLE>
- --------------
(1) Includes unrealized losses of $1.3 million and $3.7 million at March 31,
1997 and 1995, respectively, and unrealized gains of $778,000 at March 31,
1996.
The following table sets forth the composition of the Company's
mortgage-related securities portfolio held to maturity at the dates indicated.
17
<PAGE> 20
<TABLE>
<CAPTION>
Carrying Value at March 31
-----------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Mortgage-related securities:
FHLMC $125,205 $149,990 $194,970
FNMA 124,433 150,286 190,085
GNMA 7,130 8,397 27,014
Privately issued 19,740 1,785 2,043
--------- --------- ---------
Total mortgage-related securities 276,508 310,458 414,112
--------- --------- ---------
Collateralized mortgage obligations 108,785 93,692 55,108
--------- --------- ---------
Total mortgage-related securities, net $385,293 $404,150 $469,220
========= ========= =========
Total market value (1) $380,046 $401,231 $453,455
========= ========= =========
</TABLE>
- ------------
(1) See Note 4 of the Notes to Consolidated Financial Statements incorporated
by reference in Item 8 hereof.
At March 31, 1997, the contractual maturity of substantially all of the
Company's mortgage-related securities was in excess of ten years. The actual
maturity of a mortgage-related security is expected to be less than its stated
maturity due to prepayments of the underlying mortgages. Prepayments that are
faster than anticipated may shorten the life of the security and adversely
affect its yield to maturity. The yield is based upon the interest income and
the amortization of any premium or discount related to the mortgage-backed
security. In accordance with GAAP, premiums and discounts are amortized over
the estimated lives of the loans, which decrease and increase interest income,
respectively. The prepayment assumptions used to determine the amortization
period for premiums and discounts can significantly affect the yield of the
mortgage-related security, and these assumptions are reviewed periodically to
reflect actual prepayments. Although prepayments of underlying mortgages depend
on many factors, including the type of mortgages, the coupon rate, the age of
mortgages, the geographical location of the underlying real estate
collateralizing the mortgages and general levels of market interest rates, the
difference between the interest rates on the underlying mortgages and the
prevailing mortgage interest rates generally is the most significant
determinant of the rate of prepayments. During periods of falling mortgage
interest rates, if the coupon rate of the underlying mortgages exceeds the
prevailing market interest rates offered for mortgage loans, refinancing
generally increases and accelerates the prepayment of the underlying mortgages
and the related security. Under such circumstances, the Company may be subject
to reinvestment risk because to the extent that the Company's mortgage-related
securities amortize or prepay faster than anticipated, the Company may not be
able to reinvest the proceeds of such repayments and prepayments at a
comparable rate. The declining yields earned during recent periods is a direct
response to falling interest rates and accelerated prepayments. At March 31,
1997, of the $385.3 million of mortgage-related securities held to maturity, an
aggregate of $342.0 million were secured by fixed-rate mortgage loans and an
aggregate of $43.3 million were secured by adjustable-rate mortgage loans. As
of such date, of the $535.9 million of mortgage-related securities available
for sale, an aggregate of $355.9 million were secured by fixed-rate mortgage
loans and an aggregate of $180.0 million were secured by adjustable-rate
mortgage loans.
18
<PAGE> 21
OTHER INVESTMENTS. The following table sets forth certain information relating
to the Company's investment portfolio held to maturity at the dates indicated.
<TABLE>
<CAPTION>
March 31,
----------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- -----------------------
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
----- ----- ----- ----- ----- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal Home Loan Bank stock $21,878 $21,878 $18,802 $18,802 $15,997 $15,997
U.S. Government and agency
obligations and securities 9,935 9,594 6,000 6,004 30,000 29,157
Other securities 258 258 140 140 166 166
-------- -------- -------- -------- -------- --------
Total $32,071 $31,730 $24,942 $24,946 $46,163 $45,320
======== ======== ======== ======== ======== ========
</TABLE>
The following table sets forth certain information relating to the Company's
equity and other securities portfolio available for sale at the dates
indicated.
<TABLE>
<CAPTION>
Fair Value at March 31,
---------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Equity securities $20,010 $6,823 $4,650
U. S. Government agency notes 23,530 17,762 20,286
Asset Management Funds for
Financial Institutions, Inc. 12,370 11,826 10,951
Trust preferred 5,974 - -
Other - 2,355 745
------- ------- -------
Total $61,884 $38,766 $36,632
======= ======= =======
</TABLE>
- --------------
At March 31, 1997, investments in the debt and/or equity securities of any one
issuer (other than securities of the U.S. Government and U.S. Government
agencies and corporations) did not exceed more than 10.0% of the Company's
equity.
SOURCES OF FUNDS
General. The Company's principal source of funds for use in lending and for
other general business purposes has traditionally come from customer accounts
obtained through the Company's business centers. The Company also derives funds
from amortization and prepayments of outstanding loans and investments
19
<PAGE> 22
and sales from advances from the FHLB of Pittsburgh. Loan repayments are a
relatively stable source of funds, while deposits inflows and outflows as well
as sales of investments, are significantly influenced by general interest rates
and money market conditions. Borrowings may be used on a short-term basis to
compensate for reductions in the availability of funds from other sources.
Customer Accounts. The Company's current customer account products include
non-interest bearing checking accounts, interest bearing checking accounts,
passbook accounts, money market deposit accounts and certificates of deposit
ranging in terms from 14 days to 5 years. The Company's customer accounts
products also include Individual Retirement Account certificates ("IRA
certificates").
The Company's customer accounts are obtained primarily from residents in its
primary market area. The Company participates in the regional ATM network
known as MAC(R) and the national ATM network known as PLUS(R).
The Company also acquires customer accounts through an intermediary (without
cost). At March 31, 1997, the Company's customer accounts originated through
an intermediary were $12.5 million with a weighted average cost of 5.12% and an
average life of 36 months.
The Company has been competitive in the types of accounts and interest rates it
has offered on its deposit products but does not necessarily seek to match the
highest rates paid by competing institutions.
The following table shows the distribution of the Company's customer accounts
by type of account as of the dates indicated.
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook and statement savings accounts $88,574 10.14 % $88,011 10.22 % $94,649 13.64 %
Money market accounts 93,807 10.74 100,530 11.68 82,055 11.82
Certificates of deposit 469,073 53.71 506,104 58.78 417,465 60.15
Repurchase agreements with customers 40,549 4.64 30,019 3.49 5,310 0.77
NOW accounts 62,518 7.16 54,585 6.34 40,673 5.86
Non-interest-bearing deposits:
Demand deposits 79,651 9.12 49,038 5.70 33,187 4.78
Other 39,185 4.49 32,729 3.79 20,649 2.98
-------- ------- -------- ------- -------- -------
Total customer accounts at end of period $873,357 100.00 % $861,016 100.00 % $693,988 100.00 %
======== ======= ======== ======= ======== =======
</TABLE>
The following table presents, by various interest rate categories, the amount
of certificates of deposit at March 31, 1997 and 1996, and the amounts at March
31, 1997 which mature during the periods indicated.
20
<PAGE> 23
<TABLE>
<CAPTION>
Certificates of Deposit March 31, Amounts at March 31, 1997 Matur
- ------------------------ ---------------------- -------------------------------------------------------
1997 1996 One Year Two Years Three Years Thereafter
---- ---- -------- --------- ------------ ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
4.0% or less $2,799 $10,570 $2,799 - - -
4.01% to 6.0% 384,595 352,168 300,738 43,787 $19,027 $21,043
6.01% to 8.0% 80,077 136,519 32,327 9,429 23,691 14,630
8.01% to 10.0% 1,602 6,847 1,217 237 60 88
-------- -------- -------- ------- ------- -------
Total certificate accounts $469,073 $506,104 $337,081 $53,453 $42,778 $35,761
======== ======== ======== ======= ======= =======
</TABLE>
The following table presents the average balance of each customer account type
and the average rate paid on each deposit type for the periods indicated.
<TABLE>
<CAPTION>
March 31,
-----------------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- -------------------------
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
------- ---------- ------- --------- ------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook and Statement
Savings Accounts $86,828 2.16 % $85,578 2.26 % $115,840 2.38 %
Money Market Accounts 97,323 3.02 89,229 3.04 87,243 2.69
Certificates of Deposits 481,154 5.47 456,727 5.76 396,133 4.97
Repurchase agreements
with customers 32,890 4.75 13,925 5.54 2,136 4.49
NOW Accounts 56,614 1.63 48,382 1.73 46,003 1.78
Non-Interest Bearing Deposits 111,417 - 65,494 - 46,448 -
-------- ----- -------- ----- -------- -----
Total Customer Accounts $866,226 3.88 % $759,335 4.29 % $693,803 3.72 %
======== ===== ======== ===== ======== =====
</TABLE>
The following table sets forth the net savings flows of the Company during the
periods indicated.
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Increase (decrease) before interest credit ($21,204) $134,795 ($10,917)
Interest credited 33,545 32,233 25,218
--------- --------- ---------
Net savings increase $12,341 $167,028 $14,301
========= ========= =========
</TABLE>
The following table sets forth maturities of the Company's certificates of
deposit of $100,000 or more at March 31, 1997 by time remaining to maturity.
21
<PAGE> 24
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Three months or less $41,964
Over three months through six months 11,274
Over six months through 12 months 8,580
Over 12 months 5,198
-------
$67,016
=======
</TABLE>
Borrowings. The Company may obtain advances from the FHLB of Pittsburgh upon
the security of the common stock it owns in that bank and certain of its
residential mortgage loans and securities held to maturity, provided certain
standards related to creditworthiness have been met. Such advances are made
pursuant to several credit programs, each of which has its own interest rate
and range of maturities. Such advances are generally available to meet
seasonal and other withdrawals of deposit accounts and to permit increased
lending. In recent years, such advances were primarily used to fund the
Company's investment and loan activities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Results of
Operations incorporated by reference in Item 7 hereof." At March 31, 1997, the
Company had $437.4 million of advances from the FHLB of Pittsburgh. See Note 8
of the Notes to Consolidated Financial Statements incorporated by reference in
Item 8 hereof.
In recent years, the Company entered into agreements to sell securities under
terms which require it to repurchase the same securities by a specified date.
Repurchase agreements are considered borrowings which are secured by the sold
securities and generally are short-term (90 days or less) in nature. At March
31, 1997, the Company had $456.3 million of repurchase agreements outstanding.
See Note 9 of the Notes to Consolidated Financial Statements incorporated by
reference in Item 8 hereof.
22
<PAGE> 25
The following table sets forth certain information regarding borrowed funds at
or for the dates indicated:
<TABLE>
<CAPTION>
At or for the Year Ended March 31,
--------------------------------------------
1997 1996 1995
---- ---- -----
(Dollars In Thousands)
<S> <C> <C> <C>
FHLB of Pittsburgh advances:
Average balance outstanding $405,921 $361,128 $320,572
Maximum amount outstanding at any
month-end during the period 537,992 461,946 409,607
Balance outstanding at end of period 437,418 376,013 319,928
Weighted average interest rate
during the period 6.00 % 6.31 % 5.64 %
Weighted average interest rate at
end of period 6.08 6.21 6.36
Repurchase agreements:
Average balance outstanding $444,785 $343,139 $177,735
Maximum amount outstanding at any
month-end during the period 516,646 400,354 394,503
Balance outstanding at end of period 456,285 372,193 385,303
Weighted average interest rate
during the period 5.65 % 6.22 % 5.37 %
Weighted average interest rate at
end of period 5.60 5.65 6.18
Total borrowings
Average balance outstanding $850,706 $704,267 $498,307
Maximum amount outstanding at any
month-end during the period 925,238 755,290 710,541
Balance outstanding at end of period 893,703 748,206 705,231
Weighted average interest rate
during the period 5.82 % 6.27 % 5.54 %
Weighted average interest rate at
end of period 5.83 5.93 6.26
</TABLE>
23
<PAGE> 26
SUBSIDIARIES
The Company maintains subsidiary service corporations in order to conduct the
orderly disposition of repossessed assets or conduct operations which
complement the Company's business. The Company is not currently involved in
any real estate development activities, and does not presently intend to enter
into any development projects in the future. At March 31, 1997, the Company's
net investment in and advances to its subsidiaries was not significant. A brief
description of the activities of the Company's subsidiaries is set forth below.
Main Line Abstract Company. Main Line Abstract Company ("Abstract"), a
Pennsylvania corporation and first tier subsidiary of the Company, is a title
insurance agency and abstract company, which provides title services primarily
to the Company and its customers.
Greene Townes Financial Corporation. Greene Townes Financial Corporation
("Greene Townes"), a first tier subsidiary of the Bank, is a Pennsylvania
corporation which holds the stock of Revest II Corporation and Main Line of New
Jersey.
Main Line Financial Corporation. Main Line Financial Corporation ("Main Line
Financial"), is a Pennsylvania corporation, which, through an unaffiliated
intermediary, sells mutual funds.
First ML Corporation. First ML Corporation ("First ML"), a Pennsylvania
corporation and a first-tier subsidiary of the Bank, holds the stock of Main
Line of Delaware, Inc., a Delaware holding company. At March 31, 1997, the
Bank's investment and net advances in First ML amounted to $(40,000).
During the year ended March 31, 1997, Revest I was liquidated due to cessation
of the company's operations.
REGULATION
Set forth below is a brief description of certain laws and regulations which
relate to the regulation of the Company and the Bank. The description of these
laws and regulations, as well as descriptions of laws and regulations contained
elsewhere herein, does not purport to be complete and is qualified in its
entirety by reference to applicable laws and regulations.
THE COMPANY. The Company is a registered savings and loan holding company and
is subject to OTS regulations, examinations, supervision and reporting
requirements. As a subsidiary of a savings and loan holding company, the Bank
is subject to certain restrictions in its dealings with the Company and
affiliates thereof.
Federal Activities Restrictions. There are generally no restrictions on the
activities of a savings and loan holding company which holds only one
subsidiary savings association. However, if the Director of the
24
<PAGE> 27
OTS determines that there is reasonable cause to believe that the continuation
by a savings and loan holding company of an activity constitutes a serious risk
to the financial safety, soundness or stability of its subsidiary savings
institution, the Director may impose such restrictions as deemed necessary to
address such risk, including limiting (i) payment of dividends by the savings
institution; (ii) transactions between the savings institution and its
affiliates; and (iii) any activities of the savings institution that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings institution. Notwithstanding the
above rules as to permissible business activities of unitary savings and loan
holding companies, if the savings institution subsidiary of such a holding
company fails to meet a Qualified Thrift Lender ("QTL") test, then such unitary
holding company also shall become subject to the activities restrictions
applicable to multiple savings and loan holding companies and, unless the
savings institution requalifies as a QTL within one year thereafter, shall
register as, and become subject to the restrictions applicable to, a bank
holding company. See "- The Bank - Qualified Thrift Lender Test."
If the Company were to acquire control of another savings institution, other
than through merger or other business combination with the Bank, the Company
would thereupon become a multiple savings and loan holding company. Except
where such acquisition is pursuant to the authority to approve emergency thrift
acquisitions and where each subsidiary savings institution meets the QTL test,
as set forth below, the activities of the Company and any of its subsidiaries
(other than the Bank or other subsidiary savings institutions) would thereafter
be subject to further restrictions. Among other things, no multiple savings
and loan holding company or subsidiary thereof which is not a savings
institution shall commence or continue for a limited period of time after
becoming a multiple savings and loan holding company or subsidiary thereof any
business activity, upon prior notice to, and no objection by the OTS, other
than: (i) furnishing or performing management services for a subsidiary savings
institution; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
savings institution; (iv) holding or managing properties used or occupied by a
subsidiary savings institution; (v) acting as trustee under deeds of trust;
(vi) those activities authorized by regulation as of March 5, 1987 to be
engaged in by multiple savings and loan holding companies; or (vii) unless the
Director of the OTS by regulation prohibits or limits such activities for
savings and loan holding companies, those activities authorized by the Federal
Reserve Board as permissible for bank holding companies. The activities
described in (i) through (vi) above may only be engaged in after giving the OTS
prior notice and being informed that the OTS does not object to such
activities. In addition, the activities described in (vii) above also must be
approved by the Director of the OTS prior to being engaged in by a multiple
savings and loan holding company.
Limitations on Transactions with Affiliates. Transactions between savings
institutions and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act ("FRA"). An affiliate of a savings institution is any
company or entity which controls, is controlled by or is under common control
with the savings institution. In a holding company context, the parent holding
company of a savings institution (such as the Company) and any companies which
are controlled by such parent holding company are affiliates of the savings
institution. Generally, Sections 23A and 23B (i) limit the extent to which the
savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable, to the
25
<PAGE> 28
institution or subsidiary as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and similar transactions. In addition to the
restrictions imposed by Sections 23A and 23B, no savings institution may (i)
loan or otherwise extend credit to an affiliate, except for any affiliate which
engages only in activities which are permissible for bank holding companies, or
(ii) purchase or invest in any stocks, bonds, debentures, notes or similar
obligations of any affiliate, except for affiliates which are subsidiaries of
the savings institution.
In addition, Sections 22(h) and (g) of the FRA place restrictions on loans to
executive officers, directors and principal stockholders. Under Section 22(h),
loans to a director, an executive officer and to a greater than 10% stockholder
of a savings institution (a "principal stockholder"), and certain affiliated
interests of either, may not exceed, together with all other outstanding loans
to such person and affiliated interests, the savings institution's loans to one
borrower limit (generally equal to 15% of the institution's unimpaired capital
and surplus). Section 22(h) also requires that loans to directors, executive
officers and principal stockholders be made on terms substantially the same as
offered in comparable transactions to other persons and also requires prior
board approval for certain loans. In addition, the aggregate amount of
extensions of credit by a savings institution to all insiders cannot exceed the
institution's unimpaired capital and surplus. Furthermore, Section 22(g)
places additional restrictions on loans to executive officers. At March 31,
1997, the Bank was in compliance with the above restrictions.
Restrictions on Acquisitions. Except under limited circumstances, savings and
loan holding companies are prohibited from acquiring, without prior approval of
the Director of the OTS, (i) control of any other savings institution or
savings and loan holding company or substantially all the assets thereof or
(ii) more than 5% of the voting shares of a savings institution or holding
company thereof which is not a subsidiary. Except with the prior approval of
the Director of the OTS, no director or officer of a savings and loan holding
company or person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may acquire control of any savings institution, other
than a subsidiary savings institution, or of any other savings and loan holding
company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home
or branch office located in the state of the institution to be acquired as of
March 5, 1987; (ii) the acquiror is authorized to acquire control of the
savings institution pursuant to the emergency acquisition provisions of the
Federal Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in
which the institution to be acquired is located specifically permit
institutions to be acquired by the state-chartered institutions or savings and
loan holding companies located in the state where the acquiring entity is
located (or by a holding company that controls such state-chartered savings
institutions).
Under applicable law, the Federal Reserve Board is authorized to approve an
application by a bank holding company to acquire control of a savings
institution. In addition, a bank holding company that controls a savings
institution may merge or consolidate the assets and liabilities of the savings
institution with, or transfer assets and liabilities to, any subsidiary bank
which is a member of the Bank Insurance Fund ("BIF") with the approval of the
appropriate federal banking agency and the Federal Reserve
26
<PAGE> 29
Board. There have been a number of acquisitions of savings institutions by
bank holding companies in recent years.
THE BANK. The OTS has extensive regulatory authority over the operations of
savings institutions. As part of this authority, savings institutions are
required to file periodic reports with the OTS and are subject to periodic
examinations by the OTS. The investment and lending authority of savings
institutions are prescribed by federal laws and regulations and they are
prohibited from engaging in any activities not permitted by such laws and
regulations. Those laws and regulations generally are applicable to all
federally-chartered savings institutions and may also apply to state-chartered
savings institutions. Such regulation and supervision is primarily intended
for the protection of depositors.
The OTS' enforcement authority over all savings institutions and their holding
companies includes, among other things, the ability to assess civil money
penalties, to issue cease and desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS. The OTS is required, except
under certain circumstances, to make public disclosure of final enforcement
actions.
Insurance of Accounts. The customer accounts of the Bank are insured up to
$100,000 per insured member (as defined by law and regulation) by the SAIF
administered by the FDIC and are backed by the full faith and credit of the
United States Government. As insurer, the FDIC is authorized to conduct
examinations of, and to require reporting by, FDIC-insured institutions. It
also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious threat to the
FDIC. The FDIC also has the authority to initiate enforcement actions against
savings institutions, after giving the OTS an opportunity to take such action.
Pursuant to legislation enacted in September 1996, a one-time fee was paid by
all SAIF-insured institutions at the rate of $0.657 per $100 of customer
accounts held by such institutions at March 31, 1995. The money collected
recapitalized the SAIF reserve to the level of 1.25% of insured customer
accounts as required by law. In September 1996, the Bank recorded a pre-tax
accrual of $4.8 million for this assessment, which was subsequently paid in
November 1996.
The new legislation also provides for the merger, subject to certain
conditions, of the SAIF into the Bank Insurance Fund ("BIF") administered by
the FDIC by 1999 and also requires BIF-insured institutions to share in the
payment of interest on the bonds issued by a specially created government
entity ("FICO"), the proceeds of which were applied toward resolution of the
thrift industry crisis in the 1980s. Beginning on January 1, 1997, in addition
to the insurance premiums that will be paid by SAIF-insured institutions to
maintain the SAIF reserve at its required level pursuant to the current risk
classification system, SAIF-insured institutions will pay deposit insurance
premiums at the annual rate of 6.4 basis points of their insured customer
accounts and BIF-insured institutions will pay deposit insurance premiums at
the annual rate of 1.3 basis points of their insured customer accounts towards
the payment of interest on the FICO bonds. Under the current risk
classification system, institutions are assigned on one of three capital groups
which are based solely on the level of an institutions capital--"well
capitalized," "adequately capitalized" and "undercapitalized"-- which are
defined in the same manner as the regulations
27
<PAGE> 30
establishing the prompt corrective action system under section 38 of the FDIA,
as discussed below. These three groups are then divided into three subgroups
which are based on supervisory evaluations by the institution's primary federal
regulator, resulting in nine assessment classifications. Assessment rates
currently range from 0 basis points for well capitalized, healthy institutions
to 27 basis points for undercapitalized institutions with substantial
supervisory concerns.
The recapitalization of the SAIF is expected to result in lower deposit
insurance premiums in the future for most SAIF-insured financial institutions,
including the Bank.
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation , order or any condition imposed by an agreement
with the FDIC. It also may suspend deposit insurance temporarily during the
hearing process for the permanent termination of insurance, if the institution
has no tangible capital. If insurance of accounts is terminated, the accounts
at the institution at the time of the termination, less subsequent withdrawals,
shall continue to be insured for a period of six months to two years, as
determined by the FDIC. Management is aware of no existing circumstances which
would result in termination of the Bank's deposit insurance.
Capital Requirements. Federally insured savings institutions are required to
maintain minimum levels of regulatory capital. Pursuant to the Financial
Institutions Reform Recovery and Enforcement Act of 1989 ("FIRREA"), the OTS
has established capital standards applicable to all savings institutions. These
standards generally must be as stringent as the comparable capital requirements
imposed on national banks. The OTS also is authorized to impose capital
requirements in excess of these standards on individual institutions on a
case-by-case basis.
Current OTS capital standards require savings institutions to satisfy three
different capital requirements. Under these standards, savings institutions
must maintain "tangible" capital equal to 1.5% of adjusted total assets, "core"
capital equal to 3% of adjusted total assets and "total" capital (a combination
of core and "supplementary" capital) equal to 8.0% of "risk-weighted" assets.
For purposes of the regulation, core capital generally consists of common
stockholders' equity (including retained earnings), noncumulative perpetual
preferred stock and related surplus, minority interests in the equity accounts
of fully consolidated subsidiaries, certain non-withdrawable accounts and
pledged customer accounts and "qualifying supervisory goodwill." Tangible
capital is given the same definition as core capital but does not include
qualifying supervisory goodwill and is reduced by the amount of all the savings
institution's intangible assets, with only a limited exception for purchased
mortgage servicing rights. Both core and tangible capital are further reduced
by an amount equal to a savings institution's debt and equity investments in
subsidiaries engaged in activities not permissible to national banks (other
than subsidiaries engaged in activities undertaken as agent for customers or in
mortgage banking activities and subsidiary depository institutions or their
holding companies). At March 31, 1997, the Bank had no subsidiaries which were
engaged in impermissible activities, and therefore did not have a deduction
from its capital calculation.
A savings institution is allowed to include both core capital and supplementary
capital in the calculation of its total capital for purposes of the risk-based
capital requirements, provided that the amount of
28
<PAGE> 31
supplementary capital does not exceed the savings institution's core capital.
Supplementary capital generally consists of hybrid capital instruments;
perpetual preferred stock which is not eligible to be included as core capital;
subordinated debt and intermediate-term preferred stock; and, subject to
limitations, general allowances for loan losses. Assets are adjusted under the
risk-based guidelines to take into account different risk characteristics, with
the categories ranging from 0% (requiring no additional capital) for assets
such as cash to 100% for repossessed assets or loans more than 90 days past
due. Single-family residential real estate loans which are not more than 90
days past-due or non-performing and which have been made in accordance with
prudent underwriting standards are assigned a 50% level in the risk-weighing
system, as are certain privately-issued mortgage-backed securities representing
indirect ownership of such loans. Off-balance sheet items also are adjusted to
take into account certain risk characteristics.
OTS policy imposes a limitation on the amount of net deferred tax assets under
SFAS No. 109 that may be included in regulatory capital. (Net deferred tax
assets represent deferred tax assets, reduced by any valuation allowances, in
excess of deferred tax liabilities.) Application of the limit depends on the
possible sources of taxable income available to an institution to realize
deferred tax assets. Deferred tax assets that can be realized from the
following generally are not limited: taxes paid in prior carryback years and
future reversals of existing taxable temporary differences. To the extent that
the realization of deferred tax assets depends on an institution's future
taxable income (exclusive of reversing temporary differences and carry
forwards), or its tax-planning strategies, such deferred tax assets are limited
for regulatory capital purposes to the lesser of the amount that can be
realized within one year of the quarter-end report date or 10% of core capital.
The foregoing considerations did not affect the calculation of the Bank's
regulatory capital at March 31, 1997.
In August 1993, the OTS adopted a final rule incorporating an interest-rate
risk component into the risk-based capital regulation. Under the rule, an
institution with a greater than "normal" level of interest rate risk will be
subject to a deduction of its interest rate risk component from total capital
for purposes of calculating the risk-based capital requirement. As a result,
such an institution will be required to maintain additional capital in order to
comply with the risk-based capital requirement. Although the final rule was
originally scheduled to be effective as of January 1994, the OTS has not yet
established an effective date for the capital deduction. Management of the
Company does not believe that the OTS' adoption of an interest rate risk
component to the risk-based capital requirement will adversely affect the Bank
if it becomes effective in its current form.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Capital Resources" incorporated by reference in Item 7 hereof
setting forth the Bank's compliance with its capital requirements.
Prompt Corrective Action. Under the FDIA, each federal banking agency is
required to implement a system of prompt corrective action for institutions
which it regulates. The federal banking agencies, including the OTS, have
adopted substantially similar regulations, which became effective December 19,
1992. Under the regulations, an institution shall be deemed to be (i) "well
capitalized" if it has total risk-based capital of 10.0% or more, has a Tier I
risk-based capital ratio of 6.0% or more, has a Tier I
29
<PAGE> 32
leverage capital ratio of 5.0% or more and is not subject to any order or final
capital directive to meet and maintain a specific capital level for any capital
measure, (ii) "adequately capitalized" if it has a total risk-based capital
ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and a
Tier I leverage capital ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized," (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less than
8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier I
leverage capital ratio that is less than 4.0% (3.0% under certain
circumstances), (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital
ratio that is less than 3.0% or a Tier I leverage capital ratio that is less
than 3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. The FDIA and the
regulations promulgated thereunder also specify circumstances under which a
federal banking agency may reclassify a well capitalized institution as
adequately capitalized and may require an adequately capitalized institution or
an undercapitalized institution to comply with supervisory actions as if it
were in the next lower category (except that the FDIC may not reclassify a
significantly undercapitalized institution as critically undercapitalized). At
March 31, 1999, the Bank was in the "well capitalized" category.
Liquidity Requirements. All savings institutions are required to maintain an
average daily balance of liquid assets equal to a certain percentage of the sum
of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary
from time to time (between 4% and 10%) depending upon economic conditions and
savings flows of all savings institutions. At the present time, the required
minimum liquid asset ratio is 5%. The Bank has consistently exceeded such
regulatory liquidity requirement and, at March 31, 1997, had a liquidity ratio
of 6.6%.
QUALIFIED THRIFT LENDER TEST. Under Section 2303 of the Economic Growth and
Regulatory Paperwork Reduction Act of 1996, a savings association can comply
with the QTL test by either meeting the QTL test set forth in the HOLA and
implementing regulations or qualifying as a domestic building and loan
association as defined in Section 7701(a)(19) of the Code. A savings bank
subsidiary of a savings and loan holding company that does not comply with the
QTL test must comply with the following restrictions on it s operations:(i) the
institution may not engage in any new activity or make any new investment,
directly or indirectly, unless such activity or investment is permissible for a
national bank; (ii) the branching powers of the institution shall be restricted
to those of a national bank; (iii) the institution shall not be eligible to
obtain any advances from its FHLB; and (iv) payment for dividends by the
institution shall be subject to the pules regarding payment of dividends by a
national bank. Upon the expiration of three years from the date the savings
institution ceases to meet the QTL test, it must cease any activity and not
retain any investment not permissible for a national bank and immediately repay
any outstanding FHLB advances (subject to safety and soundness considerations).
The QTL test set forth in the HOLA requires that qualified thrift investments
("QTIs") represent 65% of portfolio assets of the savings institution and its
consolidated subsidiaries. Portfolio assets are defined as total assets less
intangibles, property used by a savings association in its business and
liquidity investments in an amount not exceeding 20% of assets. Generally,
QTIs are residential housing related assets. The 1996 amendments allow small
business loans, credit card loans, student loans and loans for personal, family
and household purposes to be included without limitation as qualified
investments. At
30
<PAGE> 33
March 31, 1997, approximately 82.1% of the Bank's assets were invested in QTIs,
which was in excess of the percentage required to qualify the Bank under the
QTL test.
Restrictions on Capital Distributions. OTS regulations govern capital
distributions by savings institutions, which include cash dividends, stock
redemptions or repurchases, cash-out mergers, interest payments on certain
convertible debt and other transactions charged to the capital account of a
savings institution to make capital distributions. Generally, the regulation
creates a safe harbor for specified levels of capital distributions from
institutions meeting at least their minimum capital requirements, so long as
such institutions notify the OTS and receive no objection to the distribution
from the OTS. Savings institutions and distributions that do not qualify for
the safe harbor are required to obtain prior OTS approval before making any
capital distributions.
Generally, savings institutions that before and after the proposed distribution
meet or exceed their fully phased-in capital requirements, or Tier 1
institutions, may make capital distributions during any calendar year equal to
the higher of (i) 100% of net income for the calendar year-to-date plus 50% of
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75%
of net income over the most recent four-quarter period. The "surplus capital
ratio" is defined to mean the percentage by which the institution's ratio of
total capital to assets exceeds the ratio of its fully phased-in capital
requirement to assets. "Fully phased-in capital requirement" is defined to
mean an institution's capital requirement under the applicable statutory and
regulatory standards on December 31, 1994, as modified to reflect any
applicable individual minimum capital requirement imposed upon the institution.
Failure to meet fully phased-in or minimum capital requirements will result in
further restrictions on capital distributions including possible prohibition
without explicit OTS approval.
In order to make distributions under these safe harbors, Tier 1 and Tier 2
institutions must submit written notice to the OTS 30 days prior to making the
distribution. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns. In addition, a Tier 1 institution
deemed to be in need of more than normal supervision by the OTS may be
downgraded to a Tier 2 or Tier 3 institution as a result of such a
determination. The Bank currently is a Tier 1 institution for purposes of the
regulation dealing with capital distributions.
OTS regulations also prohibit the Bank from declaring or paying any dividends
or from repurchasing any of its stock if, as a result, the regulatory (or
total) capital of the Bank would be reduced below the amount required to be
maintained for the liquidation account established by it for certain depositors
in connection with its conversion from mutual to stock form.
On December 5, 1994, the OTS published a notice of proposed rule making to
amend its capital distribution regulation. Under the proposal, institutions
would only be permitted to make capital distributions that would not result in
their capital being reduced below the level required to remain "adequately
capitalized," as defined under "- Prompt Corrective Action" above. Because the
Bank is a subsidiary of a holding company, the proposal would require the Bank
to provide notice to the OTS of its intent to make a capital distribution. The
Bank does not believe that the proposal will adversely affect its ability to
make capital distributions if it is adopted substantially as proposed.
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<PAGE> 34
Community Reinvestment. Under the Community Reinvestment Act of 1977, as
amended ("CRA"), as implemented by OTS regulations, a savings institution has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the OTS, in connection with its examination of a savings
institution, to assess the institution's record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such institution. FIRREA amended the CRA to require public
disclosure of an institution's CRA rating and require the OTS to provide a
written evaluation of an institution's CRA performance utilizing a rating
system which identifies four levels of performance that may describe an
institution's record of meeting community needs: outstanding, satisfactory,
needs to improve and substantial noncompliance. The CRA also requires all
institutions to make public disclosure of their CRA ratings.
Policy Statement on Nationwide Branching. The OTS policy statement on
branching by federally-chartered savings institutions permits nationwide
branching to the extent allowed by federal statute. Current OTS policy
generally permits a federally-chartered savings institution to establish branch
offices outside of its home state if the institution meets the domestic
building and loan test under the Internal Revenue Code or an asset composition
test set forth in the Code, and if, with respect to each state outside of its
home state where the institution has established branches, the branches, taken
alone, also satisfy one of the two tax tests. An institution seeking to take
advantage of this authority would have to have a branching application approved
by the OTS, which would consider the regulatory capital of the institution and
its record under the CRA, as amended, among other things.
Federal Home Loan Bank System. The Bank is a member of the FHLB of Pittsburgh,
which is one of 12 regional FHLBs that administers the home financing credit
function of savings institutions. Each FHLB serves as a reserve or central
bank for its members within its assigned region. It is funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB System.
It makes loans to members (i.e., advances) in accordance with policies and
procedures established by the Board of Directors of the FHLB.
As a member, the Bank is required to purchase and maintain stock in the FHLB of
Pittsburgh in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year or 5% of its advances from the FHLB of Pittsburgh,
whichever is greater. At March 31, 1997, the Bank had $21.9 million in FHLB
stock, which was in compliance with this requirement.
Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain reserves against their transaction accounts and
non-personal time customer accounts. At March 31, 1997, the Bank was in
compliance with applicable requirements. However, because required reserves
must be maintained in the form of vault cash or a non-interest-bearing account
at a Federal Reserve Bank, the effect of this reserve requirement is to reduce
an institution's earning assets.
32
<PAGE> 35
FEDERAL AND STATE TAXATION
General. The Company and the Bank are subject to the corporate tax provisions
of the Internal Revenue Code of 1986 (the "Code"), as well as certain
additional provisions of the Code which apply to thrift and other types of
financial institutions. The following discussion of tax matters is intended
only as a summary and does not purport to be a comprehensive description of the
tax rules applicable to the Company and the Bank. The Company and its
subsidiaries file a consolidated federal income tax return.
Bad Debt Reserves. The Company had previously established a deferred tax
liability representing the estimated income taxes payable in the event that the
Bank were to convert its charter to that of a commercial bank. Prior to the
passage of the Small Business Job Protection Act of 1996 ("the Act") in August
of 1996, the Company would have been required to recapture and pay taxes on
approximately $17.8 million in bad debt deductions it had previously taken for
tax purposes if it were to convert its charter to that of a commercial bank.
Legislation enacted under the Act provided for the Bank to recapture into
income only the portion of its tax bad debt reserves as of March 31, 1996 that
exceed its base year reserves (i.e.: tax reserves for years beginning before
1988). Under the Act, the amount of the excess base year reserves subject to
recapture would be suspended for each of two successive tax years beginning
April 1, 1996 in which the Bank originates a minimum amount of certain
residential loans based upon the average of the principal amounts of such loans
the Bank made during its six preceding tax years.
The Company had previously established a deferred tax liability to recapture
both the base year reserves and the excess base year reserves, in anticipation
of changing the Bank's charter to that of a commercial bank. As a result of the
signing of the Act, the Company recognized approximately $3.8 million of income
due to the reversal of the previously established base year tax bad reserve
liability.
The base year tax reserves, which may be subject to recapture if the Bank
ceases to qualify as a bank for federal income tax purposes, are restricted to
certain distributions. Under the provisions of the Act, the Bank is considered
a "large bank" (i.e., a bank that has total assets in excess of $500 million)
and may only claim actual charge-offs of loans as tax bad debt deductions for
tax years beginning after December 31, 1995.
Minimum Tax. The Code imposes an alternative minimum tax at a rate of 20% on a
base of regular taxable income plus certain tax preferences ("alternative
minimum taxable income" or "AMTI"). The alternative minimum tax is payable to
the extent such AMTI is in excess of an exemption amount. The Code provides
that an item of tax preference is the excess of bad debt deduction allowable
for a taxable year pursuant to the percentage of taxable income method over the
amount allowable under the experience method. The other items of tax
preference that constitute AMTI include (a) tax exempt interest on newly-issued
(generally, issued on or after August 8, 1986) privately activity bonds other
than certain qualified bonds and (b) for taxable years beginning after 1989,
75% of the excess (if any) of (I) adjusted current earnings as defined in the
Code, over (ii) AMTI (determined without regard to this preference and prior to
reduction by net operating losses). Net operating losses can offset no more
than 90% of AMTI. Certain payments of alternative minimum tax may be used as
credits against regular tax
33
<PAGE> 36
liabilities in future years. In addition, for taxable years after 1986 and
beginning before January 1, 1996, the Company is also subject to an
environmental tax equal to 0.12% of the excess of AMTI for the taxable year
over $2.0 million.
Audit by IRS. The Company's consolidated federal income tax returns for taxable
years through December 31, 1992 have been closed for the purpose of examination
by the IRS.
State Taxation. The Company and its non-thrift Pennsylvania subsidiaries are
subject to the Pennsylvania Corporate Net Income Tax and Capital Stock and
Franchise Tax. The Corporate Net Income Tax rate for 1997 is 9.99% and is
imposed on the Company's and its non-thrift subsidiaries unconsolidated taxable
income for federal purposes with certain adjustments. In general, the Capital
Stock Tax is a property tax imposed at the rate of 1.275% of a corporation's
capital stock value, which is determined in accordance with a fixed formula.
The Bank is taxed under the Pennsylvania Mutual Thrift Institutions Tax Act
(the "MTIT"), as amended to include thrift institutions having capital stock.
Pursuant to the MTIT, the Company's tax rate is 11.5%. The MTIT exempts the
Company from all other taxes imposed by the Commonwealth of Pennsylvania for
state income tax purposes and from all local taxation imposed by political
subdivisions, except taxes on real estate and real estate transfers. The MTIT
is a tax upon net earnings, determined in accordance with generally accept
accounting principals ("GAAP") with certain adjustments. The MTIT, in
computing GAAP income, allows for the deduction of interest earned on state and
federal securities, while disallowing a percentage of a thrift's interest
expense deduction in the proportion of interest income on those securities to
the overall interest income of the Company. Net operating losses, if any,
thereafter can be carried forward three years for MTIT purposes. As of March
31, 1997, the Company has net operating loss carryforwards of approximately
300,000 for MTIT tax purposes which will expire March 31, 1998 if not utilized.
Upon conversion to a commercial bank charter, the Bank will no longer be
subject to the MTIT, but will become subject to the Pennsylvania Company Shares
Tax, which is a tax on an average of the most recent six years net worth of the
Bank on January 1 of each year, after exclusion of a portion of certain
government securities. The current rate applicable to the Pennsylvania Bank
Shares Tax is 1.25%. See Note 11 of the Notes to Consolidated Financial
Statements, incorporated herein by reference, for further information regarding
taxation.
34
<PAGE> 37
ITEM 2. PROPERTIES
At March 31, 1997, the Company conducted business from its executive offices
located in Villanova, Pennsylvania and 24 full service offices located in
Chester, Delaware and Montgomery Counties, Pennsylvania. See generally Note 14
of the Notes to Consolidated Financial Statements incorporated by reference in
Item 8 hereof.
The following table sets forth certain information with respect to the
Company's offices at March 31, 1997.
35
<PAGE> 38
<TABLE>
<CAPTION>
Net Book Amount of
Value of Customer
Description/Address Leased/Owned Property Accounts
--------------------- -------------- ---------- ----------
<S> <C> <C> <C>
Executive Offices:
- ------------------
Two Aldwyn Center Owned $4,573 -
Lancaster Avenue and Rt. 320
Villanova, PA 19085
Branch Offices:
1415 Old York Road Leased(12) 8 $7,627
Abington, PA 19001
Two Aldwyn Center Owned 44,899
Lancaster Avenue and Rt. 320
Villanova, PA 19085
44 E. Lancaster Ave. Owned 361 99,912
Ardmore, PA 19003
1770 W. Dekalb Pike Leased(1) 54 24,606
Blue Bell, PA 19422
3001 West Chester Pike Owned 419 80,812
Broomall, PA 19008
44 N. Bryn Mawr Ave. Owned 262 55,203
Bryn Mawr, PA 19010
407 Second Ave. (Rt. 29) Leased(9) 488 3,188
Collegeville, PA, 19426
MacDade Blvd. & Chester Pike Owned 322 37,764
Collingdale, PA 19023
612 Fayette Street Leased(14) 32 6,108
Conshohocken, PA 19428
133 Lancaster Ave. Owned 573 53,889
Devon, PA 19333
Dreshertown Rd. & Limekiln Pike Leased(13) 40 6,894
Dresher, PA 19025
5116 State Road Leased(3) 20 7,588
Drexel Hill, PA 19026
</TABLE>
(Continued)
36
<PAGE> 39
<TABLE>
<CAPTION>
Net Book
Value of Amount of
Description/Address Leased/Owned Property Deposits
------------------- ------------ -------- --------
<S> <C> <C> <C>
Marchwood Shopping Center Leased(4) $20 $24,185
Exton, PA 19341
1140 West Chester Pike Owned 501 26,297
Goshen, PA 19382
Manoa Shopping Center Leased(5) 127 57,768
Havertown, PA 19083
Rt. 309 & Orvilla Rd. (1513 Hilltown Leased(11) 636 5,540
Crossings Shopping)
Hilltown, PA 19440
677 DeKalb Pike Leased(6) 700 30,726
King of Prussia, PA 19406
1758 Allentown Rd. Leased(10) 499 6,502
Lansdale, PA 19446
Front and Orange Streets Owned 253 72,291
Media, PA 19063
3557 W. Chester Pike Leased(7) 31 10,174
Newtown Square, PA 19073
49 E. Lancaster Ave. Owned 1,221 24,573
Paoli, PA 19301
1141 Baltimore Pike Leased(8) 50 17,520
Springfield, PA 19064
123 W. Lancaster Ave. Owned 224 62,568
Wayne, PA 19087
33 W. Gay Street Owned 332 8,876
West Chester, PA 19380
Other Administrative Offices:
One Aldwyn Center Owned 929 32,491 (9)
Lancaster Ave. & Rt. 320
Villanova, PA 19085
</TABLE>
- -----------
(1) Lease expiration date is 06/30/2010; the Company has three
five-year renewal options.
(3) Lease expiration date is August 31, 2001; the Company has three
three-year renewal options.
37
<PAGE> 40
(2) Lease expiration date is September 30, 2001; the Company has two
five-year renewal options.
(4) Lease expiration date is August 31, 2001.
(5) Lease expiration date is November 30, 1999; the Company has two
five-year renewal options.
(6) Lease expiration date is March 31, 2002; the Company has one
five-year renewal option.
(7) Lease expiration date is September 30, 1998; the Company has
three five-year renewal options.
(8) Lease expiration date is July 31, 2004; the Company has three
five-year renewal options.
(9) Comprised of custodial accounts associated with the Company's loan
servicing for others. See "Loan Lending Activities - Loan
Servicing.
(10) Lease expiration date is August 30, 2011; the Company has three
five-year renewal options.
(11) Lease expiration date is September 30, 2016; the Company has one
ten-year renewal option.
(12) Lease expiration date is August 31, 2011; the Company has one
five-year renewal option.
(13) Lease expiration date is September 30, 2001; the Company has two
five-year renewal options.
(14) Lease expiration date is October 31, 2011; the Company has a
fifteen-year and five-year renewal option.
ITEM 3. LEGAL PROCEEDINGS.
The Company and the Bank are involved in routine legal proceedings occurring in
the ordinary course of business which, in the aggregate, are believed by
management to be immaterial to the financial condition and results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required herein is incorporated by reference from page 9 of the
Registrant's 1997 Annual Report to Stockholders ("Annual Report").
ITEM 6. SELECTED FINANCIAL DATA.
The information required herein is incorporated by reference from page 9 of the
Registrant's 1997 Annual Report.
38
<PAGE> 41
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required herein is incorporated by reference from pages 10 to
18 of the Registrant's 1997 Annual Report.
ITEM 8. FINANCIAL STATEMENTS.
The information required herein is incorporated by reference from pages 19 to
40 of the Registrant's 1997 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required herein is incorporated by reference from pages 5 to 7
of the Registrant's Proxy Statement dated June 13, 1997 ("Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
The information required herein is incorporated by reference from pages 7 to 10
of the Registrant's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required herein is incorporated by reference from pages 3 and 4
of the Registrant's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required herein is incorporated by reference from pages 14 and
15 of the Registrant's Proxy Statement.
39
<PAGE> 42
PART IV
ITEM 14. EXHIBITS. LIST AND REPORTS ON FORM 8-K
(a)(1) The Following exhibits are filed as part of this Form 10-K, and
this list includes the Exhibit Index.
No. Description
3.1 Articles of Incorporation of ML Bancorp, Inc. (1)
3.2 Bylaws of ML Bancorp, Inc. (1)
4.1 Specimen Stock Certificate of ML Bancorp, Inc. (1)
4.2 Amended and Restated Declaration of Trust relating to ML
Capital Trust I, dated as of March 10, 1997, between ML
Bancorp, Inc. and the trustees named therein.
4.3 Form of Common Securities and form of Capital Securities of ML
Capital Trust I (included as exhibits to the Amended and
Restated Declaration included as Exhibit 4.2).
4.4 Indenture, dated as of March 10, 1997, between the Company and
The Bank of New York, as trustee, relating to Junior
Subordinated Deferrable Interest Debentures due 2027 of ML
Bancorp, Inc.
4.5 Form of Junior Subordinated Deferrable Interest Debentures due
2027 of ML Bancorp, Inc. (included as Exhibit A to the
Indenture included as Exhibit 4.4).
4.6 Series A Capital Securities Guarantee Agreement, dated as of
March 10, 1997, relating to the Series A capital Securities of
ML Capital Trust I
4.7 Common Securities Guarantee Agreement, dated as of March 10,
1997, relating to the Common Securities of ML Capital Trust I.
10.1 Employee Stock Ownership Plan and Trust of ML Bancorp, Inc. (1)
10.2 Employment Agreements between ML Bancorp, Inc. and Main Line
Bank and Dennis S. Marlo (3)
10.3 Form of Employment Agreement between ML Bancorp, Inc. and
Robert M. Campbell, Jr., Joseph M. Blaston and Brian M.
Hartline (1)*
10.4 1994 Stock Option Plan (2)*
40
<PAGE> 43
10.5 1994 Recognition and Retention Plan and Trust Agreement (2)*
*Management contract or compensatory plan or arrangement.
10.6 1997 Stock Option Plan (4)
13 1997 Annual Report to Stockholders specified portion of the
Registrant's Annual Report to Stockholders for the year ended
March 31, 1997.
21 Subsidiaries of the Registrant - Reference is made to Item 1.
"Business" for the required information
23 Consent of Accountants
27 Financial Data Schedule
- ---------
(1)Incorporated by reference from the Registration Statement on Form
S-1 (Registration No. 33-76666) filed by the Registrant with the
Securities and Exchange Commission on March 18, 1994, as amended.
41
<PAGE> 44
(2)Incorporated by reference from the Annual Report on Form 10-K for
the year ended March 31, 1995 filed by the Registrant with the
Securities and Exchange Commission on June 29, 1995.
(3)Incorporated by reference from the Annual Report on Form 10-K for
the year ended March 31, 1996 filed by the Registrant with the
Securities and Exchange Commission on July 1, 1996.
(4)Incorporated by reference from the Proxy Statement for the Annual
Meeting of Stockholders held on July 25, 1997 filed by the Registrant
with the Securities and Exchange Commission on June 17, 1997.
(a)(2) The following documents are filed as part of this Form 10-K
and are incorporated herein by reference from the Registrant's 1997
Annual Report.
Independent Auditors' Report.
Consolidated Statements of Operations for each of the years in the
three year period ended March 31, 1997
Consolidated Statements of Financial Condition as of March 31, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity for each of
the years in the three year period ended March 31, 1997
Consolidated Statements of Cash Flows for each of the years in the
three year period ended March 31, 1997
Notes to the Consolidated Financial Statements
(a)(3) All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
omitted because they are not applicable or the required information is
included in the Consolidated Financial Statements or notes thereto.
(b) Reports filed on Form 8-K.
42
<PAGE> 45
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MLF BANCORP, INC.
By: /s/ Dennis S. Marlo
--------------------------------------
Dennis S. Marlo
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<S> <C>
/s/ Dennis S. Marlo June 26, 1997
- -----------------------------------------
Dennis S. Marlo
President, Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Brian M. Hartline June 26, 1997
- -----------------------------------------
Brian M. Hartline
Secretary, Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
/s/ John R. Eppinger June 26, 1997
- -----------------------------------------
John R. Eppinger
Chairman of the Board
</TABLE>
<PAGE> 46
<TABLE>
<S> <C>
/s/ David B. Hastings June 26, 1997
- -----------------------------------------
David B. Hastings
Director
/s/ John J. Leahy June 26, 1997
- -----------------------------------------
John J. Leahy
Director
/s/ Henry M. Luedecke June 26, 1997
- -----------------------------------------
Henry M. Luedecke
Director
/s/ Allan Woolford June 26, 1997
- -----------------------------------------
Allan Woolford
Director
</TABLE>
<PAGE> 1
Exhibit 4.2
Amended and Restated Declaration of Trust relating to ML Capital Trust I, dated
as of March 10, 1997, between ML Bancorp, Inc. and the trustees named therein
<PAGE> 2
EXHIBIT 4.2
================================
AMENDED AND RESTATED DECLARATION
OF TRUST
ML CAPITAL TRUST I
Dated as of March 10, 1997
================================
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . 9
--------------------------------
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . . 10
------------------------------
SECTION 2.3 Reports by the Property Trustee . . . . . . . . . . . . . 10
-------------------------------
SECTION 2.4 Periodic Reports to Property Trustee . . . . . . . . . . 10
------------------------------------
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . 11
------------------------------------------------
SECTION 2.6 Events of Default; Waiver . . . . . . . . . . . . . . . . 11
-------------------------
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . . 12
------------------------
ARTICLE III
ORGANIZATION
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . 13
----
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . 14
------
SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------
SECTION 3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . 14
---------
SECTION 3.5 Title to Property of the Trust . . . . . . . . . . . . . 14
------------------------------
SECTION 3.6 Powers and Duties of the Administrative Trustees . . . . 14
------------------------------------------------
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees . . 18
----------------------------------------------------
SECTION 3.8 Powers and Duties of the Property Trustee . . . . . . . . 19
-----------------------------------------
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee 21
-----------------------------------------------------------
SECTION 3.10 Certain Rights of Property Trustee . . . . . . . . . . . 23
----------------------------------
SECTION 3.11 Delaware Trustee . . . . . . . . . . . . . . . . . . . . 25
----------------
SECTION 3.12 Execution of Documents . . . . . . . . . . . . . . . . . 25
----------------------
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities . 26
------------------------------------------------------
SECTION 3.14 Duration of Trust . . . . . . . . . . . . . . . . . . . . 26
-----------------
SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities . . . . . . . . . 28
---------------------------------------
SECTION 4.2 Responsibilities of the Sponsor . . . . . . . . . . . . . 28
-------------------------------
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.3 Right to Proceed . . . . . . . . . . . . . . . . . . . . 29
----------------
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee . . . . . . 29
---------------------------------------------
SECTION 5.2 Delaware Trustee . . . . . . . . . . . . . . . . . . . . 30
----------------
SECTION 5.3 Property Trustee; Eligibility . . . . . . . . . . . . . . 30
-----------------------------
SECTION 5.4 Certain Qualifications of Administrative Trustees and
------------------------------------------------------
Delaware Trustee Generally . . . . . . . . . . . . . . . 31
--------------------------
SECTION 5.5 Administrative Trustees . . . . . . . . . . . . . . . . . 31
-----------------------
SECTION 5.6 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . 31
-----------------
SECTION 5.7 Appointment, Removal and Resignation of Trustees . . . . 32
------------------------------------------------
SECTION 5.8 Vacancies among Trustees . . . . . . . . . . . . . . . . 33
------------------------
SECTION 5.9 Effect of Vacancies . . . . . . . . . . . . . . . . . . . 34
-------------------
SECTION 5.10 Meetings . . . . . . . . . . . . . . . . . . . . . . . . 34
--------
SECTION 5.11 Delegation of Power . . . . . . . . . . . . . . . . . . . 35
-------------------
SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business 35
-----------------------------------------------------------
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions . . . . . . . . . . . . . . . . . . . . . . 35
-------------
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities . . . . . . . . . 36
---------------------------------------
SECTION 7.2 Execution and Authentication . . . . . . . . . . . . . . 36
----------------------------
SECTION 7.3 Form and Dating . . . . . . . . . . . . . . . . . . . . . 37
---------------
SECTION 7.4 Registrar, Paying Agent and Exchange Agent . . . . . . . 39
------------------------------------------
SECTION 7.5 Paying Agent to Hold Money in Trust . . . . . . . . . . . 39
-----------------------------------
SECTION 7.6 Replacement Securities . . . . . . . . . . . . . . . . . 40
----------------------
SECTION 7.7 Outstanding Capital Securities . . . . . . . . . . . . . 40
------------------------------
SECTION 7.8 Capital Securities in Treasury . . . . . . . . . . . . . 40
------------------------------
SECTION 7.9 Temporary Securities . . . . . . . . . . . . . . . . . . 41
--------------------
SECTION 7.10 Cancellation . . . . . . . . . . . . . . . . . . . . . . 42
------------
SECTION 7.11 CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . 42
-------------
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust . . . . . . . . . . . . . . . . . . 42
--------------------
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities . . . . . . . . . . . . . . . . . 43
----------------------
SECTION 9.2 Transfer Procedures and Restrictions . . . . . . . . . . 44
------------------------------------
SECTION 9.3 Deemed Security Holders . . . . . . . . . . . . . . . . . 53
-----------------------
SECTION 9.4 Book Entry Interests . . . . . . . . . . . . . . . . . . 53
--------------------
SECTION 9.5 Notices to Clearing Agency . . . . . . . . . . . . . . . 54
--------------------------
SECTION 9.6 Appointment of Successor Clearing Agency . . . . . . . . 54
----------------------------------------
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability . . . . . . . . . . . . . . . . . . . . . . . . 54
---------
SECTION 10.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . . 55
-----------
SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . 55
--------------
SECTION 10.4 Indemnification . . . . . . . . . . . . . . . . . . . . . 56
---------------
SECTION 10.5 Outside Businesses . . . . . . . . . . . . . . . . . . . 59
------------------
SECTION 10.6 Compensation; Fees . . . . . . . . . . . . . . . . . . . 60
------------------
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 60
-----------
SECTION 11.3 Banking . . . . . . . . . . . . . . . . . . . . . . . . . 61
-------
SECTION 11.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . 61
-----------
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . 62
----------
SECTION 12.2 Meetings of the Holders; Action by Written Consent . . . 64
--------------------------------------------------
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee . . . 65
--------------------------------------------------
SECTION 13.2 Representations and Warranties of Delaware Trustee . . . 66
--------------------------------------------------
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement . . . . . . . . . . . . . . 67
-----------------------------
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------
SECTION 15.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . 68
-------------
SECTION 15.3 Intention of the Parties . . . . . . . . . . . . . . . . 68
------------------------
SECTION 15.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . 69
--------
SECTION 15.5 Successors and Assigns . . . . . . . . . . . . . . . . . 69
----------------------
SECTION 15.6 Partial Enforceability . . . . . . . . . . . . . . . . . 69
----------------------
SECTION 15.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . 69
------------
ANNEX I TERMS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE . . . . . . . . . . . . . . . A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE . . . . . . . . . . . . . . . A2-4
EXHIBIT B SPECIMEN OF DEBENTURE . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . D-1
</TABLE>
iv
<PAGE> 7
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(c), 5.3(d)
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4; 3.6(j)
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7(a)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(b)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(e)
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8(e); 3.8(h)
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8(i); 7.5
</TABLE>
- ---------------
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
v
<PAGE> 8
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
ML CAPITAL TRUST I
March 10, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of March 10, 1997, by the Trustees (as defined herein),
the Sponsor (as defined herein) and by the holders, from time to time, of
undivided beneficial interests in the Trust to be issued pursuant to this
Declaration;
WHEREAS, the Trustees (other than the Property Trustee (as
defined herein)) and the Sponsor established ML Capital Trust I (the "Trust"),
a trust formed under the Delaware Business Trust Act pursuant to a Declaration
of Trust dated as of March 3, 1997 (the "Original Declaration"), and a
Certificate of Trust filed with the Secretary of State of the State of Delaware
on March 3 1997, for the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain Debentures of the Debenture Issuer
(each as hereinafter defined), and engaging in only those other activities
necessary, advisable or incidental thereto; and
WHEREAS, as of the date hereof, no interests in the Trust have
been issued; and
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the
Original Declaration;
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a statutory business trust under the Business Trust
Act and that this Declaration constitute the governing instrument of such
business trust, the Trustees declare that all assets contributed to the Trust
will be held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
<PAGE> 9
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the
same meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration as modified, supplemented or
amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections of and
Annexes and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the
same meaning when used in this Declaration unless otherwise defined in
this Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and
vice versa.
"Administrative Trustee" has the meaning set forth in Section
5.1(b).
"Affiliate" has the same meaning as given to that term in Rule
405 under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
"Authorized Officer" of a Person means any other Person that
is authorized to legally bind such former Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a Saturday or a Sunday
or a day on which banking institutions in the City of New York or the City of
Villanova, Pennsylvania are authorized or required by law or executive order to
close.
2
<PAGE> 10
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from
time to time, or any successor legislation.
"Capital Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Capital Securities" means, collectively, the Series A Capital
Securities and the Series B Capital Securities.
"Capital Securities Guarantee" means, collectively, the Series
A Capital Securities Guarantee and the Series B Capital Securities Guarantee.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depositary for the Capital Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Capital
Securities.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Time" means the "Closing Time" under the Purchase
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation.
"Commission" means the United States Securities and Exchange
Commission as from time to time constituted, or if any time after the execution
of this Declaration such Commission is not existing and performing the duties
now assigned to it under applicable Federal securities laws, then the body
performing such duties at such time.
"Common Securities" has the meaning specified in Section
7.1(a).
"Common Securities Guarantee" means the guarantee agreement
dated as of March 10, 1997 of the Sponsor in respect of the Common Securities.
"Company Indemnified Person" means (a) any Administrative
Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers,
directors, shareholders, members,
3
<PAGE> 11
partners, employees, representatives or agents of any Administrative Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Property
Trustee at which the corporate trust business of the Property Trustee shall, at
any particular time, be principally administered, which office at the date of
execution of this Agreement is located at 101 Barclay Street, 21st Floor West,
New York, New York 10286.
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent of (i) the
Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means ML Bancorp, Inc., a Pennsylvania
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer
of the Debentures under the Indenture.
"Debenture Trustee" means The Bank of New York, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means, collectively, the Series A Debentures and
the Series B Debentures.
"Default" means an event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" shall have the meaning set
forth in Section 7.3(c).
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Direct Action" shall have the meaning set forth in Section
3.8(e).
"Distribution" means a distribution payable to Holders in
accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"Event of Default" in respect of the Securities means an Event
of Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
4
<PAGE> 12
"Exchange Agent" has the meaning set forth in Section 7.4.
"Exchange Offer" means the offer that may be made pursuant to
the Registration Rights Agreement (i) by the Trust to exchange Series B Capital
Securities for Series A Capital Securities and (ii) by the Debenture Issuer to
exchange Series B Debentures for Series A Debentures and the Series B Capital
Securities Guarantee for the Series A Capital Securities Guarantee.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Capital Security" has the meaning set forth in Section
7.3(a).
"Holder" means a Person in whose name a Security is
registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of March 10, 1997,
among the Debenture Issuer and the Debenture Trustee, as amended from time to
time.
"Investment Company" means an investment company as defined in
the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Legal Action" has the meaning set forth in Section 3.6(g).
"List of Holders" has the meaning set forth in Section 2.2(a).
"Liquidated Damages" has the meaning set forth in the
Registration Rights Agreement.
"Majority in liquidation amount" means, with respect to the
Trust Securities, except as provided in the terms of the Capital Securities or
by the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting
together as a single class or, as the context may require, Holders of
outstanding Capital Securities or Holders of outstanding Common
5
<PAGE> 13
Securities voting separately as a class, who are the record owners of more than
50% of the aggregate liquidation amount of all outstanding Securities of the
relevant class.
"Offering Memorandum" has the meaning set forth in Section
3.6(b)(i).
"Officers' Certificate" means, with respect to any Person, a
certificate signed by any of the Chairman, a Vice Chairman, the Chief Executive
Officer, the President, a Vice President, the Comptroller, the Secretary or an
Assistant Secretary of such Person. Any Officers' Certificate delivered by the
Trust shall be signed by at least one Administrative Trustee. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that each officer signing the Certificate
has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be an employee of the Sponsor, and who shall be acceptable to the Property
Trustee.
"Paying Agent" has the meaning specified in Section 7.4.
"Payment Amount" has the meaning specified in Section 6.1.
"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.
"PORTAL" has the meaning set forth in Section 3.6(b)(iii).
"Property Trustee" has the meaning set forth in Section
5.3(a).
"Property Trustee Account" has the meaning set forth in
Section 3.8(c)(i).
6
<PAGE> 14
"Purchase Agreement" means the Purchase Agreement for the
initial offering and sale of Capital Securities in the form of Exhibit C.
"QIBs" shall mean qualified institutional buyers as defined in
Rule 144A.
"Quorum" means a majority of the Administrative Trustees or,
if there are only two Administrative Trustees, both of them.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of March 10, 1997, by and among the Trust, the Debenture
Issuer and the initial purchaser named therein, as amended from time to time.
"Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means any officer within the Corporate
Trust Office of the Property Trustee with direct responsibility for the
administration of this Declaration 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.
"Restricted Definitive Capital Securities" has the meaning set
forth in Section 7.3(c).
"Restricted Capital Security" means a Capital Security
required by Section 9.2 to contain a Restricted Securities Legend.
"Restricted Securities Legend" has the meaning set forth in
Section 9.2(i).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act,
or any successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
7
<PAGE> 15
"Rule 144A" means Rule 144A under the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Securities" or "Trust Securities" means the Common Securities
and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee
and the Capital Securities Guarantee.
"Series A Capital Securities" has the meaning specified in
Section 7.1(a) and may be alternatively referred to as the 9.875% Capital
Securities.
"Series A Capital Securities Guarantee" means the guarantee
agreement dated as of March 10, 1997, by the Sponsor in respect of the Series A
Capital Securities.
"Series A Debentures" means the Series A 9.875% Junior
Subordinated Deferrable Interest Debentures due March 1, 2027 of the Debenture
Issuer issued pursuant to the Indenture.
"Series B Capital Securities" has the meaning specified in
Section 7.1(a).
"Series B Capital Securities Guarantee" means the guarantee
agreement to be entered in connection with the Exchange Offer by the Sponsor in
respect of the Series B Capital Securities.
"Series B Debentures" means the Series B 9.875% Junior
Subordinated Deferrable Interest Debentures due March 1, 2027 of the Debenture
Issuer issued pursuant to the Indenture.
"Special Event" has the meaning set forth in Section 4(c) of
Annex I hereto.
"Sponsor" means ML Bancorp, Inc., a Pennsylvania corporation,
or any successor entity resulting from any merger, consolidation, amalgamation
or other business combination, in its capacity as sponsor of the Trust.
"Successor Entity" has the meaning set forth in Section
3.15(b)(i).
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
8
<PAGE> 16
"10% in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding
Capital Securities or Holders of outstanding Common Securities voting
separately as a class, who are the record owners of 10% or more of the
aggregate liquidation amount of all outstanding Securities of the relevant
class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue as a trustee in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Unrestricted Global Capital Security" has the meaning set
forth in Section 9.2(b).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of
the Trust Indenture Act that are required to be part of this Declaration in
order for this Declaration to be qualified under the Trust Indenture Act and
shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee
which is a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
9
<PAGE> 17
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrative Trustees
on behalf of the Trust shall provide the Property Trustee, unless the Property
Trustee is Registrar for the Securities, (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, provided that neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time that the List of Holders does not differ from
the most recent List of Holders given to the Property Trustee by the Sponsor
and the Administrative Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of
Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity), provided that the Property Trustee may destroy any
List of Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture
Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year, commencing May 15,
1997, the Property Trustee shall provide to the Holders of the Capital
Securities such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Property Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Administrative Trustees on behalf
of the Trust shall provide to the Property Trustee such documents, reports and
information as are required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314(a)(4) of the Trust
Indenture Act, such compliance certificate to be delivered annually on or
before 120 days after the end of each fiscal year of the Sponsor. Delivery of
such documents, reports and information to the Property Trustee is for
informational purposes only and the Property Trustee's receipt of such shall
not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the
10
<PAGE> 18
Sponsor's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Administrative Trustees on behalf
of the Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Capital Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in aggregate principal amount of the holders of the
Debentures (a "Super Majority") to be waived under the Indenture, the
Event of Default under the Declaration may only be waived by the vote
of the Holders of at least the proportion in aggregate liquidation
amount of the Capital Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders
of the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of
the Common Securities may, by vote, on behalf of the Holders of all of the
Common Securities, waive any
11
<PAGE> 19
past Event of Default with respect to the Common Securities and its
consequences, provided that, if the underlying Event of Default under the
Indenture:
(i) is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super Majority to
be waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the Declaration as
provided below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in aggregate liquidation amount of the Common
Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding;
provided further, the Holders of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and their consequences if all Events of Default with respect
to the Capital Securities have been cured, waived or otherwise eliminated, and
until such Events of Default have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf
of the Holders of the Capital Securities and only the Holders of the Capital
Securities will have the right to direct the Property Trustee in accordance
with the terms of the Securities. The foregoing provisions of this Section
2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture
by the Property Trustee, at the direction of the Holders of the Capital
Securities, constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after
the occurrence of a default actually known to a Responsible Officer, transmit
by mail, first class postage prepaid,
12
<PAGE> 20
to the Holders, notices of all defaults with respect to the Securities actually
known to a Responsible Officer, unless such defaults have been cured before the
giving of such notice (the term "defaults" for the purposes of this Section
2.7(a) being hereby defined to be an Event of Default as defined in the
Indenture, not including any periods of grace provided for therein and
irrespective of the giving of any notice provided therein); provided that,
except for a default in the payment of principal of (or premium, if any) or
interest (including Compounded Interest and Additional Sums (as such terms are
defined in the Indenture), if any) or Liquidated Damages (as defined in the
Registration Rights Agreement) on any of the Debentures, the Property Trustee
shall be protected in withholding such notice if and so long as a Responsible
Officer in good faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Property Trustee shall not be deemed to have
knowledge of any default except:
(i) a default under Sections 5.01(a) (other than the
payment of Compounded Interest, Additional Sums and Liquidated
Damages) and 5.01(b) of the Indenture; or
(ii) any default as to which the Property Trustee shall
have received written notice or of which a Responsible Officer charged
with the administration of the Declaration shall have actual
knowledge.
(c) Within ten Business Days after the occurrence of
any Event of Default actually known to the Property Trustee, the Property
Trustee shall transmit notice of such Event of Default to the Holders of the
Capital Securities, the Administrative Trustees and the Sponsor, unless such
Event of Default shall have been cured or waived. The Sponsor and the
Administrative Trustees shall file annually with the Property Trustee a
certification as to whether or not they are in compliance with all the
conditions and covenants applicable to them under this Declaration.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "ML Capital Trust I" as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Delaware Trustee, the Property Trustee and the Holders. The
Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.
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SECTION 3.2 Office.
The address of the principal office of the Trust is c/o ML
Bancorp, Inc., Two Aldwyn Center, Lancaster Avenue & Route 320, Villanova,
Pennsylvania 19085. On ten Business Days written notice to the Delaware
Trustee, the Property Trustee and the Holders of Securities, the Administrative
Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities, (b) use the proceeds from the sale of the Securities
to acquire the Debentures, and (c) except as otherwise limited herein, to
engage in only those other activities necessary, advisable or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, mortgage or pledge any of its assets, or otherwise
undertake (or permit to be undertaken) any activity that would cause the Trust
not to be classified for United States federal income tax purposes as a grantor
trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to
the specific duties of the Property Trustee, the Administrative Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no Person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the
Debentures and the Property Trustee Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 Powers and Duties of the Administrative Trustees.
The Administrative Trustees shall have the exclusive power,
duty and authority to cause the Trust to engage in the following activities:
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(a) to issue and sell the Securities in accordance with
this Declaration; provided, however, that except as contemplated in Section
7.1(a), (i) the Trust may issue no more than one series of Capital Securities
and no more than one series of Common Securities, (ii) there shall be no
interests in the Trust other than the Securities, and (iii) the issuance of
Securities shall be limited to a simultaneous issuance of both Capital
Securities and Common Securities at the Closing Time;
(b) in connection with the issue and sale of the
Capital Securities and the consummation of the Exchange Offer, at the direction
of the Sponsor, to:
(i) prepare and execute, if necessary, an offering
memorandum (the "Offering Memorandum") in preliminary and final form
prepared by the Sponsor, in relation to the offering and sale of
Series A Capital Securities to qualified institutional buyers in
reliance on Rule 144A under the Securities Act and to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act), and to execute and file with the
Commission, at such time as determined by the Sponsor, any
Registration Statement, including any amendments thereto, as
contemplated by the Registration Rights Agreement;
(ii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be
necessary, in order to qualify or register all or part of the Capital
Securities in any State in which the Sponsor has determined to qualify
or register such Capital Securities for sale;
(iii) execute and file an application, prepared by the
Sponsor, to permit the Capital Securities to trade or be quoted or
listed in or on the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market or any other securities exchange,
quotation system or the Nasdaq Stock Market's National Market;
(iv) execute and deliver letters, documents or
instruments with DTC and other Clearing Agencies relating to the
Capital Securities;
(v) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act; and
(vi) execute and enter into the Purchase Agreement and
the Registration Rights Agreement providing for the sale and
registration of the Capital Securities;
(c) to acquire the Series A Debentures with the
proceeds of the sale of the Series A Capital Securities and the Common
Securities and to exchange the Series A Debentures for a like principal amount
of Series B Debentures, pursuant to the Exchange Offer; provided, however, that
the Administrative Trustees shall cause legal title to the
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Debentures to be held of record in the name of the Property Trustee for the
benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all
actions to be taken hereunder that require a record date be established,
including and with respect to, for the purposes of Section 316(c) of the Trust
Indenture Act, Distributions, voting rights, redemptions and exchanges, and to
issue relevant notices to the Holders of Capital Securities and Holders of
Common Securities as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may
be required of the Administrative Trustees pursuant to the terms of the
Securities;
(g) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise adjust claims or demands of or
against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the
Property Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents
(who may be designated as officers with titles) and managers, contractors,
advisors and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(j) to give the certificate required by Section
314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate
may be executed by any Administrative Trustee;
(k) to incur expenses that are necessary or incidental
to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as,
Registrar and Exchange Agent for the Securities or to appoint a Paying Agent
for the Securities as provided in Section 7.4 except for such time as such
power to appoint a Paying Agent is vested in the Property Trustee;
(m) to give prompt written notice to the Property
Trustee and to Holders of any notice received from the Debenture Issuer of its
election to defer payments of interest on the Debentures by extending the
interest payment period under the Indenture;
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(n) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business trust
under the laws of the State of Delaware and of each other jurisdiction in which
such existence is necessary to protect the limited liability of the Holders or
to enable the Trust to effect the purposes for which the Trust was created;
(o) to take any action, not inconsistent with this
Declaration or with applicable law, that the Administrative Trustees determine
in their discretion to be necessary or desirable in carrying out the activities
of the Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the Investment
Company Act;
(ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure
that the Debentures will be treated as indebtedness of the Debenture
Issuer for United States federal income tax purposes;
(p) to take all action necessary to consummate the
Exchange Offer or otherwise cause the Capital Securities to be registered
pursuant to an effective registration statement in accordance with the
provisions of the Registration Rights Agreement;
(q) to take all action necessary to cause all
applicable tax returns and tax information reports that are required to be
filed with respect to the Trust to be duly prepared and filed by the
Administrative Trustees, on behalf of the Trust; and
(r) to execute all documents or instruments, perform
all duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing.
The Administrative Trustees must exercise the powers set forth
in this Section 3.6 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Administrative Trustees
shall not take any action that is inconsistent with the purposes and functions
of the Trust set forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall
have none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
The Administrative Trustees shall take all actions on behalf
of the Trust that are not specifically required by this Declaration to be taken
by any other Trustee.
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Any expenses incurred by the Administrative Trustees pursuant
to this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including
the Property Trustee and the Delaware Trustee) shall not, engage in any
activity other than as required or authorized by this Declaration. The Trust
shall not:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to
Holders pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as
to vary the Trust assets or the terms of the Securities in any way
whatsoever, except as otherwise expressly provided herein;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust other
than the Securities;
(vii) other than as provided in this Declaration or Annex
I, (A) direct the time, method and place of conducting any proceeding
with respect to any remedy available to the Debenture Trustee, or
exercising any trust or power conferred upon the Debenture Trustee
with respect to the Debentures, (B) waive any past default that is
waivable under the Indenture or (C) exercise any right to rescind or
annul any declaration that the principal of all the Debentures shall
be due and payable; or
(viii) consent to any amendment, modification or
termination of the Indenture or the Debentures where such
consent shall be required unless the Trust shall have received an
opinion of independent tax counsel experienced in such matters to the
effect that such amendment, modification or termination will not cause
more than an insubstantial risk that for United States federal income
tax purposes the Trust will not be classified as a grantor trust.
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SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by
and held of record in the name of the Property Trustee in trust for the benefit
of the Holders. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.7. Such vesting and
cessation of title shall be effective whether or not conveyancing documents
with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right,
title and interest in the Debentures to the Administrative Trustees or to the
Delaware Trustee (if the Property Trustee does not also act as Delaware
Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the name of
and under the exclusive control of the Property Trustee on behalf of
the Holders and, upon the receipt of payments of funds made in respect
of the Debentures held by the Property Trustee, deposit such funds
into the Property Trustee Account and make payments or cause the
Paying Agent to make payments to the Holders from the Property Trustee
Account in accordance with Section 6.1. Funds in the Property Trustee
Account shall be held uninvested until disbursed in accordance with
this Declaration. The Property Trustee Account shall be an account
that is maintained with a banking institution the rating on whose
long-term unsecured indebtedness by a "nationally recognized
statistical rating organization", as that term is defined for purposes
of Rule 436(g)(2) under the Securities Act, is at least investment
grade;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Trust
Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the
Securities, engage in such ministerial activities as shall be
necessary or appropriate to effect the distribution of the Debentures
to Holders upon the occurrence of certain events.
(d) The Property Trustee shall take all actions and
perform such duties as may be specifically required of the Property Trustee
pursuant to the terms of the Securities.
(e) Subject to Section 3.9(a), the Property Trustee
shall take any Legal Action which arises out of or in connection with an Event
of Default of which a Responsible Officer has actual knowledge or the Property
Trustee's duties and obligations under this
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Declaration or the Trust Indenture Act. If an Event of Default has occurred
and is continuing and such event is attributable to the failure of the
Debenture Issuer to pay the principal of or premium, if any, or interest
(including Compounded Interest and Additional Sums, if any) or Liquidated
Damages, if any, on the Debentures on the date such principal, premium, if any,
or interest (including Compounded Interest and Additional Sums, if any) or
Liquidated Damages, if any, is otherwise payable (or in the case of redemption,
on the redemption date), then a Holder of Capital Securities may directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or premium, if any, or interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, on the Debentures
having a principal amount equal to the aggregate liquidation amount of the
Capital Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such
Direct Action, the rights of the Holders of the Common Securities will be
subrogated to the rights of such Holder of Capital Securities to the extent of
any payment made by the Debenture Issuer to such Holder of Capital Securities
in such Direct Action. Except as provided in the preceding sentence, the
Holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Debentures.
(f) The Property Trustee shall not resign as a Trustee
unless either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders pursuant to the
terms of the Securities; or
(ii) a successor Property Trustee has been appointed and
has accepted that appointment in accordance with Section 5.7 (a
"Successor Property Trustee").
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer occurs and is continuing, the Property Trustee shall, for the benefit
of Holders, enforce its rights as holder of the Debentures subject to the
rights of the Holders pursuant to the terms of such Securities.
(h) The Property Trustee shall be authorized to
undertake any actions set forth in Section 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying
Agent, the Property Trustee may authorize one or more Persons to act as
additional Paying Agents and to pay Distributions, redemption payments or
liquidation payments on behalf of the Trust with respect to all Securities and
any such Paying Agent shall comply with Section 317(b) of the Trust Indenture
Act. Any such additional Paying Agent may be removed by the Property Trustee
at any time the Property Trustee remains as Paying Agent and a successor Paying
Agent or additional Paying Agents may be (but are not required to be) appointed
at any time by the Property Trustee while the Property Trustee is so acting as
Paying Agent.
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(j) Subject to this Section 3.8, the Property Trustee
shall have none of the duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 3.6.
Notwithstanding anything expressed or implied to the contrary
in this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee
must exercise the powers set forth in this Section 3.8 in a manner that is
consistent with the purposes and functions of the Trust set out in Section 3.3
and (ii) the Property Trustee shall not take any action that is inconsistent
with the purposes and functions of the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and in the Securities and no implied covenants shall
be read into this Declaration against the Property Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.6) of which a Responsible Officer has actual knowledge, the Property Trustee
shall exercise such of the rights and powers vested in it by this Declaration,
and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(b) No provision of this Declaration shall be construed
to relieve the Property Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Property
Trustee shall be determined solely by the express provisions
of this Declaration and in the Securities and the Property
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Declaration and in the Securities, and no implied covenants or
obligations shall be read into this Declaration or the
Securities against the Property Trustee; and
(B) in the absence of bad faith on the part of
the Property Trustee, the Property Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Property Trustee and conforming to
the requirements of this Declaration; provided, however, that
in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to
the Property Trustee, the Property Trustee shall
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be under a duty to examine the same to determine whether or
not they conform to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the Property
Trustee against such risk or liability is not reasonably assured to
it;
(v) the Property Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the Debentures
and the Property Trustee Account shall be to deal with such property
in a similar manner as the Property Trustee deals with similar
property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor. Money held by the Property Trustee need
not be segregated from other funds held by it except in relation to
the Property Trustee Account maintained by the Property Trustee
pursuant to Section 3.8(c)(i) and except to the extent otherwise
required by law;
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Sponsor with their respective duties under this Declaration, nor shall
the Property Trustee be liable for any default or misconduct of the
Administrative Trustees or the Sponsor; and
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(ix) the Trustee shall not be deemed to have notice of any
Event of Default unless a Responsible Officer of the Trustee has
actual knowledge thereof or unless written notice of any event which
is in fact such a default is received by the Trustee at the Corporate
Trust Office of the Trustee, and such notice references the Securities
and this Indenture.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and
shall be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the
Administrative Trustees contemplated by this Declaration may be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration,
the Property Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrative Trustees;
(iv) the Property Trustee shall have no duty to see to
any recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel or
other experts of its selection and the advice or opinion of such
counsel and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any
of its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
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(vi) the Property Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless such
Holder shall have provided to the Property Trustee security and
indemnity, reasonably satisfactory to the Property Trustee, against
the costs, expenses (including reasonable attorneys' fees and expenses
and the expenses of the Property Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as
may be requested by the Property Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to relieve the
Property Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney at the sole cost of the Company and
shall incur no liability or additional liability of any kind by reason
of such inquiry or investigation;
(viii) the Property Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or
by or through agents, custodians, nominees or attorneys and the
Property Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders, and the
signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration
the Property Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other
action hereunder, the Property Trustee (i) may request instructions
from the Holders which instructions may only be given by the Holders
of the same proportion in liquidation amount of the Securities as
would be entitled to direct the Property Trustee under the terms of
the Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right
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or taking such other action until such instructions are received and
(iii) shall be protected in conclusively relying on or acting in or
accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Declaration; and
(xii) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith,
without negligence, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Administrative Trustees or the Property Trustee
described in this Declaration. Except as set forth in Section 5.2, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act. In the
event the Delaware Trustee shall at any time be required to take any action or
perform any duty hereunder, the Delaware Trustee shall be entitled to the
benefits of Section 3.9(b)(ii)-(viii) and Section 3.10. No implied covenants
or obligations shall be read into this Declaration against the Delaware
Trustee.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Administrative Trustees,
and except as otherwise required by the Business Trust Act or this Declaration,
any Administrative Trustee is authorized to execute on behalf of the Trust any
documents that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.6; provided that any Registration Statements
contemplated by the Registration Rights Agreement and referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Administrative Trustees.
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SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration, the Debentures or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Article VIII hereof, shall have existence up to March 3, 2028.
SECTION 3.15 Mergers.
(a) The Trust may not merge with or into, consolidate,
amalgamate or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c).
(b) The Trust may, at the request of the Sponsor, with
the consent of the Administrative Trustees or, if there are more than two, a
majority of the Administrative Trustees and without the consent of the Holders,
the Delaware Trustee or the Property Trustee, merge with or into, consolidate,
amalgamate or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations of
the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as the
Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Securities rank with
respect to Distributions and payments upon liquidation,
redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the
Property Trustee as the holder of the Debentures;
(iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on
any national securities exchange or with another organization on which
the Capital Securities are then listed or quoted, if any;
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(iv) if the Capital Securities (including any Successor
Securities) are rated by any nationally recognized statistical rating
organization prior to such transaction, such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
cause the Capital Securities (including any Successor Securities), or
if the Debentures are so rated, the Debentures, to be downgraded by
any nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect
the rights, preferences and privileges of the Holders (including the
holders of any Successor Securities) in any material respect (other
than with respect to any dilution of such Holders' interests in the
new entity);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received
an opinion of an independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders
(including the holders of any Successor Securities) in any
material respect (other than with respect to any dilution of
the Holders' interest in the new entity); and
(B) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor the Successor Entity will be required to
register as an Investment Company;
(viii) the Sponsor or any permitted successor or assignee
owns all of the common securities of such Successor Entity and
guarantees the obligations of such Successor Entity under the Successor
Securities at least to the extent provided by the Capital Securities
Guarantee and the Common Securities Guarantee; and
(ix) there shall have been furnished to the Property
Trustee an Officer's Certificate and an Opinion of Counsel, each to
the effect that all conditions precedent in this Declaration to such
transaction have been satisfied.
(c) Notwithstanding Section 3.15(b), the Trust shall
not, except with the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the
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Trust or the Successor Entity not to be classified as a grantor trust for
United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
At the Closing Time, the Sponsor will purchase all of the
Common Securities then issued by the Trust, in an amount equal to at least 3%
of the total capital of the Trust, at the same time as the Series A Capital
Securities are issued and sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare the Offering Memorandum and to prepare
for filing by the Trust with the Commission any Registration Statement,
including any amendments thereto, as contemplated by the Registration Rights
Agreement;
(b) to determine the States in which to take
appropriate action to qualify or register for sale all or part of the Capital
Securities and to do any and all such acts, other than actions which must be
taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust,
as the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such States;
(c) if deemed necessary or advisable by the Sponsor, to
prepare for filing by the Trust an application to permit the Capital Securities
to trade or be quoted or listed in or on the PORTAL market, or any other
securities exchange, quotation system or the Nasdaq Stock Market's National
Market;
(d) to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A, including any amendments
thereto, relating to the registration of the Capital Securities under Section
12(b) of the Exchange Act; and
(e) to negotiate the terms of the Purchase Agreement
and the Registration Rights Agreement providing for the sale and registration
of the Capital Securities.
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SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on
the Capital Securities is attributable to the failure of the Company to pay
interest or principal on the Debentures, to institute a proceeding directly
against the Debenture Issuer for enforcement of its payment obligations on the
Debentures.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities,
the Sponsor may, by written instrument, increase or decrease the number of
Trustees; and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the Holders of a Majority in
liquidation amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee shall satisfy the requirements
of the Delaware Trustee pursuant to Section 5.2; (2) there shall be at least
one Trustee who is an officer of the Sponsor (an "Administrative Trustee"); and
(3) one Trustee shall be the Property Trustee for so long as this Declaration
is required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements. Notwithstanding the above, unless an Event of Default shall have
occurred and be continuing, at any time or times, for the purpose of meeting
the legal requirements of the Trust Indenture Act or of any jurisdiction in
which any part of the Trust's property may at the time be located, the Holders
of a Majority in liquidation amount of the Common Securities acting as a class
at a meeting of the Holders of the Common Securities, and the Administrative
Trustees shall have power to appoint one or more Persons either to act as a
co-trustee, jointly with the Property Trustee, of all or any part of the
Trust's property, or to act as separate trustee of any such property, in either
case with such powers as may be provided in the instrument of appointment, and
to vest in such Person or Persons in such capacity any property, title, right
or power deemed necessary or desirable, subject to the provisions of this
Declaration. In case an Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make any such appointment of a
co-trustee.
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SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law,
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the
"Property Trustee") which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then for the
purposes of this Section 5.3(a)(ii), the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Property Trustee shall cease to
be eligible to so act under Section 5.3(a), the Property Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.7(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the Holder of the Common Securities (as
if it were the obligor referred to in Section 310(b) of the Trust Indenture
Act) shall in all respects comply with the provisions of Section 310(b) of the
Trust Indenture Act.
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(d) The Capital Securities Guarantee and the Indenture
shall be deemed to be specifically described in this Declaration for purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
(e) The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
Trustee Generally.
Each Administrative Trustee and the Delaware Trustee (unless
the Property Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 5.5 Administrative Trustees.
The initial Administrative Trustees shall be:
Dennis S. Marlo
Brian M. Hartline
William J. Glinski
(a) Except as expressly set forth in this Declaration
and except if a meeting of the Administrative Trustees is called with respect
to any matter over which the Administrative Trustees have power to act, any
power of the Administrative Trustees may be exercised by, or with the consent
of, any one such Administrative Trustee.
(b) An Administrative Trustee shall have the authority
set forth in Section 3.12 to execute on behalf of the Trust any documents which
the Administrative Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6.
(c) An Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purposes of signing any documents which the
Administrative Trustees have power and authority to cause the Trust to execute
pursuant to Section 3.6.
SECTION 5.6 Delaware Trustee.
The initial Delaware Trustee shall be:
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The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.7(b) of this Declaration and
to Section 6(b) of Annex I hereto, Trustees may be appointed or removed without
cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and
be continuing after the issuance of any Securities, by vote of the
Holders of a Majority in liquidation amount of the Common Securities
voting as a class at a meeting of the Holders of the Common
Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to the
Property Trustee or the Delaware Trustee, by vote of Holders of a
Majority in liquidation amount of the Capital Securities voting as a
class at a meeting of Holders of the Capital Securities.
(b) (i) The Trustee that acts as Property Trustee shall not
be removed in accordance with Section 5.7(a) until a Successor Property Trustee
("Successor Property Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Property Trustee
and delivered to the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not
be removed in accordance with this Section 5.7(a) until a successor
Trustee possessing the qualifications to act as Delaware Trustee under
Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed by such Successor Delaware Trustee and delivered to the
Administrative Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office
until his successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing signed by the Trustee and
delivered to the Sponsor and the Trust, which resignation shall take effect
upon such delivery or upon such later date as is specified therein; provided,
however, that:
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(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Property Trustee and delivered to
the Trust, the Sponsor and the resigning Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to
the Holders; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the
Trust, the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an
Event of Default shall have occurred and be continuing after the issuance of
the Securities, the Holders of the Capital Securities shall use their best
efforts to promptly appoint a Successor Delaware Trustee or Successor Property
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.7.
(e) If no Successor Property Trustee or Successor
Delaware Trustee shall have been appointed and accepted appointment as provided
in this Section 5.7 within 60 days after delivery of an instrument of
resignation or removal, the Property Trustee or Delaware Trustee resigning or
being removed, as applicable, may petition any court of competent jurisdiction
for appointment of a Successor Property Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may deem
proper and prescribe, appoint a Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
(g) At the time of resignation or removal of the
Property Trustee or the Delaware Trustee, the Debenture Issuer shall pay to
such Trustee any amounts that may be owed to such Trustee pursuant to Section
10.4.
SECTION 5.8 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy
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by the Administrative Trustees or, if there are more than two, a majority of
the Administrative Trustees shall be conclusive evidence of the existence of
such vacancy. The vacancy shall be filled with a Trustee appointed in
accordance with Section 5.7.
SECTION 5.9 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to dissolve, terminate or annul the Trust. Whenever
a vacancy in the number of Administrative Trustees shall occur, until such
vacancy is filled by the appointment of an Administrative Trustee in accordance
with Section 5.7, the Administrative Trustees in office, regardless of their
number, shall have all the powers granted to the Administrative Trustees and
shall discharge all the duties imposed upon the Administrative Trustees by this
Declaration.
SECTION 5.10 Meetings.
If there is more than one Administrative Trustee, meetings of
the Administrative Trustees shall be held from time to time upon the call of
any Administrative Trustee. Regular meetings of the Administrative Trustees
may be held at a time and place fixed by resolution of the Administrative
Trustees. Notice of any in-person meetings of the Administrative Trustees
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
such meeting. Notice of any telephonic meetings of the Administrative Trustees
or any committee thereof shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall contain a brief statement
of the time, place and anticipated purposes of the meeting. The presence
(whether in person or by telephone) of an Administrative Trustee at a meeting
shall constitute a waiver of notice of such meeting except where an
Administrative Trustee attends a meeting for the express purpose of objecting
to the transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration,
any action of the Administrative Trustees may be taken at a meeting by vote of
a majority of the Administrative Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Administrative Trustees. In the event there is only one Administrative
Trustee, any and all action of such Administrative Trustee shall be evidenced
by a written consent of such Administrative Trustee.
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SECTION 5.11 Delegation of Power.
(a) Any Administrative Trustee may, by power of
attorney consistent with applicable law, delegate to any other natural person
over the age of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.6, including any registration statement or amendment
thereto filed with the Commission, or making any other governmental filing; and
(b) the Administrative Trustees shall have power to
delegate from time to time to such of their number or to officers of the Trust
the doing of such things and the execution of such instruments either in the
name of the Trust or the names of the Administrative Trustees or otherwise as
the Administrative Trustees may deem expedient, to the extent such delegation
is not prohibited by applicable law or contrary to the provisions of the Trust,
as set forth herein.
SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee that is not a natural person, as the case may be,
may be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee or the Delaware Trustee, as the case may be, shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
the Property Trustee or the Delaware Trustee, as the case may be, shall be the
successor of the Property Trustee or the Delaware Trustee, as the case may be,
hereunder, provided such 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.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. If and to the extent
that the Debenture Issuer makes a payment of interest (including Compounded
Interest and Additional Sums), premium and/or principal on the Debentures held
by the Property Trustee or Liquidated Damages or any other payments pursuant to
the Registration Rights Agreement with respect to the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to make a distribution (a "Distribution") of the Payment Amount
to Holders.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Administrative Trustees shall on behalf of the
Trust issue one class of capital securities representing undivided beneficial
interests in the assets of the Trust having such terms as are set forth in
Annex I (the "Series A Capital Securities") and one class of common securities
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I (the "Common Securities"). The
Administrative Trustees shall on behalf of the Trust issue one class of capital
securities representing undivided beneficial interests in the Trust having such
terms as set forth in Annex I (the "Series B Capital Securities") in exchange
for the Series A Capital Securities accepted for exchange in the Exchange
Offer, which Series B Capital Securities shall not bear the legends required by
Section 9.2(i) unless the Holder of such Series A Capital Securities is either
(A) a broker-dealer who purchased such Series A Capital Securities directly
from the Trust for resale pursuant to Rule 144A or any other available
exemption under the Securities Act, (B) a Person participating in the
distribution of the Series A Capital Securities or (C) a Person who is an
affiliate (as defined in Rule 144A) of the Trust. The Trust shall issue no
securities or other interests in the assets of the Trust other than the Trust
Securities.
(b) The consideration received by the Trust for the
issuance of the Securities shall constitute a contribution to the capital of
the Trust and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable undivided beneficial interests in the assets of
the Trust.
(d) Every Person, by virtue of having become a Holder
or a Capital Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the
Trust by an Administrative Trustee by manual or facsimile signature. In case
any Administrative Trustee of the Trust who shall have signed any of the
Securities shall cease to be such Administrative Trustee before the Securities
so signed shall be delivered by the Trust, such Securities nevertheless may be
delivered as though the person who signed such Securities had not ceased to be
such Administrative Trustee; and any Securities may be signed on behalf of the
Trust by such persons who, at the actual date of execution of such Security,
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shall be the Administrative Trustees of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrative Trustee.
(b) One Administrative Trustee shall sign the Capital
Securities for the Trust by manual or facsimile signature. Unless otherwise
determined by the Trust, such signature shall, in the case of Common
Securities, be a manual signature.
A Capital Security shall not be valid until authenticated by
the manual or facsimile signature of an authorized signatory of the Property
Trustee. The signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in the Terms in Annex I hereto
except as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Capital Securities. An authenticating
agent may authenticate Capital Securities whenever the Property Trustee may do
so. Each reference in this Declaration to authentication by the Property
Trustee includes authentication by such agent. An authenticating agent has the
same rights as the Property Trustee to deal with the Sponsor or an Affiliate.
SECTION 7.3 Form and Dating.
The Capital Securities and the Property Trustee's certificate
of authentication shall be substantially in the form of Exhibit A-1 and the
Common Securities shall be substantially in the form of Exhibit A-2, each of
which is hereby incorporated in and expressly made a part of this Declaration.
Certificates representing the Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by their execution thereof. The
Securities may have letters, CUSIP or other numbers, notations or other marks
of identification or designation and such legends or endorsements required by
law, stock exchange rule, agreements to which the Trust is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Trust). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Property Trustee in
writing. Each Capital Security shall be dated the date of its authentication.
The terms and provisions of the Securities set forth in Annex I and the forms
of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Property Trustee and the Sponsor,
by their execution and delivery of this Declaration, expressly agree to such
terms and provisions and to be bound thereby.
(a) Global Securities. Securities offered and sold to
QIBs in reliance on Rule 144A, as provided in the Purchase Agreement, shall be
issued in the form of one or
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more permanent global Securities in definitive, fully registered form without
distribution coupons with the appropriate global legends and Restricted
Securities Legend set forth in Exhibit A-1 hereto (a "Global Capital
Security"), which shall be deposited on behalf of the purchasers of the Capital
Securities represented thereby with the Property Trustee, as custodian for the
Clearing Agency, and registered in the name of the Clearing Agency or a nominee
of the Clearing Agency, duly executed by the Trust and authenticated by the
Property Trustee as hereinafter provided. The number of Capital Securities
represented by a Global Capital Security may from time to time be increased or
decreased by adjustments made on the records of the Property Trustee and the
Clearing Agency or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 7.3(b) shall
apply only to the Global Capital Securities and such other Capital Securities
in global form as may be authorized by the Trust to be deposited with or on
behalf of the Clearing Agency.
The Trust shall execute and the Property Trustee shall, in
accordance with this Section 7.3, authenticate and make available for delivery
initially one or more Global Capital Securities that (i) shall be registered in
the name of Cede & Co. or other nominee of such Clearing Agency and (ii) shall
be delivered by the Trustee to such Clearing Agency or pursuant to such
Clearing Agency's written instructions or held by the Property Trustee as
custodian for the Clearing Agency.
Members of, or participants in, the Clearing Agency
("Participants") shall have no rights under this Declaration with respect to
any Global Capital Security held on their behalf by the Clearing Agency or by
the Property Trustee as the custodian of the Clearing Agency or under such
Global Capital Security, and the Clearing Agency may be treated by the Trust,
the Property Trustee and any agent of the Trust or the Property Trustee as the
absolute owner of such Global Capital Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Property Trustee or any agent of the Trust or the Property Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Clearing Agency or impair, as between the Clearing Agency and its
Participants, the operation of customary practices of such Clearing Agency
governing the exercise of the rights of a holder of a beneficial interest in
any Global Capital Security.
(c) Definitive Capital Securities. Except as provided
in Section 7.9 or 9.2(f)(i), owners of beneficial interests in a Global Capital
Security will not be entitled to receive physical delivery of certificated
Capital Securities ("Definitive Capital Securities"). Purchasers of Securities
(other than QIBs) who are "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) will receive Capital Securities in
the form of individual certificates in definitive, fully registered form
without distribution coupons and with the Restricted Securities Legend set
forth in Exhibit A-1 hereto ("Restricted Definitive Capital Securities");
provided, however, that upon transfer of such Restricted Definitive Capital
Securities to a QIB, such Restricted Definitive Capital Securities will,
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unless the Global Capital Security has previously been exchanged, be exchanged
for an interest in a Global Capital Security pursuant to the provisions of
Section 9.2. Restricted Definitive Capital Securities will bear the Restricted
Securities Legend set forth on Exhibit A-1 unless removed in accordance with
this Section 7.3 or Section 9.2.
(d) Authorized Denominations. The Capital Securities
are issuable only in denominations of $1,000 and any integral multiple thereof.
SECTION 7.4 Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in the Borough of Manhattan, The City
of New York, (i) an office or agency where Capital Securities may be presented
for registration of transfer ("Registrar"), (ii) an office or agency where
Capital Securities may be presented for payment ("Paying Agent") and (iii) an
office or agency where Securities may be presented for exchange ("Exchange
Agent"). The Registrar shall keep a register of the Capital Securities and of
their transfer. The Trust may appoint the Registrar, the Paying Agent and the
Exchange Agent and may appoint one or more co-registrars, one or more
additional paying agents and one or more additional exchange agents in such
other locations as it shall determine. The term "Registrar" includes any
additional registrar, "Paying Agent" includes any additional paying agent and
the term "Exchange Agent" includes any additional exchange agent. The Trust
may change any Paying Agent, Registrar, co-registrar or Exchange Agent without
prior notice to any Holder. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees. The
Trust shall notify the Property Trustee of the name and address of any Agent
not a party to this Declaration. If the Trust fails to appoint or maintain
another entity as Registrar, Paying Agent or Exchange Agent, the Property
Trustee shall act as such. The Trust or any of its Affiliates may act as
Paying Agent, Registrar, or Exchange Agent. The Trust shall act as Paying
Agent, Registrar, and Exchange Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar
and Paying Agent for the Capital Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the
Property Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Property Trustee all money held by the Paying
Agent for the payment of liquidation amounts or Distributions, and will notify
the Property Trustee if there are insufficient funds for such purpose. While
any such insufficiency continues, the Property Trustee may require a Paying
Agent to pay all money held by it to the Property Trustee. The Trust at any
time may require a Paying Agent to pay all money held by it to the Property
Trustee and to account for any money disbursed by it. Upon payment over to the
Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of
the Trust) shall have no further liability for the money. If the Trust or the
Sponsor or an Affiliate of the Trust or the
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Sponsor acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall, upon
written order of the Trust, authenticate a replacement Security if the Property
Trustee's and the Trust's requirements, as the case may be, are met. An
indemnity bond must be provided by the Holder which, in the judgment of the
Property Trustee, is sufficient to protect the Trustees, the Sponsor, the Trust
or any authenticating agent from any loss which any of them may suffer if a
Security is replaced. The Trust may charge such Holder for its expenses in
replacing a Security.
Every replacement Security is an additional beneficial
interest in the Trust.
SECTION 7.7 Outstanding Capital Securities.
The Capital Securities outstanding at any time are all the
Capital Securities authenticated by the Property Trustee except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant
to Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with
the terms of this Declaration, they cease to be outstanding and Distributions
on them shall cease to accumulate.
A Capital Security does not cease to be outstanding because
one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the
Security.
SECTION 7.8 Capital Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be
fully protected in relying on any such direction, waiver or consent, only
Securities which a Responsible Officer of the Property Trustee actually knows
are so owned shall be so disregarded.
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SECTION 7.9 Temporary Securities.
(a) Until Definitive Capital Securities are ready for
delivery, the Trust may prepare and, in the case of the Capital Securities, the
Property Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of Definitive Capital Securities but may
have variations that the Trust considers appropriate for temporary Securities.
Without unreasonable delay, the Trust shall prepare and, in the case of the
Capital Securities, the Property Trustee shall authenticate Definitive Capital
Securities in exchange for temporary Securities.
(b) A Global Capital Security deposited with the
Clearing Agency or with the Property Trustee as custodian for the Clearing
Agency pursuant to Section 7.3 shall be transferred to the beneficial owners
thereof in the form of Definitive Capital Securities only if such transfer
complies with Section 9.2 and (i) the Clearing Agency notifies the Sponsor that
it is unwilling or unable to continue as Clearing Agency for such Global
Capital Security or if at any time such Clearing Agency ceases to be a
"clearing agency" registered under the Exchange Act and a clearing agency is
not appointed by the Sponsor within 90 days of such notice, (ii) a Default or
an Event of Default has occurred and is continuing or (iii) the Trust at its
sole discretion elects to cause the issuance of Definitive Capital Securities.
(c) Any Global Capital Security that is transferable to
the beneficial owners thereof in the form of Definitive Capital Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the
Property Trustee located in the Borough of Manhattan, The City of New York, to
be so transferred, in whole or from time to time in part, without charge, and
the Property Trustee shall authenticate and make available for delivery, upon
such transfer of each portion of such Global Capital Security, an equal
aggregate liquidation amount of Securities of authorized denominations in the
form of certificated Capital Securities. Any portion of a Global Capital
Security in transferred pursuant to this Section shall be registered in such
names as the Clearing Agency shall direct. Any Capital Security in the form of
Definitive Capital Securities delivered in exchange for an interest in the
Global Capital Security shall, except as otherwise provided by Sections 7.3 and
9.2, bear the Restricted Securities Legend set forth in Exhibit A-1 hereto.
(d) Subject to the provisions of Section 7.9(c), the
Holder of a Global Capital Security may grant proxies and otherwise authorize
any Person, including Participants and Persons that may hold interests through
Participants, to take any action which such Holder is entitled to take under
this Declaration or the Securities.
(e) In the event of the occurrence of any of the events
specified in Section 7.9(b), the Trust will promptly make available to the
Property Trustee a reasonable supply of certificated Capital Securities in
fully registered form without distribution coupons.
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SECTION 7.10 Cancellation.
The Trust at any time may deliver Capital Securities to the
Property Trustee for cancellation. The Registrar, Paying Agent and Exchange
Agent shall forward to the Property Trustee any Capital Securities surrendered
to them for registration of transfer, redemption, exchange or payment. The
Property Trustee shall promptly cancel all Capital Securities, surrendered for
registration of transfer, redemption, exchange, payment, replacement or
cancellation and shall dispose of cancelled Capital Securities in accordance
with its customary procedures unless the Trust otherwise directs. The Trust
may not issue new Capital Securities to replace Capital Securities that it has
paid or that have been delivered to the Property Trustee for cancellation or
that any Holder has exchanged.
SECTION 7.11 CUSIP Numbers.
The Trust in issuing the Capital Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Property Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Sponsor will promptly notify the Property
Trustee of any change in the CUSIP numbers.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall automatically terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the
revocation of the Sponsor's charter and the expiration of 90 days
after the date of revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount of the
Debentures to the Holders, provided that, the Property Trustee has
received written notice from the Sponsor directing the Property
Trustee to terminate the Trust (which direction is optional, and
except as otherwise expressly provided below, within the discretion of
the Sponsor) and provided, further, that such direction and such
distribution is conditioned on (a) the receipt of any required
regulatory approval and (b) the
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Administrative Trustees' receipt of an opinion of an independent tax
counsel experienced in such matters, which opinion may rely on
published rulings of the Internal Revenue Service, to the effect that
the Holders will not recognize any gain or loss for United States
federal income tax purposes as a result of the dissolution of the
Trust and the distribution of Debentures;
(iv) upon the entry of a decree of judicial dissolution
of the Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called
for redemption and the amounts necessary for redemption thereof shall
have been paid to the Holders in accordance with the terms of the
Securities; or
(vi) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable after the occurrence of
an event referred to in Section 8.1(a), the Administrative Trustees shall file
a certificate of cancellation with the Secretary of State of the State of
Delaware.
(c) The provisions of Section 3.9 and Article X shall
survive the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(b) The Administrative Trustees shall provide for the
registration of Capital Securities and of the transfer of Capital Securities,
which will be effected without charge but only upon payment (with such
indemnity as the Administrative Trustees may require) in respect of any tax or
other governmental charges that may be imposed in relation to it. Upon
surrender for registration of transfer of any Capital Securities, the
Administrative Trustees shall cause one or more new Capital Securities to be
issued in the name of the designated transferee or transferees. Every Capital
Security surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Administrative
Trustees and the Registrant duly executed by the Holder or such Holder's
attorney duly authorized in writing. Each Capital Security surrendered for
registration of transfer shall be canceled by the Property Trustee. A
transferee of a Capital
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Security shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Capital Security. By
acceptance of a Capital Security, each transferee shall be deemed to have
agreed to be bound by this Declaration.
(c) For so long as the Trust Securities remain
outstanding, the Sponsor will covenant (i) to directly or indirectly maintain
100% direct or indirect ownership of the Common Securities of the Trust;
provided, however, that any permitted successor of the Sponsor under the
Indenture may succeed to the Sponsor's ownership of such Common Securities,
(ii) to use its reasonable efforts to cause the Trust (a) to remain a business
trust, except in connection with the distribution of Debentures to the Holders
of Trust Securities in liquidation of the Trust, the redemption of all of the
Trust Securities, or certain mergers, consolidations or amalgamations, each as
permitted by this Declaration, and (b) to otherwise continue to be classified
as a grantor trust 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 undivided beneficial interest in the Debentures.
SECTION 9.2 Transfer Procedures and Restrictions
(a) General. Except as otherwise provided in Section
9.2(b), if Capital Securities are issued upon the registration of transfer,
exchange or replacement of Capital Securities bearing the Restricted Securities
Legend set forth in Exhibit A-1 hereto, or if a request is made to remove such
Restricted Securities Legend on Capital Securities, the Capital Securities so
issued shall bear the Restricted Securities Legend, or the Restricted
Securities Legend shall not be removed, as the case may be, unless there is
delivered to the Trust and the Property Trustee such evidence satisfactory to
the Sponsor, which shall include an Opinion of Counsel as may be reasonably
required by the Sponsor, that neither the legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof are
made pursuant to an exception from the registration requirements of the
Securities Act or, with respect to Restricted Definitive Capital Securities,
that such Securities are not "restricted" within the meaning of Rule 144. Upon
provision of such satisfactory evidence, the Property Trustee, at the written
direction of the Trust, shall authenticate and deliver Capital Securities that
do not bear the legend.
(b) Transfers After Effectiveness of a Registration
Statement. After the effectiveness of a Registration Statement with respect to
any Capital Securities, all requirements pertaining to legends on such Capital
Securities will cease to apply (other than the legend requiring that transfers
of Capital Securities be made in blocks having an aggregate liquidation amount
of not less than $100,000), and beneficial interests in a Capital Security in
global form without legends will be available to transferees of such Capital
Securities, upon exchange of the transferring Holder's Restricted Definitive
Capital Security or directions to transfer such Holder's beneficial interest in
the Global Capital Security as the case may be. No such transfer or exchange
of a Restricted Definitive Capital Security or of an interest in the Global
Capital Security shall be effective unless the transferor delivers to the Trust
a certificate in a form substantially similar to that attached hereto as the
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form of "Assignment" in Exhibit A-1. Except as otherwise provided in Section
9.2(m), after the effectiveness of a Registration Statement, the Trust shall
issue and the Property Trustee, upon a written order of the Trust signed by one
Administrative Trustee, shall authenticate a Capital Security in global form
without the Restricted Securities Legend (the "Unrestricted Global Capital
Security") for deposit with the Clearing Agency or its custodian to evidence
transfers of beneficial interests from the (i) Global Capital Security and (ii)
Restricted Definitive Capital Securities.
(c) Transfer and Exchange of Definitive Capital
Securities. When Definitive Capital Securities are presented to the Registrar
or co-Registrar
(x) to register the transfer of such Definitive Capital
Securities; or
(y) to exchange such Definitive Capital Securities which
became mutilated, destroyed, defaced, stolen or lost, for an equal
number of Definitive Capital Securities,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Capital Securities surrendered for
registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Administrative Trustees and the Registrar or co-registrar, duly
executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) in the case of Definitive Capital Securities that
are Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are
being delivered to the Registrar by a Holder for registration
in the name of such Holder, without transfer, a certification
from such Holder to that effect; or
(B) if such Restricted Capital Securities are
being transferred: (i) a certification from the transferor in
a form substantially similar to that attached hereto as the
form of "Assignment" in Exhibit A-1, and (ii) if the Trust or
Registrar so requests, evidence reasonably satisfactory to it
as to the compliance with the restrictions set forth in the
Restricted Securities Legend.
(d) Restrictions on Transfer of a Definitive Capital
Security for a Beneficial Interest in a Global Capital Security. A Definitive
Capital Security may not be exchanged for a beneficial interest in a Global
Capital Security except upon satisfaction of the requirements set forth below.
Upon receipt by the Property Trustee of a Definitive
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Capital Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Property Trustee and the Administrative
Trustees, together with:
(i) if such Definitive Capital Security is a Restricted
Capital Security, certification (in a form substantially similar to
that attached hereto as the form of "Assignment" in Exhibit A-1); and
(ii) whether or not such Definitive Capital Security is
a Restricted Capital Security, written instructions directing the
Property Trustee to make, or to direct the Clearing Agency to make, an
adjustment on its books and records with respect to the appropriate
Global Capital Security to reflect an increase in the number of the
Capital Securities represented by such Global Capital Security,
then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of Capital
Securities represented by the appropriate Global Capital Security to be
increased accordingly. If no Global Capital Securities are then outstanding,
the Trust shall issue and the Property Trustee shall authenticate, upon written
order of any Administrative Trustee, an appropriate number of Capital
Securities in global form.
(e) Transfer and Exchange of Global Capital Securities.
Subject to Section 9.2(f), the transfer and exchange of Global Capital
Securities or beneficial interests therein shall be effected through the
Clearing Agency, in accordance with this Declaration (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Clearing Agency therefor.
(f) Transfer of a Beneficial Interest in a Global
Capital Security for a Definitive Capital Security.
(i) Any Person having a beneficial interest in a Global
Capital Security may upon request, but only upon 20 days prior notice
to the Property Trustee, and if accompanied by the information
specified below, exchange such beneficial interest for a Definitive
Capital Security representing the same number of Capital Securities.
Upon receipt by the Property Trustee from the Clearing Agency or its
nominee on behalf of any Person having a beneficial interest in a
Global Capital Security of written instructions or such other form of
instructions as is customary for the Clearing Agency or the Person
designated by the Clearing Agency as having such a beneficial interest
in a Restricted Capital Security and a certification from the
transferor (in a form substantially similar to that attached hereto as
the form of "Assignment" in Exhibit A-1), which may be submitted by
facsimile, then the Property Trustee will cause the aggregate number
of Capital Securities represented by Global Capital Securities to be
reduced on its books and records and, following such reduction, the
Trust will execute and the Property Trustee will authenticate and make
available for delivery to the transferee a Definitive Capital
Security.
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(ii) Definitive Capital Securities issued in exchange
for a beneficial interest in a Global Capital Security pursuant to
this Section 9.2(f) shall be registered in such names and in such
authorized denominations as the Clearing Agency, pursuant to
instructions from its Clearing Agency Participants or otherwise, shall
instruct the Property Trustee in writing. The Property Trustee shall
deliver such Capital Securities to the Persons in whose names such
Capital Securities are so registered in accordance with such
instructions of the Clearing Agency.
(g) Restrictions on Transfer and Exchange of Global
Capital Securities. Notwithstanding any other provisions of this Declaration
(other than the provisions set forth in subsection (h) of this Section 9.2 and
subsection (b) of Section 7.9), a Global Capital Security may not be
transferred as a whole except by the Clearing Agency to a nominee of the
Clearing Agency or another nominee of the Clearing Agency or by the Clearing
Agency or any such nominee to a successor Clearing Agency or a nominee of such
successor Clearing Agency.
(h) Authentication of Definitive Capital Securities.
If at any time:
(i) there occurs a Default or an Event of Default which
is continuing, or
(ii) the Trust, in its sole discretion, notifies the
Property Trustee in writing that it elects to cause the issuance of
Definitive Capital Securities under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a
written order of the Trust signed by one Administrative Trustee requesting the
authentication and delivery of Definitive Capital Securities to the Persons
designated by the Trust, will authenticate and make available for delivery
Definitive Capital Securities, equal in number to the number of Capital
Securities represented by the Global Capital Securities, in exchange for such
Global Capital Securities.
(i) Legend.
(i) Except as permitted by the following paragraph
(ii), each Capital Security certificate evidencing the Global Capital
Securities and the Definitive Capital Securities (and all Capital
Securities issued in exchange therefor or substitution thereof) shall
bear a legend (the "Restricted Securities Legend") in substantially
the following form:
THE CAPITAL SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER
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THIS CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH ML
BANCORP, INC. (THE "COMPANY") OR ANY "AFFILIATE" OF THE
COMPANY WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY
PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS
THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE
COMPANY PRIOR TO ANY SUCH OFFER, SALE OR
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TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (D) TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE REVERSE OF THIS CAPITAL SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE TRUST. SUCH
HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 CAPITAL SECURITIES). ANY SUCH TRANSFER OF
CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF
LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL
EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO
BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE,
INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS OF
SUCH CAPITAL SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED
TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT
AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR (ii) THE
ACQUISITION AND HOLDING OF THIS CAPITAL SECURITY BY IT IS NOT
PROHIBITED BY EITHER SECTION 406 OF ERISA OR SECTION 4975 OF
THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR EXEMPT
FROM ANY SUCH PROHIBITION.
(ii) Upon any sale or transfer of a Restricted Capital
Security (including any Restricted Capital Security represented by a
Global Capital Security) pursuant
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to an effective registration statement under the Securities Act or
pursuant to Rule 144 under the Securities Act after such registration
statement ceases to be effective:
(A) in the case of any Restricted Capital
Security that is a Definitive Capital Security, the Registrar
shall permit the Holder thereof to exchange such Restricted
Capital Security for a Definitive Capital Security that does
not bear the Restricted Securities Legend and rescind any
restriction on the transfer of such Restricted Capital
Security; and
(B) in the case of any Restricted Capital
Security that is represented by a Global Capital Security, the
Registrar shall permit the Holder of such Global Capital
Security to exchange such Global Capital Security for another
Global Capital Security that does not bear the Restricted
Securities Legend.
(j) Cancellation or Adjustment of Global Capital
Security. At such time as all beneficial interests in a Global Capital
Security have either been exchanged for Definitive Capital Securities to the
extent permitted by this Declaration or redeemed, repurchased or canceled in
accordance with the terms of this Declaration, such Global Capital Security
shall be canceled by the Property Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Capital Security is
exchanged for Definitive Capital Securities, Capital Securities represented by
such Global Capital Security shall be reduced and an adjustment shall be made
on the books and records of the Clearing Agency and the Registrar, to reflect
such reduction.
(k) Obligations with Respect to Transfers and Exchanges
of Capital Securities.
(i) To permit registrations of transfers and exchanges,
the Trust shall execute and the Property Trustee shall authenticate
Definitive Capital Securities and Global Capital Securities at the
Registrar's or co-registrar's request in accordance with the terms of
this Declaration.
(ii) Registrations of transfers or exchanges will be
effected without charge, but only upon payment (with such indemnity as
the Trust or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required
to register the transfer of or exchange of (a) Capital Securities
during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption or any notice of
selection of Capital Securities for redemption and ending at the close
of business on the day of such mailing; or (b) any Capital Security so
selected for
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redemption in whole or in part, except the unredeemed portion of any
Capital Security being redeemed in part.
(iv) Prior to the due presentation for registration of
transfer of any Capital Security, the Trust, the Property Trustee, the
Paying Agent, the Registrar or any co-registrar may deem and treat the
Person in whose name a Capital Security is registered as the absolute
owner of such Capital Security for the purpose of receiving
Distributions on such Capital Security (subject to Section 2(c) of
Annex I) and for all other purposes whatsoever, and none of the Trust,
the Property Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Capital Securities issued upon any registration
of transfer or exchange pursuant to the terms of this Declaration
shall evidence the same security and shall be entitled to the same
benefits under this Declaration as the Capital Securities surrendered
upon such registration of transfer or exchange.
(l) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility
or obligation to any beneficial owner of a Global Capital Security, a
Clearing Agency Participant in the Clearing Agency or other Person
with respect to the accuracy of the records of the Clearing Agency or
its nominee or of any Clearing Agency Participant thereof, with
respect to any ownership interest in the Capital Securities or with
respect to the delivery to any Clearing Agency Participant, beneficial
owner or other Person (other than the Clearing Agency) of any notice
(including any notice of redemption) or the payment of any amount,
under or with respect to such Capital Securities. All notices and
communications to be given to the Holders and all payments to be made
to Holders under the Capital Securities shall be given or made only to
or upon the order of the registered Holders (which shall be the
Clearing Agency or its nominee in the case of a Global Capital
Security). The rights of beneficial owners in any Global Capital
Security shall be exercised only through the Clearing Agency subject
to the applicable rules and procedures of the Clearing Agency. The
Property Trustee may conclusively rely and shall be fully protected in
relying upon information furnished by the Clearing Agency or any agent
thereof with respect to its Clearing Agency Participants and any
beneficial owners.
(ii) The Property Trustee and the Registrar shall have
no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this
Declaration or under applicable law with respect to any transfer of
any interest in any Capital Security (including any transfers between
or among Clearing Agency Participants or beneficial owners in any
Global Capital Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required
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by, the terms of this Declaration, and to examine the same to
determine substantial compliance as to form with the express
requirements hereof.
(m) Exchange of Series A Capital Securities for Series
B Capital Securities. The Series A Capital Securities may be exchanged for
Series B Securities pursuant to the terms of the Exchange Offer. The Property
Trustee shall make the exchange as follows:
The Sponsor shall present the Property Trustee with an
Officers' Certificate certifying the following:
(A) upon issuance of the Series B Capital
Securities, the transactions contemplated
by the Exchange Offer have been
consummated; and
(B) the number of Series A Capital Securities
properly tendered in the Exchange Offer
that are represented by a Global Capital
Security and the number of Series A Capital
Securities properly tendered in the
Exchange Offer that are represented by
Definitive Capital Securities, the name of
each Holder of such Definitive Capital
Securities, the liquidation amount of
Capital Securities properly tendered in the
Exchange Offer by each such Holder and the
name and address to which Definitive
Capital Securities for Series B Capital
Securities shall be registered and sent for
each such Holder.
The Property Trustee, upon receipt of (i) such Officers'
Certificate and (ii) an Opinion of Counsel (x) to the effect that the Series B
Capital Securities have been registered under Section 5 of the Securities Act
and the Indenture has been qualified under the Trust Indenture Act and (y) with
respect to the matters set forth in Section 3(p) of the Registration Rights
Agreement, shall authenticate (A) a Global Capital Security representing Series
B Capital Securities in aggregate liquidation amount equal to the aggregate
liquidation amount of Series A Capital Securities represented by a Global
Capital Security indicated in such Officers' Certificate as having been
properly tendered and (B) Definitive Capital Securities representing Series B
Capital Securities registered in the names of, and in the liquidation amounts
indicated in such Officers' Certificate.
If, upon consummation of the Exchange Offer, less than all the
outstanding Series A Capital Securities shall have been properly tendered and
not withdrawn, the Property Trustee shall make an endorsement on the Global
Capital Security representing Series A Capital Securities indicating the
reduction in the number and aggregate liquidation amount represented thereby as
a result of the Exchange Offer.
The Trust shall deliver such Definitive Capital Securities
representing Series B Capital Securities to the Holders thereof as indicated in
such Officers' Certificate.
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(n) Minimum Transfers. Series A Capital Securities
and, when issued, Series B Capital Securities may only be transferred in
minimum blocks of $100,000 aggregate liquidation amount. Any transfer of
Series A Capital Securities or Series B Capital Securities in a block having an
aggregate liquidation amount of less than $100,000 shall be deemed to be voided
and of no legal effect whatsoever. Any such transferee shall be deemed not to
be a Holder of such Series A or Series B Capital Securities for any purpose,
including, but not limited to, the receipt of Distributions on such Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Capital Securities.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security
shall be registered on the books and records of the Trust as the sole owner of
such Security for purposes of receiving Distributions and for all other
purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Security on the part of any
Person, whether or not the Trust shall have actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Global Capital Securities shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the nominee of the
Clearing Agency, and no Capital Security Beneficial Owner will receive a
definitive Capital Security Certificate representing such Capital Security
Beneficial Owner's interests in such Global Capital Securities, except as
provided in Section 9.2 and Section 7.9. Unless and until definitive, fully
registered Capital Securities certificates have been issued to the Capital
Security Beneficial Owners pursuant to Section 9.2 and Section 7.9:
(a) the provisions of this Section 9.4 shall be in full
force and effect;
(b) the Trust and the Trustees shall be entitled to
deal with the Clearing Agency for all purposes of this Declaration
(including the payment of Distributions on the Global Capital
Securities and receiving approvals, votes or consents hereunder) as
the Holder of the Capital Securities and the sole holder of the Global
Certificates and shall have no obligation to the Capital Security
Beneficial Owners;
(c) to the extent that the provisions of this Section
9.4 conflict with any other provisions of this Declaration, the
provisions of this Section 9.4 shall control; and
(d) the rights of the Capital Security Beneficial
Owners shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such
Capital Security Beneficial Owners and the Clearing Agency and/or the
Clearing Agency Participants and the Clearing Agency shall
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receive and transmit payments of Distributions on the Global
Certificates to such Clearing Agency Participants. DTC will make book
entry transfers among the Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Capital
Security Holders is required under this Declaration, the Trustees shall give
all such notices and communications specified herein to be given to the Holders
of Global Capital Securities to the Clearing Agency, and shall have no notice
obligations to the Capital Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the
Administrative Trustees may, in their sole discretion, appoint a successor
Clearing Agency with respect to such Capital Securities.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration,
the Securities Guarantees and the terms of the Securities, the Sponsor shall
not be:
(i) personally liable for the return of any portion of
the capital contributions (or any return thereon) of the Holders which
shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any
deficit upon dissolution or termination of the Trust or otherwise.
(b) The Debenture Issuer shall be liable for all of the
debts and obligations of the Trust (other than in respect of the payment of
principal, interest and premium, if any, on the Securities) to the extent not
satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust
Act, the Holders shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
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SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible
or accountable in damages or otherwise to the Trust or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and, if selected by such Indemnified
Person, has been selected by such Indemnified Person with reasonable care on
behalf of the Trust, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
Distributions to Holders might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Property Trustee
under the Trust Indenture Act), are agreed by the parties hereto to replace
such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between any Covered Persons; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens
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relating to such interests, any customary or accepted industry practices, and
any applicable generally accepted accounting practices or principles. In the
absence of bad faith by the Indemnified Person, the resolution, action or term
so made, taken or provided by the Indemnified Person shall not constitute a
breach of this Declaration or any other agreement contemplated herein or of any
duty or obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person
is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard
and shall not be subject to any other or different standard imposed by
this Declaration.
SECTION 10.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the Company Indemnified
Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Trust to procure
a judgment in its favor by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys' fees
and expenses) actually and reasonably incurred by him in connection
with the de-
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fense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification
shall be made in respect of any claim, issue or matter as to which
such Company Indemnified Person shall have been adjudged to be liable
to the Trust unless and only to the extent that the Court of Chancery
of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
Person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem
proper.
(iii) To the extent that a Company Indemnified Person
shall be successful on the merits or otherwise (including dismissal of
an action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in
defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii)
of this Section 10.4(a) (unless ordered by a court) shall be made by
the Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person
is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Administrative Trustees by a
majority vote of a Quorum consisting of such Administrative Trustees
who were not parties to such action, suit or proceeding, (2) if such a
Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Administrative Trustees so directs, by independent legal
counsel in a written opinion, or (3) by the Common Security Holder of
the Trust.
(v) Expenses (including attorneys' fees and expenses)
incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall
be paid by the Debenture Issuer in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Company Indemnified Person to repay such amount if
it shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this Section
10.4(a). Notwithstanding the foregoing, no advance shall be made by
the Debenture Issuer if a determination is reasonably and promptly
made (i) by the Administrative Trustees by a majority vote of a quorum
of disinterested Administrative Trustees, (ii) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a
written opinion or (iii) the Common Security Holder of the Trust,
that, based upon the facts known to the Administrative Trustees,
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counsel or the Common Security Holder at the time such determination
is made, such Company Indemnified Person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the
best interests of the Trust, or, with respect to any criminal
proceeding, that such Company Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event
shall any advance be made in instances where the Administrative
Trustees, independent legal counsel or Common Security Holder
reasonably determine that such person deliberately breached his duty
to the Trust or its Common or Capital Security Holders.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this
Section 10.4(a) shall not be deemed exclusive of any other rights to
which those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Capital Security Holders of the
Trust or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office. All rights
to indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Debenture Issuer and each Company
Indemnified Person who serves in such capacity at any time while this
Section 10.4(a) is in effect. Any repeal or modification of this
Section 10.4(a) shall not affect any rights or obligations then
existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall,
unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a Company Indemnified Person and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
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(b) The Debenture Issuer agrees to indemnify the (i)
Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the
Property Trustee or the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Property Trustee or the Delaware Trustee (each of the
Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any and all loss, liability, damage, claim or expense including taxes (other
than taxes based on the income of such Fiduciary Indemnified Person) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees and expenses)
of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 10.4(b)
shall survive the resignation or removal of the Property Trustee or the
Delaware Trustee and the satisfaction and discharge of this Declaration.
(c) The Debenture Trustee agrees to pay the Property
Trustee and the Delaware Trustee, from time to time, such compensation for all
services rendered by the Property Trustee and the Delaware Trustee hereunder as
may be mutually agreed upon in writing by the Sponsor and the Property Trustee
or the Delaware Trustee, as the case may be, and, except as otherwise expressly
provided herein, to reimburse the Property Trustee and the Delaware Trustee
upon its or their request for all reasonable expenses, disbursements and
advances incurred or made by the Property Trustee or the Delaware Trustee, as
the case may be, in accordance with the provisions of this Declaration, except
any such expense, disbursement or advance as may be attributable to its or
their negligence or bad faith.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee (subject to Section 5.3(c)) may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders shall have no rights by virtue of this Declaration in and
to such independent ventures or the income or profits derived therefrom, and
the pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to
present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee
and the Property Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered Person, the Delaware
Trustee and the Property Trustee may engage or be interested in any financial
or other transaction with the Sponsor or any Affiliate of the Sponsor, or may
act as depositary for, trustee or agent
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for, or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.
SECTION 10.6 Compensation; Fees.
The Debenture Issuer agrees:
(a) to pay to the Trustees from time to time such
compensation for all services rendered by them hereunder as the parties shall
agree in writing from time to time (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust); and
(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 Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith.
The provisions of this Section 10.6 shall survive the
dissolution of the Trust and the termination of this Declaration and the
removal or resignation of any Trustee.
No Trustee may claim any lien or charge on any property of the
Trust as a result of any amount due pursuant to this Section 10.6.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail,
each transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The books of account and the records of the
Trust shall be examined by and reported upon as of the end of each Fiscal Year
of the Trust by a firm of independent certified public accountants selected by
the Administrative Trustees.
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(b) The Administrative Trustees shall cause to be duly
prepared and delivered to each of the Holders, any annual United States federal
income tax information statement, required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the
Code to deliver any such statement at a later date, the Administrative Trustees
shall endeavor to deliver all such information statements within 30 days after
the end of each Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly
prepared and filed with the appropriate taxing authority, an annual United
States federal income tax return, on a Form 1041 or such other form required by
United States federal income tax law, and any other annual income tax returns
required to be filed by the Administrative Trustees on behalf of the Trust with
any state or local taxing authority.
SECTION 11.3 Banking.
The Trust may maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Property Trustee shall be made
directly to the Property Trustee Account and no other funds of the Trust shall
be deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Administrative Trustees; provided, however,
that the Property Trustee shall designate the signatories for the Property
Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Administrative Trustees shall comply with
all withholding requirements under United States federal, state and local law.
The Trust shall request, and the Holders shall provide to the Trust, such forms
or certificates as are necessary to establish an exemption from withholding
with respect to each Holder, and any representations and forms as shall
reasonably be requested by the Trust to assist it in determining the extent of,
and in fulfilling, its withholding obligations. The Administrative Trustees
shall file required forms with applicable jurisdictions and, unless an
exemption from withholding is properly established by a Holder, shall remit
amounts withheld with respect to the Holder to applicable jurisdictions. To
the extent that the Trust is required to withhold and pay over any amounts to
any authority with respect to Distributions or allocations to any Holder, the
amount withheld shall be deemed to be a Distribution in the amount of the
withholding to the Holder. In the event of any claimed over withholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount required to be withheld was not withheld from actual Distributions
made, the Trust may reduce subsequent Distributions by the amount of such
withholding.
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ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration
(including Section 7 of the Annex I hereto) or by any applicable terms of the
Securities, this Declaration may only be amended by a written instrument
approved and executed by:
(i) the Administrative Trustees (or if there are more
than two Administrative Trustees a majority of the Administrative
Trustees);
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Property Trustee, the
Property Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee, the
Delaware Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless the Property Trustee shall have first
received:
(A) an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an Opinion of Counsel (who may be counsel
to the Sponsor or the Trust) that such amendment is permitted
by, and conforms to, the terms of this Declaration (including
the terms of the Securities) and that all conditions
precedent, if any, in this Declaration to the execution and
delivery of such amendment have been satisfied,
provided, however, that the Property Trustee shall not be required to sign any
such amendment which affects the rights, powers, duties, obligations or
immunities of the Property Trustee; and
(ii) to the extent the result of such amendment would be
to:
(A) cause the Trust to fail to continue to be
classified for purposes of United States federal income
taxation as a grantor trust;
(B) reduce or otherwise adversely affect the
powers of the Property Trustee in contravention of the Trust
Indenture Act; or
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(C) cause the Trust to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(c) At such time after the Trust has issued any
Securities that remain outstanding, any amendment that would adversely affect
the rights, privileges or preferences of any Holder may be effected only with
such additional requirements as may be set forth in the terms of such
Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be
amended without the consent of all of the Holders;
(e) Article Four shall not be amended without the
consent of the Holders of a Majority in liquidation amount of the Common
Securities and;
(f) The rights of the holders of the Common Securities
under Article Five to increase or decrease the number of, and appoint and
remove Trustees shall not be amended without the consent of the Holders of a
Majority in liquidation amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration
may be amended without the consent of the Holders to:
(i) cure any ambiguity, correct or supplement any
provision in this Declaration that may be inconsistent with any other
provision of this Declaration or to make any other provisions with
respect to matters or questions arising under this Declaration which
shall not be inconsistent with the other provisions of the
Declaration; and
(ii) to modify, eliminate or add to any provisions of
the Declaration to such extent as shall be necessary to ensure that
the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Securities are
outstanding or to ensure that the Trust will not be required to
register as an Investment Company under the Investment Company Act;
and
(iii) to modify, eliminate or add any provisions of the
Declaration to such extent as shall be necessary to enable the Trust
and the Sponsor to conduct an Exchange Offer in the manner
contemplated by the Registration Rights Agreement;
provided, however, that in each case such action shall not adversely affect in
any material respect the interests of the Holders, and any amendments of this
Declaration shall become effective when notice thereof is given to the Holders.
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SECTION 12.2 Meetings of the Holders; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities
may be called at any time by the Administrative Trustees (or as provided in the
terms of the Securities) to consider and act on any matter on which Holders of
such class of Securities are entitled to act under the terms of this
Declaration, the terms of the Securities or the rules of any stock exchange on
which the Capital Securities are listed or admitted for trading. The
Administrative Trustees shall call a meeting of the Holders of such class if
directed to do so by the Holders of at least 10% in liquidation amount of such
class of Securities. Such direction shall be given by delivering to the
Administrative Trustees one or more notices in writing stating that the signing
Holders wish to call a meeting and indicating the general or specific purpose
for which the meeting is to be called. Any Holders calling a meeting shall
specify in writing the Security Certificates held by the Holders exercising the
right to call a meeting and only those Securities specified shall be counted
for purposes of determining whether the required percentage set forth in the
second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the
terms of the Securities, the following provisions shall apply to meetings of
Holders:
(i) notice of any such meeting shall be given to all
the Holders having a right to vote thereat at least seven days and not
more than 60 days before the date of such meeting. Whenever a vote,
consent or approval of the Holders is permitted or required under this
Declaration or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading, such vote, consent or
approval may be given at a meeting of the Holders. Any action that
may be taken at a meeting of the Holders may be taken without a
meeting if a consent in writing setting forth the action so taken is
signed by the Holders owning not less than the minimum amount of
Securities in liquidation amount that would be necessary to authorize
or take such action at a meeting at which all Holders having a right
to vote thereon were present and voting. Prompt notice of the taking
of action without a meeting shall be given to the Holders entitled to
vote who have not consented in writing. The Administrative Trustees
may specify that any written ballot submitted to the Security Holder
for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Administrative
Trustees;
(ii) each Holder may authorize any Person to act for it
by proxy on all matters in which a Holder is entitled to participate,
including waiving notice of any meeting, or voting or participating at
a meeting. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder executing it.
Except as otherwise provided herein, all matters relating to the
giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders were stockholders of a Delaware
corporation;
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(iii) each meeting of the Holders shall be conducted by
the Administrative Trustees or by such other Person that the
Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration,
the terms of the Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Capital Securities are then
listed or trading, otherwise provides, the Administrative Trustees, in
their sole discretion, shall establish all other provisions relating
to meetings of Holders, including notice of the time, place or purpose
of any meeting at which any matter is to be voted on by any Holders,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person
or by proxy or any other matter with respect to the exercise of any
such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Property Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a New York banking
corporation, a national banking association or a bank or trust company
organized under the laws of any State of the United States or the District of
Columbia, in any case with trust powers and authority to execute and deliver,
and to carry out and perform its obligations under the terms of, this
Declaration;
(b) The execution, delivery and performance by the
Property Trustee of this Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee. This Declaration has
been duly executed and delivered by the Property Trustee and constitutes a
legal, valid and binding obligation of the Property Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law);
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(c) The execution, delivery and performance of this
Declaration by the Property Trustee does not conflict with or constitute a
breach of the charter or by-laws of the Property Trustee; and
(d) No consent, approval or authorization of, or
registration with or notice to, any New York State or federal banking authority
is required for the execution, delivery or performance by the Property Trustee
of this Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly
existing and in good standing under the laws of the State of Delaware or the
United States, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;
(b) The execution, delivery and performance by the
Delaware Trustee of this Declaration has been duly authorized by all necessary
corporate action on the part of the Delaware Trustee. This Declaration has
been duly executed and delivered by the Delaware Trustee and constitutes a
legal, valid and binding obligation of the Delaware Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law);
(c) No consent, approval or authorization of, or
registration with or notice to, any federal banking authority is required for
the execution, delivery or performance by the Delaware Trustee of this
Declaration; and
(d) The Delaware Trustee is a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware.
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ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement.
The Holders of the Capital Securities, the Debentures and the
Capital Securities Guarantee are entitled to the benefits of a Registration
Rights Agreement. In certain limited circumstances set forth in the
Registration Rights Agreement, the Debenture Issuer shall be required to pay
Liquidated Damages with respect to the Debentures. Unless otherwise stated,
the term "Distribution", as used in this Declaration, includes such Liquidated
Damages.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, overnight courier service or
confirmed telecopy, as follows:
(a) if given to the Trust, in care of the
Administrative Trustees at the Trust's mailing address set forth below (or such
other address as the Trust may give notice of to the Property Trustee, the
Delaware Trustee and the Holders):
ML Capital Trust I
c/o ML Bancorp, Inc.
Two Aldwyn Center
Villanova, Pennsylvania 19085
Attention: Brian M. Hartline
Administrative Trustee
Telecopy: (610) 526-6227
(b) if given to the Delaware Trustee, at the mailing
address set forth below (or such other address as Delaware Trustee may give
notice of to the Holders):
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
Telecopy: (212) 815-5917
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(c) if given to the Property Trustee, at the Property
Trustee's mailing address set forth below (or such other address as the
Property Trustee may give notice of to the Holders):
The Bank of New York
101 Barclay Street
21st Floor West
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
Telecopy: (212) 815-5917
(d) if given to the Holder of the Common Securities, at
the mailing address of the Sponsor set forth below (or such other address as
the Holder of the Common Securities may give notice to the Property Trustee and
the Trust):
ML Bancorp, Inc.
Lancaster Avenue & Route 320
Villanova, Pennsylvania 19085
Attention: Brian M. Hartline
Executive Vice President, Chief
Financial Officer and Secretary
Telecopy: (610) 526-6227
(e) if given to any other Holder, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 15.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 15.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
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SECTION 15.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 15.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed.
SECTION 15.6 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
/s/ Dennis S. Marlo
---------------------------------------------
Dennis S. Marlo, as Administrative Trustee
/s/ Brian M. Hartline
---------------------------------------------
Brian M. Hartline, as Administrative Trustee
/s/ William J. Glinski
---------------------------------------------
William J. Glinski, as Administrative Trustee
THE BANK OF NEW YORK (DELAWARE)
as Delaware Trustee
By: /s/ Fred Clark
------------------------------------------
Name: Fred Clark
Title:
THE BANK OF NEW YORK
as Property Trustee
By: /s/ Byron Merino
------------------------------------------
Name: Byron Merino
Title: Assitant Treasurer
ML BANCORP, INC.
as Sponsor and Debenture Issuer
By: /s/ Brian M. Hartline
------------------------------------------
Name: Brian M. Hartline
Title: Executive Vice President, Chief
Financial Officer and Secretary
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ANNEX I
TERMS OF
SERIES A/SERIES B 9.875% CAPITAL SECURITIES
9.875% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of March 10, 1997 (as amended from time to time,
the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Securities are set out below
(each capitalized term used but not defined herein has the meaning set forth in
the Declaration or, if not defined in such Declaration, as defined in the
Offering Memorandum referred to below in Section 2(c) of this Annex I):
1. Designation and Number.
(a) Capital Securities. 50,000 Series A Capital
Securities of the Trust and 50,000 Series B Capital Securities of the Trust,
both series together with an aggregate liquidation amount with respect to the
assets of the Trust of fifty million dollars ($50,000,000), and each with a
liquidation amount with respect to the assets of the Trust of $1,000 per
security, are hereby designated for the purposes of identification only as
"Series A % Capital Securities" and "Series B 9.875% Capital Securities",
respectively (collectively, the "Capital Securities"). The certificates
evidencing the Capital Securities shall be substantially in the form of Exhibit
A-1 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice or to
conform to the rules of any exchange or quotation system on or in which the
Capital Securities are listed, traded or quoted.
(b) Common Securities. 1,547 Common Securities of the
Trust with an aggregate liquidation amount with respect to the assets of the
Trust of one million five hundred forty seven thousand dollars ($1,547,000) and
a liquidation amount with respect to the assets of the Trust of $1,000 per
security, are hereby designated for the purposes of identification only as
"9.875% Common Securities" (collectively, the "Common Securities"). The
certificates evidencing the Common Securities shall be substantially in the
form of Exhibit A-2 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or
practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed
at a rate per annum of 9.875% (the "Coupon Rate") of the liquidation amount of
$1,000 per Security (the "Liquidation Amount"), such rate being the rate of
interest payable on the Debentures to be held by the Property Trustee.
Distributions in arrears for more than one semi-annual
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period will bear additional distributions thereon compounded semi-annually at
the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes distributions of any such Liquidated
Damages payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds on hand legally
available therefor.
(b) Distributions on the Securities will be cumulative,
will accumulate from the most recent date to which Distributions have been paid
or duly provided for or, if no Distributions have been paid or duly provided
for, from March 10, 1997, and will be payable semi-annually in arrears on March
1 and September 1 of each year, commencing on September 1, 1997 (each, a
"Distribution Date"), except as otherwise described below. Distributions will
be computed on the basis of a 360-day year consisting of twelve 30-day months
and for any period less than a full calendar month on the basis of the actual
number of days elapsed in such month. As long as no Event of Default has
occurred and is continuing under the Indenture, the Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 10 consecutive semi-annual periods, including the first
such semi-annual period during such period (each an "Extension Period"), during
which Extension Period no interest shall be due and payable on the Debentures,
provided that no Extension Period shall end on a date other than an Interest
Payment Date for the Debentures or extend beyond the Maturity Date of the
Debentures. As a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, Distributions will continue to accumulate
with additional Distributions thereon (to the extent permitted by applicable
law but not at a rate greater than the rate at which interest is then accruing
on the Debentures) at the Coupon Rate compounded semi-annually during any such
Extension Period. Prior to the termination of any such Extension Period, the
Debenture Issuer may further defer payments of interest by further extending
such Extension Period; provided that such Extension Period, together with all
such previous and further extensions within such Extension Period, may not
exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension Period, or extend beyond the Maturity Date of the
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Securities will be payable to
the Holders thereof as they appear on the books and records of the Trust on the
close of business on the 15th day of the month preceding the month in which the
relevant Distribution Date occurs, which Distribution Dates correspond to the
interest payment dates on the Debentures. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment in respect
of the Global Capital Securities will be made as described under the heading
"Description of Capital Securities -- Form, Denomination, Book-Entry Procedures
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and Transfer" in the Offering Memorandum dated March 4, 1997, of the Debenture
Issuer and the Trust relating to the Securities and the Debentures. Payments
in respect of Capital Securities held in certificated form will be made by
check mailed to the Holder entitled thereto. The relevant record dates for the
Common Securities shall be the same as the record dates for the Capital
Securities. Distributions payable on any Securities that are not punctually
paid on any Distribution Date, as a result of the Debenture Issuer having
failed to make a payment under the Debentures, will cease to be payable to the
Holder on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered
on the special record date or other specified date determined in accordance
with the Indenture. If any date on which Distributions are payable on the
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that if such next succeeding Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day with
the same force and effect as if made on such date.
(d) In the event that there is any money or other
property held by or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein) among the Holders.
3. Liquidation Distribution Upon Dissolution.
In the event of any termination of the Trust or the Sponsor
otherwise gives notice of its election to liquidate the Trust pursuant to
Section 8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders a Like
Amount (as defined below) of the Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
Holders will be entitled to receive Pro Rata out of the assets of the Trust
legally available for distribution to Holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the aggregate of the liquidation amount of $1,000 per Security plus
accumulated and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to the principal
amount of Debentures to be paid in accordance with their terms and (ii) with
respect to a distribution of Debentures upon the liquidation of the Trust,
Debentures having a principal amount equal to the Liquidation Amount of the
Securities of the Holder to whom such Debentures are distributed.
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If, upon any such liquidation, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets on hand
legally available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by the Trust on the Securities shall be paid on a
Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in
part, at maturity or upon early redemption (either at the option of the
Debenture Issuer or pursuant to a Special Event, as described below), the
proceeds from such repayment shall be simultaneously applied by the Property
Trustee (subject to the Property Trustee having received written notice no
later than 45 days prior to such repayment) to redeem a Like Amount of the
Securities at a redemption price equal to (i) in the case of the repayment of
the Debentures at maturity, the Maturity Redemption Price (as defined below),
(ii) in the case of the optional redemption of the Debentures upon the
occurrence and continuation of a Special Event, the Special Event Redemption
Price (as defined below) and (iii) in the case of the optional redemption of
the Debentures on or after March 1, 2007, the Optional Redemption Price (as
defined below). The Maturity Redemption Price, the Special Event Redemption
Price and the Optional Redemption Price are referred to collectively as the
"Redemption Price". Holders will be given not less than 30 nor more than 60
days notice of such redemption.
(b) (i) The "Maturity Redemption Price", with respect to a
redemption of Securities, shall mean an amount equal to the principal of and
accrued and unpaid interest on the Debentures as of the maturity date thereof.
(ii) In the case of an optional redemption, if fewer than all
the outstanding Securities are to be so redeemed, the Securities to be redeemed
will be determined as described in Section 4(f)(ii) below. Upon the entry of
an order for the dissolution of the Trust by a court of competent jurisdiction,
the Debentures thereafter will be subject to optional repayment, in whole, but
not in part, on or after March 1, 2007 (the "Initial Optional Redemption
Date").
The Debenture Issuer shall have the right (subject to the
conditions in the Indenture) to elect to redeem the Debentures in whole or in
part at any time on or after the Initial Optional Redemption Date, upon not
less than 30 days and not more than 60 days notice, at the Optional Redemption
Price and, simultaneous with such redemption, to cause a Like Amount of the
Securities to be redeemed by the Trust at the Optional Redemption Price on a
Pro Rata basis. "Optional Redemption Price" shall mean a price equal to the
percentage of the liquidation amount of Securities to be redeemed plus
accumulated and unpaid Distributions thereon, if any, to the date of such
redemption if redeemed during the 12-month period beginning March 1 of the
years indicated below:
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Year Percentage
---- ----------
2007 104.937%
2008 104.443%
2009 103.950%
2010 103.456%
2011 102.962%
2012 102.469%
2013 101.975%
2014 101.481%
2015 100.987%
2016 100.494%
2017 and thereafter 100.000%
(c) If at any time a Tax Event or a Regulatory Capital
Event (each as defined below, and each a "Special Event") occurs, the Debenture
Issuer shall have the right (subject to the conditions set forth in the
Indenture) at any time prior to the Initial Optional Redemption Date, upon not
less than 30 nor more than 60 days notice, to redeem the Debentures in whole,
but not in part, within the 90 days following the occurrence of such Special
Event (the "90 Day Period"), and, simultaneous with such redemption, to cause a
Like Amount of the Securities to be redeemed by the Trust at the Special Event
Redemption Price on a Pro Rata basis.
"Make-Whole Amount" shall be equal to the greater of (i) 100%
of the principal of a Like Amount of Debentures to be redeemed or (ii) the sum,
as determined by a Quotation Agent (as defined in the Indenture), of the
present values of remaining scheduled payments of principal amount and interest
on the Debentures, discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined in the Indenture), plus, in the case of each of
clauses (i) and (ii), accrued and unpaid Distributions thereon, if any, to the
date of such redemption.
"Tax Event" shall occur upon receipt by the Sponsor and the
Trust of an Opinion of Counsel from 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 March 10,
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1997, there is more than an insubstantial risk that (i) the Trust is, or will
be within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the Debentures, (ii)
interest payable by the Debenture Issuer on the Debentures is not, or within 90
days of the date of such opinion, will not be, deductible by the Debenture
Issuer, in whole or in part, for United States federal income tax purposes, or
(iii) the Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
A "Regulatory Capital Event" means that the Sponsor shall have
become, or pursuant to law or regulation will become within 180 days, subject
to capital requirements under which, in the written opinion of independent bank
regulatory counsel experienced in such matters, the Capital Securities would
not constitute Tier 1 Capital (as that concept is used in the guidelines or
regulations issued by the Federal Reserve Board as of the date of the Offering
Memorandum) applied as if the Sponsor (or its successor) were a bank holding
company, or the then-equivalent of such Tier 1 Capital.
"Special Event Redemption Price" shall mean, with respect to a
redemption of Securities, a price equal to the Make-Whole Amount.
(d) On and from the date fixed by the Administrative
Trustees for any distribution of Debentures and liquidation of the
Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) the
Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), as the Holder of the Capital Securities, will receive a registered
global certificate or certificates representing the Debentures to be delivered
upon such distribution and any certificates representing Securities not held by
the Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee) will be deemed to represent beneficial interests in a Like Amount of
Debentures until such certificates are presented to the Debenture Issuer or its
agent for transfer or reissue.
(e) The Trust may not redeem fewer than all the
outstanding Securities unless all accumulated and unpaid Distributions have
been paid on all Securities for all semi-annual Distribution periods
terminating on or before the date of redemption.
(f) The procedure with respect to redemptions or
distributions of Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder to be
redeemed or exchanged not fewer than 30 nor more than 60 days before
the date fixed for redemption or exchange thereof which, in the case
of a redemption, will be the date fixed for redemption of the
Debentures. For purposes of the calculation of the date of redemption
or exchange and the dates on which notices are given pursuant to this
Section 4(f)(i), a Redemption/ Distribution Notice shall be deemed to
be given on the day such notice is first mailed
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by first-class mail, postage prepaid, to Holders. Each
Redemption/Distribution Notice shall be addressed to the Holders at
the address of each such Holder appearing in the books and records of
the Trust. No defect in the Redemption/Distribution Notice or in the
mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any
other Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the particular Securities to be
redeemed shall be selected on a Pro Rata basis (based upon Liquidation
Amounts) not more than 60 days prior to the date fixed for redemption
from the outstanding Capital Securities not previously called for
redemption, provided, however, that with respect to Holders that would
be required to hold less than 100 but more than zero Securities as a
result of such pro rata redemption, the Trust shall redeem Securities
of each such Holder so that after such redemption such Holder shall
hold either 100 Securities or such Holder no longer holds any
Securities and shall use such method (including, without limitation,
by lot) as the Trust shall deem fair and appropriate, provided,
further, that any such proration may be made on the basis of the
aggregate Liquidation Amount of Securities held by each Holder thereof
and may be made by making such adjustments as the Trust deems fair and
appropriate in order that only Securities in denominations of $1,000
or integral multiples thereof shall be redeemed. In respect of Capital
Securities registered in the name of and held of record by the
Clearing Agency or its nominee (or any successor Clearing Agency or
its nominee) or any nominee, the distribution of the proceeds of such
redemption will be made to the Clearing Agency and disbursed by such
Clearing Agency in accordance with the procedures applied by such
agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, (which notice will be irrevocable),
then (A) with respect to Capital Securities issued in book-entry form,
by 12:00 noon, New York City time, on the redemption date, provided
that the Debenture Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity
of the Debentures by 10:00 a.m., New York City time, on the maturity
date or the date of redemption, as the case requires, the Property
Trustee will deposit irrevocably with the Clearing Agency or its
nominee (or successor Clearing Agency or its nominee) funds sufficient
to pay the applicable Redemption Price with respect to such Capital
Securities and will give the Clearing Agency irrevocable instructions
and authority to pay the Redemption Price to the relevant Clearing
Agency Participants, and (B) with respect to Capital Securities issued
in certificated form and Common Securities, provided that the
Debenture Issuer has paid the Property Trustee a sufficient amount of
cash in connection with the related redemption or maturity of the
Debentures, the Property Trustee will pay the relevant Redemption
Price to the Holders by check mailed to the address of the relevant
Holder appearing on the books and records of the Trust on the
redemption date. If a Redemp-
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tion/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of
business on the date of such deposit, or on the redemption date, as
applicable, Distributions will cease to accumulate on the Securities
so called for redemption and all rights of Holders so called for
redemption will cease, except the right of the Holders of such
Securities to receive the Redemption Price, but without interest on
such Redemption Price, and such Securities shall cease to be
outstanding.
(iv) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of
Holders on the close of business on a regular record date in respect
of a Distribution Date occurring on or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust
shall be required to register or cause to be registered the transfer
of (i) any Securities beginning on the opening of business 15 days
before the day of mailing of a notice of redemption and ending at the
close of business on the day of such mailing or (ii) any Securities
selected for redemption except the unredeemed portion of any Security
being redeemed. If any date fixed for redemption of Securities is not
a Business Day, then payment of the Redemption Price payable on such
date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such
delay) except that, if such next succeeding Business Day falls in the
next calendar year, such payment shall be made on the immediately
preceding Business Day, with the same force and effect as if made on
such date fixed for redemption. If payment of the Redemption Price in
respect of any Securities is improperly withheld or refused and not
paid either by the Property Trustee or by the Sponsor as guarantor
pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accumulate from the original redemption
date to the actual date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the
Property Trustee on behalf of the Trust to (A) in respect of the
Capital Securities, the Clearing Agency or its nominee (or any
successor Clearing Agency or its nominee) if the Global Certificates
have been issued or, if Definitive Capital Security Certificates have
been issued, to the Holder thereof, and (B) in respect of the Common
Securities to the Holder thereof.
(vi) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws and banking
laws), provided the acquiror is not the Holder of the Common
Securities or the obligor under the Indenture, the Sponsor or any of
its subsidiaries may at any time and from time to time purchase
outstanding Capital Securities by tender, in the open market or by
private agreement.
I-8
<PAGE> 86
5. Voting Rights - Capital Securities.
(a) Except as provided under Sections 5(b), 6(b) and 7
and as otherwise required by law and the Declaration, the Holders of the
Capital Securities will have no voting rights.
(b) So long as any Debentures are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on such Debenture Trustee with respect
to the Debentures, (ii) waive any past default that is waivable under Section
5.07 of the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures
or (iv) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a majority in liquidation amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee
without the prior approval of each Holder of the Capital Securities. The
Trustees shall not revoke any action previously authorized or approved by a
vote of the Holders of the Capital Securities except by subsequent vote of such
Holders. Subject to Section 2.7 of the Declaration, the Property Trustee shall
notify each Holder of Capital Securities of any notice of default with respect
to the Debentures. In addition to obtaining the foregoing approvals of such
Holders of the Capital Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that the Trust will not be classified as an association
taxable as a corporation for United States federal income tax purposes on
account of such action.
If an Event of Default under the Declaration has occurred and
is continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures on
the due date (or in the case of redemption, on the redemption date), then a
Holder of Capital Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or premium, if any,
or interest on a Like Amount of Debentures (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such
Direct Action, the rights of the Common Securities Holder will be subrogated to
the rights of such Holder of Capital Securities to the extent of any payment
made by the Debenture Issuer to such Holder of Capital Securities in such
Direct Action. Except as provided in the second preceding sentence, the
Holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may
be given at a separate meeting of Holders of Capital Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice
of any meeting at which Holders of Capital
I-9
<PAGE> 87
Securities are entitled to vote, or of any matter upon which action by written
consent of such Holders is to be taken, to be mailed to each Holder of record
of Capital Securities. Each such notice will include a statement setting forth
(i) the date of such meeting or the date by which such action is to be taken,
(ii) a description of any resolution proposed for adoption at such meeting on
which such Holders are entitled to vote or of such matter upon which written
consent is sought and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Capital Securities
will be required for the Trust to redeem and cancel Capital Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Capital Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Capital Securities that are owned by the Sponsor or any Affiliate of the
Sponsor shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
6. Voting Rights - Common Securities.
(a) Except as provided under Sections 6(b), 6(c), and 7
as otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Unless an 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 an Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a Majority in liquidation amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace, or increase or decrease the number
of, the Administrative Trustees, which voting rights are vested exclusively in
the Sponsor as the holder of the Common Securities. No resignation or removal
of a Trustee and no appointment of a successor trustee shall be effective until
the acceptance of appointment by the successor trustee in accordance with the
provisions of the Declaration.
(c) So long as any Debentures are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on such Debenture Trustee with respect
to the Debentures, (ii) waive any past default that is waivable under Section
5.07 of the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures
or (iv) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in liquidation amount
of all outstanding Common Securities; provided, however, that where a consent
under the Indenture would require the consent of
I-10
<PAGE> 88
each holder of Debentures affected thereby, no such consent shall be given by
the Property Trustee without the prior approval of each Holder of the Common
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of the Common Securities except by subsequent
vote of such Holders. Subject to Section 2.7 of the Declaration, the Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing
approvals of such Holders of the Common Securities, prior to taking any of the
foregoing actions, the Trustees shall obtain an opinion of counsel experienced
in such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.
If an Event of Default under the Declaration has occurred and
is continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures on
the due date (or in the case of redemption, on the redemption date), then a
Holder of Common Securities may institute a Direct Action for enforcement of
payment to such Holder of the principal of or premium, if any, or interest on a
Like Amount of Debentures on or after the respective due date specified in the
Debentures. In connection with Direct Action, the rights of the Common
Securities Holder will be subordinated to the rights of such Holder of Capital
Securities to the extent of any payment made by the Debenture Issuer to such
Holder of Common Securities in such Direct Action. Except as provided in the
second preceding sentence, the Holders of Common Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice
of any meeting at which Holders of Common Securities are entitled to vote, or
of any matter upon which action by written consent of such Holders is to be
taken, to be mailed to each Holder of record of Common Securities. Each such
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
7. Amendments to Declaration and Indenture.
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees, without the consent of
the Holders (i) to cure any ambiguity,
I-11
<PAGE> 89
correct or supplement any provisions in the Declaration that may be
inconsistent with any other provisions, or to make any other provisions with
respect to matters or questions arising under the Declaration which shall not
be inconsistent with the other provisions of the Declaration, (ii) to modify,
eliminate or add to any provisions of the Declaration to such extent as shall
be necessary to ensure that the Trust will be classified for United States
federal income tax purposes as a grantor trust at all times that any Securities
are outstanding or to ensure that the Trust will not be required to register as
an "Investment Company" under the Investment Company Act or (iii) to modify,
eliminate or add any provisions of the Declaration to such extent as shall be
necessary to enable the Trust and the Sponsor to conduct an Exchange Offer in
the manner contemplated by the Registration Rights Agreement; provided,
however, that in each case such action shall not adversely affect in any
material respect the interests of any Holder. Any amendments of the
Declaration shall become effective when notice thereof is given to the Holders.
Under the circumstances referred to in Section 12.1(c) of the Declaration, the
Declaration also may be amended by the Trustees and the Sponsor with (i) the
consent of Holders representing a Majority in liquidation amount of all
outstanding Securities, and (ii) receipt by the Trustees of an Opinion of
Counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an Investment Company under the Investment
Company Act, provided that, without the consent of each Holder of Trust
Securities, the Declaration may not be amended to (i) change the amount or
timing of any Distribution on the Trust Securities or otherwise adversely
affect the amount of any Distribution required to be made in respect of the
Trust Securities as of a specified date or (ii) restrict the right of a holder
of Trust Securities to institute suit for the enforcement of any such payment
on or after such date.
8. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each
Holder according to the aggregate liquidation amount of the Securities held by
the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Capital Securities pro rata according to the aggregate liquidation amount of
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of Common Securities pro rata according to the aggregate
liquidation amount of Common Securities held by the relevant Holder relative to
the aggregate liquidation amount of all Common Securities outstanding. In any
such proration, the Trust may make such adjustments as may be appropriate in
order that only securities in authorized denominations shall be redeemed
(subject to the minimum block requirements of Section 9.2(n) of the
Declaration).
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<PAGE> 90
9. Ranking.
The Capital Securities rank pari passu with the Common
Securities and payment thereon shall be made Pro Rata with the Common
Securities, except that, if an Event of Default under the Declaration occurs
and is continuing, no payments in respect of Distributions on, or payments upon
liquidation, redemption or otherwise with respect to, the Common Securities
shall be made until the Holders of the Capital Securities shall be paid in full
the Distributions, Redemption Price, Liquidation Distribution and other
payments to which they are entitled at such time.
10. Acceptance of Securities Guarantee and Indenture.
Each Holder of Capital Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Capital Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
11. No Preemptive Rights.
The Holders shall have no preemptive rights to subscribe for
any additional securities.
12. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee, the Common Securities Guarantee (as may be
appropriate) and the Indenture (including any supplemental indenture) to a
Holder without charge upon written request to the Sponsor at its principal
place of business.
I-13
<PAGE> 91
EXHIBIT A-1
FORM OF SERIES A CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY,
INSERT: THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING
OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO
TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL
SECURITY AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY
OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER
NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.]
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[IF THIS CAPITAL SECURITY IS A RESTRICTED CAPITAL SECURITY,
INSERT:] THESE CAPITAL SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL
A1-1
<PAGE> 92
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH
IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST
DATE ON WHICH ML BANCORP, INC. (THE "COMPANY") OR ANY "AFFILIATE" OF THE
COMPANY WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS
CAPITAL SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO
LONG AS THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
PURSUANT TO CLAUSE (D), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE REVERSE OF THIS CAPITAL SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEREE TO THE TRUST. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.]
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100
CAPITAL SECURITIES). ANY SUCH TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING
A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO
THE RECEIPT OF DISTRIBUTIONS OF SUCH CAPITAL SECURITIES, AND SUCH TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
A1-2
<PAGE> 93
THE HOLDER OF THIS CAPITAL SECURITY BY ITS THE ACCEPTANCE
HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT AN
EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR (ii) THE ACQUISITION AND HOLDING OF THIS CAPITAL
SECURITY BY IT IS NOT PROHIBITED BY EITHER SECTION 406 OF ERISA OR SECTION 4975
OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR EXEMPT FROM ANY SUCH
PROHIBITION.
A1-3
<PAGE> 94
Number of Series A Aggregate Liquidation
Amount:
Capital Securities ------------
CUSIP NO.
- ------------------- ---------
Certificate Evidencing Series A Capital Securities
of
ML Capital Trust I
Series A 9.875% Capital Securities
(liquidation amount $1,000 per Capital Security)
ML Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of [$_________ in
aggregate liquidation amount of Capital Securities of the Trust](1) [the
aggregate liquidation amount of Capital Securities of the Trust specified in
Schedule A hereto](2) representing undivided beneficial interests in the assets
of the Trust designated the Series A 9.875% Capital Securities (liquidation
amount $1,000 per Capital Security) (the "Capital Securities"). Subject to the
Declaration (as defined below), the Capital Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Capital Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended
and Restated Declaration of Trust of the Trust dated as of March 10, 1997, as
the same may be amended from time to time (the "Declaration"), including the
designation of the terms of the Capital Securities as set forth in Annex I to
the Declaration. Capitalized terms used but not defined herein shall have the
meaning given them in the Declaration. The Sponsor will provide a copy of the
Declaration, the Capital Securities Guarantee, the Common Securities Guarantee
(as may be appropriate), and the Indenture (including any supplemental
indenture) to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
--------------------
(1) Insert in Definitive Capital Securities only.
(2) Insert in Global Capital Securities only.
A1-4
<PAGE> 95
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Capital
Securities as evidence of indirect beneficial ownership in the Debentures.
A1-5
<PAGE> 96
IN WITNESS WHEREOF, the Trust has duly executed this
certificate.
Dated:
ML CAPITAL TRUST I
By:
--------------------------------
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
THE BANK OF NEW YORK
as Property Trustee
By:
--------------------
Authorized Signatory
A1-6
<PAGE> 97
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed
at a rate per annum of 9.875% (the "Coupon Rate") of the liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on
the Debentures to be held by the Property Trustee. Distributions in arrears
for more than one semi-annual period will bear interest thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
Pursuant to the Registration Rights Agreement, in certain limited circumstances
the Debenture Issuer will be required to pay Liquidated Damages (as defined in
the Registration Rights Agreement) with respect to the Debentures. The term
"Distributions," as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
Distributions on the Capital Securities will be cumulative,
will accumulate from the most recent date to which Distributions have been paid
or duly provided for, if no Distributions have been paid or duly provided for,
from March 10, 1997 and will be payable semi-annually in arrears, on March 1
and September 1 of each year, commencing on September 1, 1997, except as
otherwise described below. Distributions will be computed on the basis of a
360-day year consisting of twelve 30-day months and, for any period less than a
full calendar month, the number of days elapsed in such month. As long as no
Event of Default has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period at any time and from time to
time on the Debentures for a period not exceeding 10 consecutive calendar
semi-annual periods, including the first such semi-annual period during such
extension period (each an "Extension Period"), provided that no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions also will be deferred. Despite
such deferral, semi-annual Distributions will continue to accumulate with
interest thereon (to the extent permitted by applicable law, but not at a rate
exceeding the rate of interest then accruing on the Debentures) at the Coupon
Rate compounded semi-annually during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided
that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not exceed 10 consecutive
semi-annual periods, including the first semi-annual period during such
Extension Period, end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. Payments of
accumulated Distributions will be payable to Holders as they appear on the
books and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.
A1-7
<PAGE> 98
Subject to the receipt of any required regulatory approval and
to certain other conditions set forth in the Declaration and the Indenture, the
Property Trustee may, at the direction of the Sponsor, at any time liquidate
the Trust and cause the Debentures to be distributed to the holders of the
Securities in liquidation of the Trust or, simultaneous with any redemption of
the Debentures, cause a Like Amount of the Securities to be redeemed by the
Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
A1-8
<PAGE> 99
--------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------- agent to transfer this Capital Security
Certificate on the books of the Trust. The agent may substitute another to
act for him or her.
Date:
-----------------------
Signature:
------------------
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee***:
-----------------------------------
---------------------
*** Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
A1-9
<PAGE> 100
[Include the following if the Capital Security bears a Restricted Capital
Securities Legend -
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without
transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(3) [ ] transferred to an institutional "accredited investor"
within the meaning of subparagraph (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act of 1933
that is acquiring the Capital Securities for its own
account, or for the account of such an institutional
"accredited investor," for investment purposes and
not with a view to, or for offer or sale in
connection with, any distribution in violation of the
Securities Act of 1933; or
(4) [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933; or
(5) [ ] transferred pursuant to an effective Registration
Statement.
Unless one of the boxes is checked, the Registrar will refuse to register any
of the Capital Securities evidenced by this certificate in the name of any
Person other than the registered Holder thereof; provided, however, that if box
(3) or (4) is checked, the Registrar may require, prior to registering any such
transfer of the Capital Securities, such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such
as the exemption provided by Rule 144 under such Act; provided, further, that
(i) if box (2) is checked, the transferee must also certify in the form
attached hereto that it is a "qualified institutional buyer" as defined in Rule
144A or (ii) if box (3) is checked, the transferee must also provide to the
Registrar a Transferee Letter of Representation in the form attached to the
Offering Memorandum of the Trust dated March 4, 1997; provided, further, that
after the date that a Registration Statement has been filed and so long as such
Registration Statement continues to be effective, the Registrar may only permit
transfers for which box (5) has been checked.
----------------------------------------------------
Signature
A1-10
<PAGE> 101
Schedule A ***
The initial number of Capital Securities evidenced by the Certificate
to which this Schedule is attached is _______ (having an aggregate liquidation
amount of $______). The notations in the following table evidence decreases
and increases in the number of Capital Securities evidenced by such
Certificate.
<TABLE>
<CAPTION>
Number of Capital
Decrease in Number of Increase in Number of Securities Remaining after Notation by
Capital Securities Capital Securities such Decrease or Increase Registrar
- -------------------------------------------------------------------------------------------------
<S> <C>
</TABLE>
* Append to Global Capital Securities only.
A1-11
<PAGE> 102
CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER
The undersigned transferee of Capital Securities hereby certifies that
(i) the undersigned is a "qualified institutional buyer" (a "QIB") as defined
in Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, (ii)
the undersigned is aware that the transfer of the Capital Securities to the
undersigned is being made in reliance on Rule 144A and (iii) the undersigned is
acquiring the Capital Securities for its own account or for the account of
another QIB over which the undersigned exercises its sole investment
discretion.
The undersigned also understands and acknowledges that the Capital
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Capital Securities and the
terms of the Amended and Restated Declaration of Trust of ML Capital Trust I,
dated as of March 10, 1997, as the same may be amended from time to time.
-----------------------------
Signature
A1-12
<PAGE> 103
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH ML
BANCORP, INC. (THE "COMPANY") OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER
OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS COMMON
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS COMMON SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF
THIS COMMON SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE TRUST.
SUCH HOLDER
A2-1
<PAGE> 104
FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS COMMON SECURITY IS NOT TRANSFERABLE EXCEPT AS SET FORTH IN
SECTION 9.1(c) OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE CAPITAL
TRUST I, DATED AS OF MARCH 10, 1997, AS THE SAME MAY BE AMENDED FROM TIME TO
TIME.
A2-2
<PAGE> 105
Certificate Evidencing Common Securities
of
ML Capital Trust I
9.875% Common Securities
(liquidation amount $1,000 per Common Security)
ML Capital Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that
______________________ (the "Holder") is the registered owner of __________
common securities of the Trust representing undivided beneficial interests in
the assets of the Trust designated the 9.875% Common Securities (liquidation
amount $1,000 per Common Security) (the "Common Securities"). Subject to the
limitations in Section 9.1(c) of the Declaration (as defined below), the Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of March 10, 1997, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common Securities
as set forth in Annex I to the Declaration. Capitalized terms used but not
defined herein shall have the meaning given them in the Declaration. The
Sponsor will provide a copy of the Declaration, the Common Securities
Guarantee, the Capital Securities Guarantee (as may be appropriate) and the
Indenture (including any supplemental indenture) to a Holder without charge
upon written request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
A2-3
<PAGE> 106
IN WITNESS WHEREOF, the Trust has executed this certificate
this ___ day of __________, ____.
ML Capital Trust I
By:
--------------------------------
Name:
Administrative Trustee
A2-4
<PAGE> 107
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at
a rate per annum of 9.875% (the "Coupon Rate") of the liquidation amount of
$1,000 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one semi-annual period will bear interest thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
Pursuant to the Registration Rights Agreement, in certain limited circumstances
the Debenture Issuer will be required to pay Liquidated Damages (as defined in
the Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds available therefor.
Distributions on the Common Securities will be cumulative,
will accrue from the most recent date to which Distributions have been paid or
duly provided for or, if no Distributions have been paid or duly provided for,
from March 10, 1997 and will be payable semi-annually in arrears, on March 1
and September 1 of each year, commencing on September 1, 1997, except as
otherwise described below. Distributions will be computed on the basis of a
360-day year consisting of twelve 30-day months and, for any period less than a
full calendar month, the number of days elapsed in such month. As long as no
Event of Default has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period at any time and from time to
time on the Debentures for a period not exceeding 10 consecutive calendar
semi-annual periods, including the first such semi-annual period during such
extension period (each an "Extension Period"), provided that no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions also will be deferred. Despite
such deferral, Distributions will continue to accumulate with interest thereon
(to the extent permitted by applicable law, but not at a rate exceeding the
rate of interest then accruing on the Debentures) at the Coupon Rate compounded
semi-annually during any such Extension Period. Prior to the termination of
any such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; provided that such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extension Period, or end on
a date other than an Interest Payment Date for the Debentures or extend beyond
the Maturity Date of the Debentures. Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the Trust on the
first record date after the end of the Extension Period. Upon the termination
of any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.
A2-5
<PAGE> 108
Subject to the receipt of any required regulatory approval and
to certain other conditions set forth in the Declaration and the Indenture, the
Property Trustee may, at the direction of the Sponsor, at any time liquidate
the Trust and cause the Debentures to be distributed to the holders to the
Securities in liquidation of the Trust or, simultaneous with any redemption of
the Debentures, cause a Like Amount of the Securities to be redeemed by the
Trust.
Under certain circumstances, the right of the holders of the
Common Securities shall be subordinate to the rights of the holders of the
Capital Securities (as defined in the Declaration), as provided in the
Declaration.
The Common Securities shall be redeemable as provided in the
Declaration.
A2-6
<PAGE> 109
----------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------ agent to transfer
this Common Security Certificate on the books of the Trust. The agent may
substitute another to act for him or her.
Date:
-----------------------
Signature:
------------------
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
A2-7
<PAGE> 110
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without
transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(3) [ ] transferred to an institutional "accredited investor"
within the meaning of subparagraph (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act of 1933
that is acquiring the Common Securities for its own
account, or for the account of such an institutional
"accredited investor," for investment purposes and
not with a view to, or for offer or sale in
connection with, any distribution in violation of the
Securities Act of 1933; or
(4) [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933; or
(5) [ ] transferred pursuant to an effective Registration
Statement.
Unless one of the boxes is checked, the Registrar will refuse to register any
of the Common Securities evidenced by this certificate in the name of any
Person other than the registered Holder thereof; provided, however, that if box
(3) or (4) is checked, the Registrar may require, prior to registering any such
transfer of the Capital Securities, such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such
as the exemption provided by Rule 144 under such Act; provided, further, that
(i) if box (2) is checked, the transferee must also certify in the form
attached that it is a "qualified institutional buyer" as defined in Rule 144A
or (ii) if box (3) is checked, the transferee must also provide to the
Registrar a Transferee Letter of Representation in the form attached to the
Offering Memorandum of the Trust, dated March 4, 1997 (as modified to reflect
the transfer of Common Securities).
--------------------------
Signature
A2-8
<PAGE> 111
CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER
The undersigned transferee of Common Securities hereby certifies that
(i) the undersigned is a "qualified institutional buyer" (a "QIB") as defined
in Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, (ii)
the undersigned is aware that the transfer of the Common Securities to the
undersigned is being made in reliance on Rule 144A and (iii) the undersigned is
acquiring the Common Securities for its own account or for the account of
another QIB over which the undersigned exercises its sole investment
discretion.
The undersigned also understands and acknowledges that the Common
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Common Securities and the
terms of the Amended and Restated Declaration of Trust of ML Capital Trust I,
dated as of March 10, 1997, as the same may be amended from time to time.
-----------------------------
Signature
A2-9
<PAGE> 1
Exhibit 4.4
Indenture, dated as of March 10, 1997, between the Company and The Bank of New
York, as trustee, relating to Junior Subordinated Deferrable Interest Debentures
due 2027 of ML Bancorp, Inc.
<PAGE> 2
EXHIBIT 4.4
================================================================================
ML BANCORP, INC.
------------------------------
------------------------------
INDENTURE
DATED AS OF MARCH 10, 1997
------------------------------
THE BANK OF NEW YORK
AS TRUSTEE
------------------------------
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
================================================================================
<PAGE> 3
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture dated as
of March 10, 1997 between ML Bancorp, Inc. and The Bank of New York, Trustee:
<TABLE>
<CAPTION>
ACT SECTION INDENTURE SECTION
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
310(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
310(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10, 6.11
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
311(a) and (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.01, 4.02(a)
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
312(b) and (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(c)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
314(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
315(a)(c) and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.09
316(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.07
316(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
316(a) last sentence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.02
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08
</TABLE>
- -------------------------------
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
<PAGE> 4
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional Sums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Adjusted Treasury Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capital Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capital Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comparable Treasury Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comparable Treasury Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Compounded Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Deferred Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Definitive Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissolution Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Extended Interest Payment Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
- -------------------------------
* THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A
PART OF THE INDENTURE.
i
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Indebtedness Ranking on a Parity with the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indebtedness Ranking Junior to the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Optional Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Make Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ML Capital Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Non Book-Entry Capital Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Optional Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Other Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Other Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Principal Office of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Quotation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Reference Treasury Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Reference Treasury Dealer Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Restricted Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
holder of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Series A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Series B Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Special Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Special Event Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trust Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.01. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.03. Form and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.04. Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.05. Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.06 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.07. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.08. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.09. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.10. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . 19
SECTION 3.01. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.02. Offices for Notices and Payments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.04. Provision as to Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.05. Certificate to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.06. Compliance with Consolidation Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.07. Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.08. Covenants as to ML Capital Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.09. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.10. Payment Upon Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.01. Securityholders' Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.02. Preservation and Disclosure of Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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SECTION 4.03. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.04. Reports by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.02. Payment of Securities on Default; Suit Therefor . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.03. Application of Moneys Collected by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.04. Proceedings by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.05. Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.06. Remedies Cumulative and Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders . . . . . . . . . 33
SECTION 5.08. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.09. Undertaking to Pay Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI
CONCERNING THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.01. Duties and Responsibilities of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.02. Reliance on Documents, Opinions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.03. No Responsibility for Recitals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Securities . . 38
SECTION 6.05. Moneys to be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.06. Compensation and Expenses of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.07. Officers' Certificate as Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.08. Conflicting Interest of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.09. Eligibility of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.10. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.11. Acceptance by Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.12. Succession by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.13. Limitation on Rights of Trustee as a Creditor . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.14. Authenticating Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
CONCERNING THE SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . 44
SECTION 7.01. Action by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.02. Proof of Execution by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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SECTION 7.03. Who Are Deemed Absolute Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.05. Revocation of Consents; Future Holders Bound . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VIII
SECURITYHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.01. Purposes of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.02. Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.03. Call of Meetings by Company or Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.04. Qualifications for Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.05. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.06. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE IX
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.01. Without Consent of Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.02. With Consent of Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.03. Compliance with Trust Indenture Act; Effect of Supplemental Indentures . . . . . . . . . . . . . 52
SECTION 9.04. Notation on Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished Trustee . . . . . . . . . . . . 53
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE . . . . . . . . . . . . . . 53
SECTION 10.01. Company May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.02. Successor Corporation to be Substituted for Company . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.03. Opinion of Counsel to be Given Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . 54
SECTION 11.01. Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.02. Deposited Moneys and U.S. Government Obligations to be Held in Trust by Trustee . . . . . . . . . 55
SECTION 11.03. Paying Agent to Repay Moneys Held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11.04. Return of Unclaimed Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government Obligations . . . . . . . . . . . . . . . . 56
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . . . . . . 58
SECTION 12.01. Indenture and Securities Solely Corporate Obligations . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . 58
SECTION 13.01. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 13.02. Official Acts by Successor Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 13.03. Surrender of Company Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 13.04. Addresses for Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.06. Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.07. Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.08. Trust Indenture Act to Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.09. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.11. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13.12. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 13.13. Acknowledgement of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XIV
REDEMPTION OF SECURITIES -- MANDATORY AND
OPTIONAL SINKING FUND . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14.01. Special Event Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14.02. Optional Redemption by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 14.03. No Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.04. Notice of Redemption; Selection of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.05. Payment of Securities Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XV
SUBORDINATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . 65
SECTION 15.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 15.02. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 15.03. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
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SECTION 15.04. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 15.05. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 15.06. Notice by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 15.08. Subordination May Not Be Impaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD . . . . . . . . . . . . . . . . . . 71
SECTION 16.01. Extension of Interest Payment Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 16.02. Notice of Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
Testimonium
Signatures
Acknowledgements
vii
<PAGE> 11
THIS INDENTURE, dated as of March 10, 1997, between ML
Bancorp, Inc., a Pennsylvania corporation (hereinafter sometimes called the
"Company"), and The Bank of New York, a New York banking corporation, as
trustee (hereinafter sometimes called the "Trustee"),
W I T N E S S E T H :
In consideration of the premises, and the purchase of the
Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture shall have the respective meanings specified in this
Section 1.01. All other terms used in this Indenture which are defined in the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which
are by reference therein defined in the Securities Act, shall (except as herein
otherwise expressly provided or unless the context otherwise requires) have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture as originally
executed. The following terms have the meanings given to them in the
Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Property
Trustee; (iv) Administrative Trustees; (v) Series A Capital Securities; (vi)
Series B Capital Securities; (vii) Direct Action; and (viii) Distributions.
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted
accounting principles and the term "generally accepted accounting principles"
means such accounting principles as are generally accepted at the time of any
computation. The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision. Headings are used for convenience of
reference only and do not affect interpretation. The singular includes the
plural and vice versa.
"Additional Sums" shall have the meaning set forth in Section
2.06(c).
"Adjusted Treasury Rate" means, with respect to any redemption
date pursuant to Section 14.01, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, assuming a price
for the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price
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for such redemption date plus (i) 2.90% if such redemption date occurs on or
prior to March 1, 1998 and (ii) 2.40% in all other cases.
"Affiliate" shall have the meaning given to that term in Rule
405 under the Securities Act or any successor rule thereunder.
"Authenticating Agent" shall mean any agent or agents of the
Trustee which at the time shall be appointed and acting pursuant to Section
6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any
similar federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors
of the Company or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" shall mean, with respect to any series of
Securities, any day other than a Saturday or a Sunday or a day on which banking
institutions in The City of New York or Villanova, Pennsylvania are authorized
or required by law or executive order to close.
"Capital Securities" shall mean undivided beneficial interests
in the assets of ML Capital Trust which rank pari passu with the Common
Securities issued by ML Capital Trust; provided, however, that if an Event of
Default has occurred and is continuing, no payments in respect of Distributions
on, or payments upon liquidation, redemption or otherwise with respect to, the
Common Securities shall be made until the holders of the Capital Securities
shall be paid in full the Distributions and the liquidation, redemption and
other payments to which they are entitled. References to "Capital Securities"
shall include collectively any Series A Capital Securities and Series B Capital
Securities.
"Capital Securities Guarantee" shall mean any guarantee that
the Company may enter into with The Bank of New York or other Persons that
operates directly or indirectly for the benefit of holders of Capital
Securities of ML Capital Trust and shall include a Series A Capital Securities
Guarantee and a Series B Capital Securities Guarantee with respect to the
Series A Capital Securities and the Series B Capital Securities, respectively.
"Commission" shall mean the Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act,
or if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now
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assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Common Securities" shall mean undivided beneficial interests
in the assets of ML Capital Trust which rank pari passu with Capital Securities
issued by ML Capital Trust; provided, however, that if an Event of Default has
occurred and is continuing, no payments in respect of Distributions on, or
payments upon liquidation, redemption or otherwise with respect to, the Common
Securities shall be made until the holders of the Capital Securities shall be
paid in full the Distributions and the liquidation, redemption and other
payments to which they are entitled.
"Common Securities Guarantee" shall mean any guarantee that
the Company may enter into with any Person or Persons that operates directly or
indirectly for the benefit of holders of Common Securities of ML Capital Trust.
"Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
"Company" shall mean ML Bancorp, Inc., a Pennsylvania
corporation, and, subject to the provisions of Article X, shall include its
successors and assigns.
"Company Request" or "Company Order" shall mean a written
request or order signed in the name of the Company by the Chairman, the Chief
Executive Officer, the President, a Vice Chairman, a Vice President, the
Comptroller, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
Initial Optional Prepayment Date that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the Securities.
"Comparable Treasury Price" means, with respect to any
redemption date pursuant to Section 14.01, (i) the average of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third Business Day preceding such
redemption date, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or
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(B) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Compounded Interest" shall have the meaning set forth in
Section 16.01.
"Custodian" shall mean any receiver, trustee, assignee,
liquidator, or similar official under any Bankruptcy Law.
"Declaration" means the Amended and Restated Declaration of
Trust of ML Capital Trust, dated as of March 10, 1997, as amended from time to
time.
"Default" means any event, act or condition that with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" shall have the same meaning set forth in Section 2.11.
"Deferred Interest" shall have the meaning set forth in
Section 16.01.
"Definitive Securities" shall mean those securities issued in
fully registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to Securities, for which
the Company shall determine that such Securities will be issued as a Global
Security, The Depository Trust Company, New York, New York, another clearing
agency, or any successor registered as a clearing agency under the Exchange Act
or other applicable statute or regulation, which, in each case, shall be
designated by the Company pursuant to Section 2.05(d).
"Dissolution Event" means the liquidation of ML Capital Trust
pursuant to the Declaration, and the distribution of the Securities held by the
Property Trustee to the holders of the Trust Securities issued by ML Capital
Trust pro rata in accordance with the Declaration.
"Event of Default" shall mean any event specified in Section
5.01, continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Offer" means the offer that may be made pursuant to
the Registration Rights Agreement (i) by the Company to exchange Series B
Securities for Series A Securities and to exchange a Series B Capital
Securities Guarantee for a Series A Capital Securities Guarantee and (ii) by ML
Capital Trust to exchange Series B Capital Securities for Series A Capital
Securities.
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"Extended Interest Payment Period" shall have the meaning set
forth in Section 16.01.
"Federal Reserve" shall mean the Board of Governors of the
Federal Reserve System.
"Global Security" means, with respect to the Securities, a
Security executed by the Company and delivered by the Trustee to the Depositary
or pursuant to the Depositary's instruction, all in accordance with the
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Indebtedness" shall mean (i) every obligation of the Company
for money borrowed; (ii) every obligation of the Company 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 the Company with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
the Company; (iv) every obligation of the Company 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 the Company; (vi) all indebtedness of the
Company whether incurred on or prior to the date of the Indenture or thereafter
incurred, for claims in respect of derivative products, including interest
rate, foreign exchange rate and commodity forward contracts, options and swaps
and similar arrangements; and (vii) every obligation of the type referred to in
clauses(i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, the Company has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.
"Indebtedness Ranking on a Parity with the Securities" shall
mean (i) Indebtedness, whether outstanding on the date of execution of this
Indenture or hereafter created, assumed or incurred, to the extent such
indebtedness specifically by its terms ranks equally with and not prior to the
Securities in the right of payment upon the happening of any dissolution or
winding up or liquidation or reorganization of the Company, and (ii) all other
debt securities, and guarantees in respect of those debt securities, issued to
any trust other than ML Capital Trust, or a trustee of such trust, partnership
or other entity affiliated with the Company that is a financing vehicle of the
Company (a "financing entity") in connection with the issuance by such
financing entity of equity securities or other securities guaranteed by the
Company pursuant to an instrument that ranks pari passu with or junior in right
of payment to the Capital Securities Guarantee. The securing of any
Indebtedness, otherwise constituting Indebtedness Ranking on a Parity with the
Securities, shall not be deemed to prevent such Indebtedness from constituting
Indebtedness Ranking on a Parity with the Securities.
"Indebtedness Ranking Junior to the Securities" shall mean any
Indebtedness, whether outstanding on the date of execution of this Indenture or
hereafter created,
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assumed or incurred, to the extent such indebtedness specifically by its terms
ranks junior to and not equally with or prior to the Securities (and any other
Indebtedness Ranking on a Parity with the Securities) in right of payment upon
the happening of any dissolution or winding up or liquidation or reorganization
of the Company. The securing of any Indebtedness, otherwise constituting
Indebtedness Ranking Junior to the Securities, shall not be deemed to prevent
such Indebtedness from constituting Indebtedness Ranking Junior to the
Securities.
"Indenture" shall mean this instrument as originally executed
or, if amended as herein provided, as so amended.
"Initial Optional Redemption Date" means March 1, 2007.
"Interest Payment Date" shall have the meaning set forth in
Section 2.06(a).
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Make Whole Amount" shall mean an amount equal to the greater
of (i) 100% of the principal amount of the Securities to be redeemed or (ii)
the sum, as determined by a Quotation Agent, of the present values of remaining
scheduled payments of principal and interest on the Securities, discounted to
the prepayment date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate, plus, in the case of
each of clauses (i) and (ii), accrued and unpaid interest thereon, including
Compounded Interest and Additional Sums, if any, to the date of such
redemption.
"Maturity Date" shall mean March 1, 1997.
"ML Capital Trust" or the "Trust" shall mean ML Capital Trust
I, a Delaware business trust created for the purpose of issuing its undivided
beneficial interests in connection with the issuance of Securities under this
Indenture.
"Mortgage" shall mean and include any mortgage, pledge, lien,
security interest, conditional sale or other title retention agreement or other
similar encumbrance.
"Non Book-Entry Capital Securities" shall have the meaning set
forth in Section 2.05(a)(ii).
"Officers" shall mean any of the Chairman, a Vice Chairman,
the Chief Executive Officer, the President, a Vice President, the Comptroller,
the Secretary or an Assistant Secretary of the Company.
"Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.
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"Opinion of Counsel" shall mean a written opinion of counsel,
who may be an employee of the Company, and who shall be acceptable to the
Trustee.
"Optional Redemption Price" shall have the meaning set forth
in Section 14.02(a).
"Other Debentures" means all junior subordinated debentures
issued by the Company from time to time and sold to trusts to be established by
the Company (if any), in each case similar to the Trust.
"Other Guarantees" means all guarantees to be issued by the
Company with respect to capital securities (if any) and issued to other trusts
to be established by the Company (if any), in each case similar to the Trust.
The term "outstanding" when used with reference to Securities,
shall, subject to the provisions of Section 7.04, mean, as of any particular
time, all Securities authenticated and delivered by the Trustee or the
Authenticating Agent under this Indenture, except
(a) Securities theretofore cancelled by the Trustee or
the Authenticating Agent or delivered to the Trustee
for cancellation;
(b) Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount
shall have been deposited in trust with the Trustee
or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by
the Company (if the Company shall act as its own
paying agent); provided that, if such Securities, or
portions thereof, are to be redeemed prior to
maturity thereof, notice of such redemption shall
have been given as in Article XIV provided or
provision satisfactory to the Trustee shall have been
made for giving such notice; and
(c) Securities in lieu of or in substitution for which
other Securities shall have been authenticated and
delivered pursuant to the terms of Section 2.08
unless proof satisfactory to the Company and the
Trustee is presented that any such Securities are
held by bona fide holders in due course.
"Person" shall mean any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt and as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered
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under Section 2.08 in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the lost, destroyed or stolen Security.
"Principal Office of the Trustee", or other similar term,
shall mean the office of the Trustee, at which at any particular time its
corporate trust business shall be administered.
"Purchase Agreement" shall mean the Purchase Agreement dated
March 4, 1997 among the Company, ML Capital Trust and the initial purchasers
named therein.
"Property Trustee" shall have the same meaning as set forth
in the Declaration.
"Quotation Agent" means the Reference Treasury Dealer
appointed by the Company.
"Redemption Price" means the Special Event Redemption Price or
the Optional Redemption Price, as the context requires.
"Reference Treasury Dealer" means a nationally recognized U.S.
Government securities dealer in New York City selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any redemption date pursuant to Section
14.01, the average, as determined by the Trustee, of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. New York City time on the third Business Day
preceding such redemption date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 10, 1997, by and among the Company, the Trust and
the initial purchasers named therein, as such agreement may be amended,
modified or supplemented from time to time.
A "Regulatory Capital Event" means that the Company shall have
become, or pursuant to law or regulation will become within 180 days, subject
to capital requirements under which, in the written opinion of independent bank
regulatory counsel experienced in such matters, the Capital Securities would
not constitute Tier 1 Capital (as that concept is used in the guidelines or
regulations issued by the Federal Reserve as of the date of the Offering
Memorandum) applied as if the Company (or its successor) were a bank holding
company, or the then-equivalent of such Tier 1 Capital.
"Responsible Officer" shall mean any officer of the Trustee
with direct responsibility for the administration of the Indenture and also
means, with respect to a
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particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Security" shall mean Securities that bear or are
required to bear the legends relating to transfer restrictions under the
Securities Act set forth in Exhibit A hereto.
"Rule 144A" means Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or under any similar rule or regulation
hereafter adopted by the Commission.
"Securities" means, collectively, the Series A Securities and
the Series B Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securityholder", "holder of Securities", or other similar
terms, shall mean any Person in whose name at the time a particular Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof.
"Security Register" shall mean (i) prior to a Dissolution
Event, the list of holders provided to the Trustee pursuant to Section 4.01 and
(ii) following a Dissolution Event, any security register maintained by a
security registrar for the Securities appointed by the Company following the
execution of a supplemental indenture providing for transfer procedures as
provided for in Section 2.07(a).
"Senior Indebtedness" shall mean all Indebtedness, whether
outstanding on the date of execution of this Indenture or hereafter created,
assumed or incurred, except Indebtedness Ranking on a Parity with the
Securities or Indebtedness Ranking Junior to the Securities, and any deferrals,
renewals or extensions of such Senior Indebtedness.
"Series A Securities" means the Company's Series A 9.875%
Junior Subordinated Deferrable Interest Debentures due March 1, 2027, as
authenticated and issued under this Indenture.
"Series B Securities" means the Company's Series B 9.875%
Junior Subordinated Deferrable Interest Debentures due March 1, 2027, as
authenticated and issued under this Indenture.
"Special Event" means either a Regulatory Capital Event or a
Tax Event.
"Special Event Redemption Price" shall mean, with respect to
any redemption of the Securities following a Special Event, an amount in cash
equal to the Make Whole Amount.
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"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of the outstanding voting stock of which is
owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any
general partnership, joint venture or similar entity, at least a majority of
whose outstanding partnership or similar interests shall at the time be owned
by such Person, or by one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries and (iii) any limited partnership of which such
Person or any of its Subsidiaries is a general partner. For the purposes of
this definition, "voting stock" means shares, interests, participations or
other equivalents in the equity interest (however designated) in such Person
having ordinary voting power for the election of a majority of the directors
(or the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.
"Tax Event" shall mean the receipt by ML Capital Trust and the
Company of an opinion of counsel experienced in such matters to the effect
that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws or any regulations thereunder of the United
States or any political subdivision or taxing authority thereof or therein or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after March 10,
1997, there is more than an insubstantial risk that (i) ML Capital Trust is, or
will be within 90 days of the date of such opinion, subject to United States
Federal income tax with respect to income received or accrued on the
Securities, (ii) interest payable by the Company on the Securities is not, or
within 90 days of the date of such opinion, will not be, deductible by the
Company, in whole or in part, for United States Federal income tax purposes or
(iii) ML Capital Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Trust Indenture Act of 1939" shall mean the Trust Indenture
Act of 1939 as in force at the date of execution of this Indenture; provided,
however, that, in the event the Trust Indenture Act of 1939 is amended after
such date, "Trust Indenture Act of 1939" shall mean, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" shall mean the Person identified as "Trustee" in the
first paragraph hereof, and, subject to the provisions of Article VI hereof,
shall also include its successors and assigns as Trustee hereunder. The term
"Trustee" as used with respect to a particular series of the Securities shall
mean the trustee with respect to that series.
"Trust Securities" shall mean the Capital Securities and the
Common Securities, collectively.
"U.S. Government Obligations" shall mean securities that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit
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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, which, in either case under clauses
(i) or (ii) are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company
as custodian with respect to any such U.S. Government Obligation or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of
the U.S. Government Obligation evidenced by such depository receipt.
ARTICLE II
SECURITIES
SECTION 2.01. Forms Generally.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject or usage. Each Security shall be
dated the date of its authentication. The Securities shall be issued in
denominations of $1,000 and integral multiples thereof.
SECTION 2.02. Execution and Authentication.
The Securities shall be executed on behalf of the Company by a
duly authorized officer and attested by a Secretary or an Assistant Secretary.
The signature of any such person on the Securities may be manual or facsimile.
If an Officer whose signature is on a Security no longer holds that office at
the time the Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture. The form of Trustee's certificate of authentication to be borne by
the Securities shall be substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a Company Order, authenticate for
original issue up to, and the aggregate principal amount of Securities
outstanding at any time may not exceed $51,547,000 aggregate principal amount
of the Securities, except as provided in Sections 2.07, 2.08, 2.09 and 14.05.
The series of Securities to be initially issued hereunder shall be the Series A
Securities.
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SECTION 2.03. Form and Payment.
Except as provided in Section 2.05, the Securities shall be
issued in fully registered certificated form without interest coupons.
Principal of, premium, if any, and interest on the Securities issued in
certificated form will be payable, the transfer of such Securities will be
registrable and such Securities will be exchangeable for Securities bearing
identical terms and provisions at the office or agency of the Company
maintained for such purpose under Section 3.02; provided, however, that payment
of interest with respect to Securities (other than a Global Security) may be
made at the option of the Company (i) by check mailed to the holder at such
address as shall appear in the Security Register or (ii) by transfer to an
account maintained by the Person entitled thereto, provided that proper
transfer instructions have been received in writing by the relevant record
date. Notwithstanding the foregoing, so long as the holder of any Securities
is the Property Trustee, the payment of the principal of, premium, if any, and
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on such Securities held by the Property Trustee
will be made at such place and to such account as may be designated by the
Property Trustee.
SECTION 2.04. Legends.
(a) Except as permitted by subsection (b) of this Section
2.04 or as otherwise determined by the Company in accordance with applicable
law, each Security shall bear the applicable legends relating to restrictions
on transfer pursuant to the securities laws in substantially the form set forth
on Exhibit A hereto.
(b) In the event of an Exchange Offer, the Company shall
issue and the Trustee, upon Company Order, shall authenticate Series B
Securities in exchange for Series A Securities accepted for exchange in the
Exchange Offer, which Series B Securities shall not bear the legends required
by subsection (a) above (other than the legend dealing with the restriction
referred to in Section 2.07(a)(ii) of this Indenture), in each case unless the
holder of such Series A Securities is either (A) a broker dealer who purchased
such Series A Securities directly from the Company for resale pursuant to Rule
144A or any other available exemption under the Securities Act, (B) a Person
participating in the distribution of the Series A Securities or (C) a Person
who is an Affiliate of the Company.
SECTION 2.05. Global Security.
(a) In connection with a Dissolution Event,
(i) if any Capital Securities are held in
book-entry form, the related Definitive Securities shall be presented
to the Trustee (if an arrangement with the Depositary has been
maintained) by the Property Trustee in exchange for one or more Global
Securities (as may be required pursuant to Section 2.07) in an
aggregate principal amount equal to the aggregate principal amount of
all outstanding Securi-
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ties, to be registered in the name of the Depositary, or its nominee,
and delivered by the Trustee to the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the
Administrative Trustees; the Company upon any such presentation shall
execute one or more Global Securities in such aggregate principal
amount and deliver the same to the Trustee for authentication and
delivery in accordance with this Indenture; and payments on the
Securities issued as a Global Security will be made to the Depositary;
and
(ii) if any Capital Securities are held in
certificated form, the related Definitive Securities may be presented
to the Trustee by the Property Trustee and any Capital Security
certificate which represents Capital Securities other than Capital
Securities in book-entry form ("Non Book-Entry Capital Securities")
will be deemed to represent beneficial interests in Securities
presented to the Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate liquidation amount of the Non
Book-Entry Capital Securities until such Capital Security certificates
are presented to the Security Registrar for transfer or reissuance, at
which time such Capital Security certificates will be cancelled and a
Security, registered in the name of the holder of the Capital Security
certificate or the transferee of the holder of such Capital Security
certificate, as the case may be, with an aggregate principal amount
equal to the aggregate liquidation amount of the Capital Security
certificate cancelled, will be executed by the Company and delivered
to the Trustee for authentication and delivery in accordance with this
Indenture. Upon the issuance of such Securities, Securities with an
equivalent aggregate principal amount that were presented by the
Property Trustee to the Trustee will be cancelled.
(b) The Global Securities shall represent the aggregate
amount of outstanding Securities from time to time endorsed thereon; provided,
that the aggregate amount of outstanding Securities represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee, in accordance with instructions given by
the Company as required by this Section 2.05.
(c) The Global Securities may be transferred, in whole
but not in part, only to the Depositary, another nominee of the Depositary, or
to a successor Depositary selected or approved by the Company or to a nominee
of such successor Depositary.
(d) If at any time the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary or the Depositary has
ceased to be a clearing agency registered under the Exchange Act, and a
successor Depositary is not appointed by the Company within 90 days after the
Company receives such notice or becomes aware of such condition, as the case
may be, the Company will execute, and the Trustee, upon receipt of a Company
Order, will authenticate and make available for delivery the Definitive
Securities, in authorized denominations, and in an aggregate principal amount
equal to the princi-
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pal amount of the Global Security in exchange for such Global Security. If
there is an Event of Default, the Depositary shall have the right to exchange
the Global Securities for Definitive Securities. In addition, the Company may
at any time determine that the Securities shall no longer be represented by a
Global Security. In the event of such an Event of Default or such a
determination, the Company shall execute, and subject to Section 2.07, the
Trustee, upon receipt of an Officers' Certificate evidencing such determination
by the Company and a Company Order, will authenticate and make available for
delivery the Definitive Securities, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Security
in exchange for such Global Security. Upon the exchange of the Global Security
for such Definitive Securities, in authorized denominations, the Global
Security shall be cancelled by the Trustee. Such Definitive Securities issued
in exchange for the Global Security shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Definitive Securities to the Depositary for
delivery to the Persons in whose names such Definitive Securities are so
registered.
SECTION 2.06 Interest.
(a) Each Security will bear interest at the rate of
9.875% per annum (the "Coupon Rate") from the most recent date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for, from March 10, 1997, until the principal thereof becomes due
and payable, and at the Coupon Rate on any overdue principal (and premium, if
any) and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest, compounded
semi-annually, payable (subject to the provisions of Article XVI) semi-annually
in arrears on March 1 and September 1 of each year (each, an "Interest Payment
Date") commencing on September 1, 1997, to the Person in whose name such
Security or any predecessor Security is registered, at the close of business on
the regular record date for such interest installment, which shall be the
fifteenth day of the month immediately preceding the month in which the
relevant Interest Payment Date falls.
(b) Interest will be computed on the basis of a 360-day
year consisting of twelve 30-day months and, for any period of less than a full
calendar month, the number of days lapsed in such month. In the event that any
Interest Payment Date falls on a day that is not a Business Day, then payment
of interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay), except that if such next succeeding Business Day falls in the next
succeeding calendar year, then such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(c) During such time as the Property Trustee is the
holder of any Securities, the Company shall pay any additional amounts on the
Securities as may be necessary in order that the amount of Distributions then
due and payable by ML Capital Trust
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on the outstanding Trust Securities shall not be reduced as a result of any
additional taxes, duties and other governmental charges to which ML Capital
Trust has become subject as a result of a Tax Event ("Additional Sums").
SECTION 2.07. Transfer and Exchange.
(a) Transfer Restrictions. (i) The Series A Securities,
and those Series B Securities with respect to which any Person described in
Section 2.04(b)(A), (B) or (C) is the beneficial owner, may not be transferred
except in compliance with the legends contained in Exhibit A unless otherwise
determined by the Company in accordance with applicable law. Upon any
distribution of the Securities following a Dissolution Event, the Company and
the Trustee shall enter into a supplemental indenture pursuant to Section 9.01
to provide for the transfer restrictions and procedures with respect to the
Securities substantially similar to those contained in the Declaration to the
extent applicable in the circumstances existing at such time.
(ii) The Securities will be issued and may be
transferred only in blocks having an aggregate principal amount of not less
than $100,000. Any such transfer of the Securities in a block having an
aggregate principal amount of less than $100,000 shall be deemed to be voided
and of no legal effect whatsoever. Any such transferee shall be deemed not to
be a holder of such Securities for any purpose, including, but not limited to
the receipt of payments on such Securities, and such transferee shall be deemed
to have no interest whatsoever in such Securities.
(b) General Provisions Relating to Transfers and
Exchanges. To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Security Registrar's request. All Definitive
Securities and Global Securities issued upon any registration of transfer or
exchange of Definitive Securities or Global Securities shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Definitive Securities or Global
Securities surrendered upon such registration of transfer or exchange.
No service charge shall be made to a holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith.
The Company shall not be required to (i) issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption or any
notice of selection of Securities for redemption under Article XIV hereof and
ending at the close of business on the day of such mailing; or (ii) register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
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<PAGE> 26
Prior to due presentment for the registration of a transfer of
any Security, the Trustee, the Company and any agent of the Trustee or the
Company may deem and treat the Person in whose name any Security is registered
as the absolute owner of such Security for the purpose of receiving payment of
principal of and premium, if any, and interest on such Securities, neither the
Trustee, nor the Company nor any agent of the Trustee or the Company shall be
affected by notice to the contrary.
(c) Exchange of Series A Securities for Series B Securities.
The Series A Securities may be exchanged for Series B Securities pursuant to
the terms of the Exchange Offer. The Trustee shall make the exchange as
follows:
The Company shall present the Trustee with an Officers'
Certificate certifying the following:
(A) upon issuance of the Series B Securities, the
transactions contemplated by the Exchange Offer have
been consummated; and
(B) the principal amount of Series A Securities properly
tendered in the Exchange Offer that are represented
by a Global Security and the principal amount of
Series A Securities properly tendered in the Exchange
Offer that are represented by Definitive Securities,
the name of each holder of such Definitive
Securities, the principal amount properly tendered in
the Exchange Offer by each such holder and the name
and address to which Definitive Securities for Series
B Securities shall be registered and sent for each
such holder.
The Trustee, upon receipt of (i) such Officers' Certificate,
(ii) an Opinion of Counsel (x) to the effect that the Series B Securities have
been registered under Section 5 of the Securities Act and the Indenture has
been qualified under the Trust Indenture Act and (y) with respect to the
matters set forth in Section 3(p) of the Registration Rights Agreement and
(iii) a Company Order, shall authenticate (A) a Global Security representing
Series B Securities in aggregate principal amount equal to the aggregate
principal amount of Series A Securities represented by a Global Security
indicated in such Officers' Certificate as having been properly tendered and
(B) Definitive Securities representing Series B Securities registered in the
names of, and in the principal amounts indicated in, such Officers'
Certificate.
If the principal amount of the Global Security for the Series
B Securities is less than the principal amount of the Global Security for the
Series A Securities, the Trustee shall make an endorsement on such Global
Security for Series A Securities indicating a reduction in the principal amount
represented thereby.
The Trustee shall deliver such Definitive Securities
representing Series B Securities to the holders thereof as indicated in such
Officers' Certificate.
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SECTION 2.08. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. An indemnity bond must be supplied by
the holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any agent thereof or any authenticating agent
from any loss that any of them may suffer if a Security is replaced. The
Company or the Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
SECTION 2.09. Temporary Securities.
Pending the preparation of Definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the Definitive Securities in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities
may determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company shall cause
Definitive Securities to be prepared without unreasonable delay. The
Definitive Securities shall be printed, lithographed or engraved, or provided
by any combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
officers executing such Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the office
or agency maintained by the Company for such purpose pursuant to Section 3.02
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute, and the Trustee
shall authenticate and make available for delivery, in exchange therefor the
same aggregate principal amount of Definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as Definitive
Securities.
SECTION 2.10. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or
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dispose of cancelled Securities in accordance with its normal practices
(subject to the record retention requirement of the Exchange Act) unless the
Company directs them to be returned to it. The Company may not issue new
Securities to replace Securities that have been redeemed or paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest.
Any interest on any Security that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the holder
on the relevant regular record date by virtue of having been such holder; and
such Defaulted Interest shall be paid by the Company, at its election, as
provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each such Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix
a special record date for the payment of such Defaulted Interest which
shall not be more than 15 nor less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such special record date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the special record
date therefor to be mailed, first class postage prepaid, to each
Securityholder at his or her address as it appears in the Security
Register, not less than 10 days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names such
Securities (or their respective Predecessor Securities) are registered
on such special record date and shall be no longer payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest on
any Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may
be listed, and upon such notice as may be required by such exchange,
if, after notice given by the Company to the
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Trustee of the proposed payment pursuant to this clause, such manner
of payment shall be deemed practicable by the Trustee.
SECTION 2.12. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers
in notices of redemption as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the
holders of the Securities that it will duly and punctually pay or cause to be
paid the principal of, premium, if any, and interest on the Securities at the
place, at the respective times and in the manner provided herein. Except as
provided in Section 2.03, each installment of interest on the Securities may be
paid by mailing checks for such interest payable to the order of the holder of
Security entitled thereto as they appear in the Security Register. The Company
further covenants to pay any and all amounts, including, without limitation,
Additional Sums, as may be required pursuant to Section 2.06(c), Liquidated
Damages, if any, on the dates and in the manner required under the Registration
Rights Agreement and Compounded Interest, as may be required pursuant to
Section 16.01.
SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the
Company will maintain in the Borough of Manhattan, The City of New York, an
office or agency where the Securities may be presented for payment, an office
or agency where the Securities may be presented for registration of transfer
and for exchange as in this Indenture provided and an office or agency where
notices and demands to or upon the Company in respect of the Securities or of
this Indenture may be served. The Company will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. Until otherwise designated from time to time by the Company
in a notice to the Trustee, any such office or agency for all of the above
purposes shall be the Principal Office of the Trustee. In case the Company
shall fail to maintain any such office or agency in the
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Borough of Manhattan, The City of New York, or shall fail to give such notice
of the location or of any change in the location thereof, presentations and
demands may be made and notices may be served at the Principal Office of the
Trustee.
In addition to any such office or agency, the Company may from
time to time designate one or more offices or agencies outside the Borough of
Manhattan, The City of New York, where the Securities may be presented for
payment, registration of transfer and for exchange in the manner provided in
this Indenture, and the Company may from time to time rescind such designation,
as the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Borough of Manhattan,
The City of New York, for the purposes above mentioned. The Company will give
to the Trustee prompt written notice of any such designation or rescission
thereof.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's
Office.
The Company, whenever necessary to avoid or fill a vacancy in
the office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a) If the Company shall appoint a paying agent other
than the Trustee with respect to the Securities, it
will cause such paying agent to execute and deliver
to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the
provision of this Section 3.04,
(1) that it will hold all sums held by it as such
agent for the payment of the principal of and
premium, if any, or interest on the
Securities (whether such sums have been paid
to it by the Company or by any other obligor
on the Securities) in trust for the benefit
of the holders of the Securities; and
(2) that it will give the Trustee notice of any
failure by the Company (or by any other
obligor on the Securities) to make any
payment of the principal of and premium or
interest (including Additional Sums and
Compounded Interest, if any) and Liquidated
Damages, if any, on the Securities when the
same shall be due and payable.
(b) If the Company shall act as its own paying agent, it
will, on or before each due date of the principal of
and premium, if any, or interest on the Securities,
set aside, segregate and hold in trust for the
benefit of the holders of the Securities a sum
sufficient to pay such principal,
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<PAGE> 31
premium or interest so becoming due and will notify
the Trustee of any failure to take such action and of
any failure by the Company (or by any other obligor
under the Securities) to make any payment of the
principal of and premium, if any, or interest on the
Securities when the same shall become due and
payable.
(c) Anything in this Section 3.04 to the contrary
notwithstanding, the Company may, at any time, for
the purpose of obtaining a satisfaction and discharge
with respect to the Securities hereunder, or for any
other reason, pay or cause to be paid to the Trustee
all sums held in trust for such Securities by the
Trustee or any paying agent hereunder, as required by
this Section 3.04, such sums to be held by the
Trustee upon the trusts herein contained.
(d) Anything in this Section 3.04 to the contrary
notwithstanding, the agreement to hold sums in trust
as provided in this Section 3.04 is subject to
Sections 11.03 and 11.04.
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days
after the end of each fiscal year in each year, commencing with the first
fiscal year ending after the date hereof, so long as Securities are outstanding
hereunder, an Officers' Certificate, one of the signers of which shall be the
principal executive, principal financial or principal accounting officer of the
Company, stating that in the course of the performance by the signers of their
duties as officers of the Company they would normally have knowledge of any
default by the Company in the performance of any covenants contained herein,
stating whether or not they have knowledge of any such default and, if so,
specifying each such default of which the signers have knowledge and the nature
thereof.
SECTION 3.06. Compliance with Consolidation Provisions.
The Company will not, while any of the Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other Person unless the
provisions of Article X hereof are complied with.
SECTION 3.07. Limitation on Dividends.
The Company will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, premium, if any, or
interest on or repay or repurchase or redeem any debt securities of the Company
(including Other Debentures) that rank pari passu with or
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<PAGE> 32
junior in right of payment to the Securities or (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any Subsidiary of the Company (including Other Guarantees) if such guarantee
ranks pari passu or junior in right of payment to the Securities (other than
(a) dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Common Stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Capital Securities Guarantee, (d) as a result of a
reclassification of the Company's capital stock or the exchange or the
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged and (f) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Company's benefit plans for its directors,
officers or employees or any of the Company's dividend reinvestment plans) if
at such time (1) there shall have occurred any event of which the Company has
actual knowledge that (a) is or, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default and (b) in respect of which
the Company shall not have taken reasonable steps to cure, (2) if such
Securities are held by the Property Trustee, the Company shall be in default
with respect to its payment obligations under the Capital Securities Guarantee
or (3) the Company shall have given notice of its election of the exercise of
its right to extend the interest payment period pursuant to Section 16.01 and
any such extension shall be continuing.
SECTION 3.08. Covenants as to ML Capital Trust
In the event Securities are issued to ML Capital Trust or a
trustee of such trust in connection with the issuance of Trust Securities by ML
Capital Trust, for so long as such Trust Securities remain outstanding, the
Company (i) will maintain 100% direct or indirect ownership of the Common
Securities of ML Capital Trust; provided, however, that any successor of the
Company, permitted pursuant to Article X, may succeed to the Company's
ownership of such Common Securities, (ii) will use its reasonable efforts to
cause ML Capital Trust (a) to remain a business trust, except in connection
with a distribution of Securities to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities of ML
Capital Trust or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of ML Capital Trust, and (b) to otherwise continue
to be treated as a grantor trust and not an association taxable as a
corporation for United States federal income tax purposes and (iii) use its
reasonable efforts to cause each holder of Trust Securities to be treated as
owning an undivided beneficial interest in the Securities.
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SECTION 3.09. Payment of Expenses.
In connection with the offering, sale and issuance of the
Securities to ML Capital Trust and in connection with the sale of the Trust
Securities by ML Capital Trust, the Company, in its capacity as borrower with
respect to the Securities, shall:
(a) pay all costs and expenses relating to the offering,
sale and issuance of the Securities, including commissions to the initial
purchasers payable pursuant to the Purchase Agreement, fees and expenses in
connection with any exchange offer, filing of a shelf registration statement or
other action to be taken pursuant to the Registration Rights Agreement and
compensation of the Trustee in accordance with the provisions of Section 6.06;
(b) pay all costs and expenses of the Trust (including,
but not limited to, costs and expenses relating to the organization of ML
Capital Trust, the offering, sale and issuance of the Trust Securities
(including commissions to the initial purchasers in connection therewith), the
fees and expenses of the Property Trustee and the Delaware Trustee, the costs
and expenses relating to the operation of ML Capital Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of assets of ML Capital Trust;
(c) be primarily and fully liable for any indemnification
obligations arising with respect to the Declaration;
(d) pay any and all taxes (other than United States
withholding taxes attributable to ML Capital Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the Trust; and
(e) pay all other fees, expenses, debts and obligations
(other than in respect of principal, interest and premium, if any, on the Trust
Securities) related to ML Capital Trust.
SECTION 3.10. Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or
resignation of the Trustee, unless otherwise stated, the Company shall pay to
the Trustee all amounts accrued and owing to the date of such termination,
removal or resignation. Upon termination of the Declaration or the removal or
resignation of the Delaware Trustee or the Property Trustee, as the case may
be, pursuant to Section 5.7 of the Declaration, the Company shall pay to the
Delaware Trustee or the Property Trustee, as the case may be, all amounts
accrued and owing to the date of such termination, removal or resignation.
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ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause
to be furnished to the Trustee:
(a) on a semi-annual basis on each regular record date
for the Securities, a list, in such form as the
Trustee may reasonably require, of the names and
addresses of the Securityholders as of such record
date; and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the
Company, of any such request, a list of similar form
and content as of a date not more than 15 days prior
to the time such list is furnished,
except that, no such lists need be furnished so long as the
Trustee is in possession thereof by reason of its acting as
Security registrar.
SECTION 4.02. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, all information as to the
names and addresses of the holders of the Securities
(1) contained in the most recent list furnished to it
as provided in Section 4.01 or (2) received by it in
the capacity of Securities registrar (if so acting)
hereunder. The Trustee may destroy any list
furnished to it as provided in Section 4.01 upon
receipt of a new list so furnished.
(b) In case three or more holders of Securities
(hereinafter referred to as "applicants") apply in
writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a
Security for a period of at least six months
preceding the date of such application, and such
application states that the applicants desire to
communicate with other holders of Securities or with
holders of all Securities with respect to their
rights under this Indenture and is accompanied by a
copy of the form of proxy or other communication
which such applicants propose to transmit, then the
Trustee shall within five Business Days after the
receipt of such application, at its election, either:
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(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section
4.02, or
(2) inform such applicants as to the approximate number
of holders of all Securities, whose names and
addresses appear in the information preserved at the
time by the Trustee in accordance with the provisions
of subsection (a) of this Section 4.02, and as to the
approximate cost of mailing to such Securityholders
the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such
applicants access to such information, the Trustee
shall, upon the written request of such applicants,
mail to each Securityholder whose name and address
appear in the information preserved at the time by
the Trustee in accordance with the provisions of
subsection (a) of this Section 4.02 a copy of the
form of proxy or other communication which is
specified in such request with reasonable promptness
after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment,
of the reasonable expenses of mailing, unless within
five days after such tender, the Trustee shall mail
to such applicants and file with the Commission,
together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion
of the Trustee, such mailing would be contrary to the
best interests of the holders of Securities of such
series or all Securities, as the case may be, or
would be in violation of applicable law. Such
written statement shall specify the basis of such
opinion. If the Commission, after opportunity for a
hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry
of an order sustaining one or more of such
objections, the Commission shall find, after notice
and opportunity for hearing, that all the objections
so sustained have been met and shall enter an order
so declaring, the Trustee shall mail copies of such
material to all such Securityholders with reasonable
promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such
applicants respecting their application.
(c) Each and every holder of Securities, by receiving and
holding the same, agrees with the Company and the
Trustee that neither the Company nor the Trustee nor
any paying agent shall be held accountable by reason
of the disclosure of any such information as to the
names and addresses of the holders of Securities in
accordance with the provisions of subsection (b) of
this Section 4.02, regardless of the
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source from which such information was derived, and
that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request
made under said subsection (b).
SECTION 4.03. Reports by Company.
(a) The Company covenants and agrees to file with the
Trustee, within 15 days after the date on which the
Company is required to file the same with the
Commission, copies of the annual reports and of the
information, documents and other reports (or copies
of such portions of any of the foregoing as said
Commission may from time to time by rules and
regulations prescribe) which the Company may be
required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act; or,
if the Company is not required to file information,
documents or reports pursuant to either of such
sections, then to file with the Trustee and the
Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such
of the supplementary and periodic information,
documents and reports which may be required pursuant
to Section 13 of the Exchange Act in respect of a
security listed and registered on a national
securities exchange as may be prescribed from time to
time in such rules and regulations.
(b) The Company covenants and agrees to file with the
Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by
said Commission, such additional information,
documents and reports with respect to compliance by
the Company with the conditions and covenants
provided for in this Indenture as may be required
from time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail
to all holders of Securities, as the names and
addresses of such holders appear upon the Security
Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information,
documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this
Section 4.03 as may be required by rules and
regulations prescribed from time to time by the
Commission.
(d) Delivery of such reports, information and documents
to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute
constructive notice of any information contained
therein or determinable from information contained
therein, including the Company's compliance with any
of its covenants hereunder (as to
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which the Trustee is entitled to rely exclusively on
Officers' Certificates).
(e) So long as is required for an offer or sale of the
Securities to qualify for an exemption under Rule
144A under the Securities Act, the Company shall,
upon request, provide the information required by
clause (d)(4) thereunder to each Securityholder and
to each beneficial owner and prospective purchaser of
Securities identified by each Securityholder of
Restricted Securities, unless such information is
furnished to the Commission pursuant to Section 13 or
15(d) of the Exchange Act.
SECTION 4.04. Reports by the Trustee.
(a) The Trustee shall transmit to Securityholders such
reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner
provided pursuant thereto. If required by Section
313(a) of the Trust Indenture Act, the Trustee shall,
within sixty days after each May 15 following the
date of this Indenture, commencing May 15, 1997,
deliver to Securityholders a brief report, dated as
of such May 15, which complies with the provisions of
such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the
Trustee with each stock exchange, if any, upon which
the Securities are listed, with the Commission and
with the Company. The Company will promptly notify
the Trustee when the Securities are listed on any
stock exchange.
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 5.01. Events of Default.
One or more of the following events of default shall
constitute an Event of Default hereunder:
(a) default in the payment of any interest (including
Compounded Interest or Additional Sums, if any) or
Liquidated Damages, if any, upon any Security or any
Other Debentures when it becomes due and payable, and
continuance of such default for a period of 30 days;
provided,
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however, that a valid extension of an interest
payment period by the Company in accordance with the
terms hereof shall not constitute a default in the
payment of interest for this purpose; or
(b) default in the payment of all or any part of the
principal of (or premium, if any, on) any Security or
any Other Debentures as and when the same shall
become due and payable either at maturity, upon
redemption, by declaration of acceleration of
maturity or otherwise; or
(c) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture
(other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of
such default or breach for a period of 90 days after
there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding
Securities a written notice specifying such default
or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder;
or
(d) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the
Company in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or
for any substantial part of its property, or ordering
the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect
for a period of 90 consecutive days; or
(e) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the
entry of an order for relief in an involuntary case
under any such law, or shall consent to the
appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the
Company or of any substantial part of its property,
or shall make any general assignment for the benefit
of creditors, or shall fail generally to pay its
debts as they become due.
If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Trustee or
the holders of not less than 25% in aggregate principal amount of the
Securities then outstanding may declare the principal amount of all Securities
to be due and payable immediately, by a notice in writing to the
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Company (and to the Trustee if given by the holders of the outstanding
Securities), and upon any such declaration the same shall become immediately
due and payable.
The foregoing provisions, however, are subject to the
condition that if, at any time after the principal of the Securities shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, (i) the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay (A) all matured installments of interest (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if
any, upon all the Securities and the principal of and premium, if any, on any
and all Securities which shall have become due otherwise than by acceleration
(with interest upon such principal and premium, if any, and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest, at the same rate as the rate of interest specified in
the Securities to the date of such payment or deposit) and (B) such amount as
shall be sufficient to cover compensation due to the Trustee and each
predecessor Trustee, their respective agents, attorneys and counsel, pursuant
to Section 6.06, and (ii) any and all Events of Default under the Indenture,
other than the non-payment of the principal of the Securities which shall have
become due solely by such declaration of acceleration, shall have been cured,
waived or otherwise remedied as provided herein, then, in every such case, the
holders of a majority in aggregate principal amount of the Securities then
outstanding, by written notice to the Company and to the Trustee, may rescind
and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such
case the Company, the Trustee and the holders of the Securities shall be
restored respectively to their several positions and rights hereunder, and all
rights, remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit
Therefor.
The Company covenants that (a) in case default shall be made
in the payment of any installment of interest (including Compounded Interest
and Additional Sums, if any) and Liquidated Damages, if any, upon any of the
Securities as and when the same shall become due and payable, and such default
shall have continued for a period of 30 days, or (b) in case default shall be
made in the payment of the principal of or premium, if any, on any of the
Securities as and when the same shall have become due and payable, whether at
maturity of the Securities or upon redemption or by declaration or otherwise,
then, upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the holders of the Securities, the whole amount that then shall have
become due and payable on all such Securities for principal and premium, if
any, or interest (including Compounded
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Interest and Additional Sums, if any) and Liquidated Damages, if any, or both,
as the case may be, with interest upon the overdue principal and premium, if
any, and (to the extent that payment of such interest is enforceable under
applicable law and, if the Securities are held by ML Capital Trust or a trustee
of such trust, without duplication of any other amounts paid by ML Capital
Trust or a trustee in respect thereof) upon the overdue installments of
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, at the rate borne by the Securities; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including a reasonable compensation to the Trustee,
its agents, attorneys and counsel, and any other amount due to the Trustee
pursuant to Section 6.06.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Securities and collect in the manner provided by law out of the
property of the Company or any other obligor on the Securities wherever
situated the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Securities
under Title 11, United States Code, or any other applicable law, or in case a
receiver or trustee shall have been appointed for the property of the Company
or such other obligor, or in the case of any other similar judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.02, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the Securities
and, in case of any judicial proceedings, to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for amounts due to the Trustee
pursuant to 6.06) and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Securities, or
to the creditors or property of the Company or such other obligor, unless
prohibited by applicable law and regulations, to vote on behalf of the holders
of the Securities in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
proceedings or person performing similar functions in comparable proceedings,
and to collect and receive any moneys or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
charges and expenses; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the Securityholders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to
the making of
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such payments directly to the Securityholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel,
and all other amounts due to the Trustee pursuant to Section 6.06.
Nothing herein contained shall be construed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities, or the production thereof on
any trial or other proceeding relative thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the holders of the Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the holders of the Securities, and it shall not be necessary to make any
holders of the Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such moneys, upon presentation of the Securities in respect of which moneys
have been collected, and stamping thereon the payment, if only partially paid,
and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection
applicable to the Securities and all other amounts due to the Trustee under
Section 6.06;
Second: To the payment of all Senior Indebtedness of the
Company if and to the extent required by Article XV;
Third: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall not have become due and be
unpaid, to the payment of the amounts then due and unpaid upon Securities for
principal of (and premium, if any) and interest (including Compounded Interest
and Additional Sums, if any) and Liquidated Damages, if any, on the Securities,
in respect of which or for the benefit of which money has been collected,
ratably, without preference of priority of any kind, according to the amounts
due on such Securities for principal (and premium, if any) and interest,
respectively; and
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Fourth: To the Company.
SECTION 5.04. Proceedings by Securityholders.
No holder of any Security shall have any right by virtue of or
by availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee
written notice of an Event of Default and of the continuance thereof with
respect to the Securities specifying such Event of Default, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Securities then outstanding shall have made written
request upon the Trustee to institute such action, suit or proceeding in its
own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity shall have
failed to institute any such action, suit or proceeding, it being understood
and intended, and being expressly covenanted by the taker and holder of every
Security with every other taker and holder and the Trustee, that no one or more
holders of Securities shall have any right in any manner whatever by virtue of
or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other holder of Securities, or to obtain or seek to
obtain priority over or preference to any other such holder, or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities.
Notwithstanding any other provisions in this Indenture,
however, the right of any holder of any Security to receive payment of the
principal of (premium, if any) and interest (including Compounded Interest and
Additional Sums, if any) and Liquidated Damages, if any, on such Security, on
or after the same shall have become due and payable, or to institute suit for
the enforcement of any such payment, shall not be impaired or affected without
the consent of such holder and by accepting a Security hereunder it is
expressly understood, intended and covenanted by the taker and holder of every
Security with every other such taker and holder and the Trustee, that no one or
more holders of Securities shall have any right in any manner whatsoever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other Securities, or to obtain or
seek to obtain priority over or preference to any other such holder, or to
enforce any right under this Indenture, except in the manner herein provided
and for the equal, ratable and common benefit of all holders of Securities.
For the protection and enforcement of the provisions of this Section, each and
every Securityholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
The Company and the Trustee acknowledge that pursuant to the
Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default under this Indenture and the
Securities.
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SECTION 5.05. Proceedings by Trustee.
In case an Event of Default occurs with respect to Securities
and is continuing, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding
in bankruptcy or otherwise, whether for the specific enforcement of any
covenant or agreement contained in this Indenture or in aid of the exercise of
any power granted in this Indenture, or to enforce any other legal or equitable
right vested in the Trustee by this Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Trustee
or to the Securityholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any other powers and remedies available to the
Trustee or the holders of the Securities, by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained in this Indenture or otherwise established with respect to the
Securities, and no delay or omission of the Trustee or of any holder of any of
the Securities to exercise any right or power accruing upon any Event of
Default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 5.04, every
power and remedy given by this Article V or by law to the Trustee or to the
Securityholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Securityholders.
SECTION 5.07. Direction of Proceedings and Waiver of
Defaults by Majority of Securityholders.
The holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that (subject to the provisions of Section 6.01) the Trustee shall
have the right to decline to follow any such direction if the Trustee shall
determine that the action so directed would be unjustly prejudicial to the
holders not taking part in such direction or if the Trustee being advised by
counsel determines that the action or proceeding so directed may not lawfully
be taken or if the Trustee in good faith by its board of directors or trustees,
executive committee, or a trust committee of directors or trustees and/or
Responsible Officers shall determine that the action or proceedings so directed
would involve the Trustee in personal liability. Prior to any declaration
accelerating the maturity of the Securities, the holders of a majority in
aggregate principal amount of the Securities at the time outstanding may on
behalf of the holders of all of the Securities waive any past default or Event
of Default and its consequences except a default (a) in the payment of
principal of or premium, if any, or interest (including Compounded
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Interest and Additional Sums, if any) or Liquidated Damages, if any, on any of
the Securities or (b) in respect of covenants or provisions hereof which cannot
be modified or amended without the consent of the holder of each Security
affected; provided, however, that if the Securities are held by the Property
Trustee, such waiver or modification to such waiver shall not be effective
until the holders of a majority in aggregate liquidation amount of Trust
Securities shall have consented to such waiver or modification to such waiver;
provided further, that if the consent of the holder of each outstanding
Security is required, such waiver shall not be effective until each holder of
the Trust Securities shall have consented to such waiver. Upon any such
waiver, the default covered thereby shall be deemed to be cured for all
purposes of this Indenture and the Company, the Trustee and the holders of the
Securities shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon. Whenever any default or Event
of Default hereunder shall have been waived as permitted by this Section 5.07,
said default or Event of Default shall for all purposes of the Securities and
this Indenture be deemed to have been cured and to be not continuing.
SECTION 5.08. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities known to a Responsible Officer of the
Trustee, mail to all Securityholders, as the names and addresses of such
holders appear upon the Security Register, notice of all defaults known to the
Trustee, unless such defaults shall have been cured before the giving of such
notice (the term "defaults" for the purpose of this Section 5.08 being hereby
defined to be the events specified in clauses (a), (b), (c), (d) and (e) of
Section 5.01, not including periods of grace, if any, provided for therein, and
irrespective of the giving of written notice specified in clause (c) of Section
5.01); and provided that, except in the case of default in the payment of the
principal of or premium, if any, or interest (including Compounded Interest or
Additional Sums, if any) or Liquidated Damages, if any, on any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee, or a trust committee
of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Securityholders; and provided further, that in the case of any default of the
character specified in Section 5.01(c) no such notice to Securityholders shall
be given until at least 60 days after the occurrence thereof but shall be given
within 90 days after such occurrence.
SECTION 5.09. Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for
any action taken or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
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court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 5.09 shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Securityholder,
or group of Securityholders, holding in the aggregate more than 10% in
aggregate principal amount of the Securities outstanding, or to any suit
instituted by any Securityholder for the enforcement of the payment of the
principal of (or premium, if any) or interest (including Compounded Interest
and Additional Sums, if any) or Liquidated Damages, if any, on any Security
against the Company on or after the same shall have become due and payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of the Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default and
after the curing or waiving of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default has occurred (which has
not been cured or waived) the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and
after the curing or waiving of all Events of Default
which may have occurred,
(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
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certificates or opinions furnished to the
Trustee and conforming to the requirements of
this Indenture; but, in the case of any such
certificates or opinions which by any
provision hereof are specifically required to
be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer
or Officers, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith, in accordance with the direction of the
Securityholders pursuant to Section 5.07, relating to
the time, method and place of conducting any
proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the
Trustee, under this Indenture.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing
that the repayment of such funds or liability is not reasonably assured to it
under the terms of this Indenture or adequate indemnity against such risk is
not reasonably assured to it.
SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, note,
debenture or other paper or document believed by it
to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, direction, order or demand of the
Company mentioned herein may be sufficiently
evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically
prescribed); and any Board Resolution may be
evidenced to the Trustee by a copy thereof certified
by the Secretary or an Assistant Secretary of the
Company;
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(c) the Trustee may consult with counsel of its selection
and any advice or Opinion of Counsel shall be full
and complete authorization and protection in respect
of any action taken or suffered omitted by it
hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this
Indenture at the request, order or direction of any
of the Securityholders, pursuant to the provisions of
this Indenture, unless such Securityholders shall
have offered to the Trustee reasonable and sufficient
security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or
powers conferred upon it by this Indenture; nothing
contained herein shall, however, relieve the Trustee
of the obligation, upon the occurrence of an Event of
Default (that has not been cured or waived), to
exercise such of the rights and powers vested in it
by this Indenture, and to use the same degree of care
and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the
conduct of his own affairs;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order,
approval, bond, debenture, coupon or other paper or
document, unless requested in writing to do so by the
holders of a majority in aggregate principal amount
of the outstanding Securities; provided, however,
that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such
expense or liability as a condition to so proceeding;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either
directly or by or through agents (including any
Authenticating Agent) or attorneys, and the Trustee
shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney
appointed by it with due care;
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(h) the Trustee shall not be charged with knowledge of
any Default or Event of Default with respect to the
Securities unless (1) such default is a default under
Sections 5.01(a) (other than a default with respect
to the payment of Compunded Interest, Liquidated
Damages or Additional Sums) and 5.01(b) of the
Indenture, (2) a Responsible Officer shall have
actual knowledge of such Default or Event of Default
or (3) written notice of such Default or Event of
Default shall have been given to the Trustee by the
Company or any other obligor on the Securities or by
any holder of the Securities; and
(i) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith, without
negligence or willful misconduct and believed by it
to be authorized or within the discretion or rights
or powers conferred upon it by this Indenture.
SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in
the certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the same.
The Trustee and the Authenticating Agent make no representations as to the
validity or sufficiency of this Indenture or of the Securities. The Trustee
and the Authenticating Agent shall not be accountable for the use or
application by the Company of any Securities or the proceeds of any Securities
authenticated and delivered by the Trustee or the Authenticating Agent in
conformity with the provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents,
Transfer Agents or Registrar May Own
Securities.
The Trustee or any Authenticating Agent or any paying agent or
any transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys
received by the Trustee or any paying agent shall, until used or applied as
herein provided, be held in trust for the purpose for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee and any paying agent shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed in writing
with the Company. So long as no Event of Default shall have occurred and be
continuing, all interest allowed on any such moneys shall be paid from time to
time upon the written
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order of the Company, signed by the Chairman of the Board of Directors, the
President, a Vice President, the Treasurer or an Assistant Treasurer of the
Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company, as issuer of Securities under this Indenture,
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation as shall be agreed to in writing
between the Company and the Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify each of the Trustee or any predecessor
Trustee (and its officers, agents, directors and employees) for, and to hold it
harmless against, any and all loss, damage, claim, liability or expense
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or bad faith on the part of the Trustee and arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim of liability in
the premises. The obligations of the Company under this Section 6.06 to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to
that of the Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(d) or Section
5.01(e), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the resignation
or removal of the Trustee and the defeasance or other termination of this
Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02,
whenever in the administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or omitting any action hereunder, such matter (unless other
evidence in respect thereof is herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to
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the Trustee, and such certificate, in the absence of negligence or bad faith on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken or omitted by it under the provisions of this Indenture upon the faith
thereof.
SECTION 6.08. Conflicting Interest of Trustee.
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee
and the Company shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act.
SECTION 6.09. Eligibility of Trustee.
The Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state or territory thereof or of the District of Columbia or a corporation
or other Person permitted to act as trustee by the Commission authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($50,000,000) and subject to
supervision or examination by federal, state, territorial, or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 6.09
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10. Resignation or Removal of Trustee.
(a) The Trustee, or any trustee or trustees hereafter
appointed, may at any time resign by giving written
notice of such resignation to the Company and by
mailing notice thereof to the holders of the
Securities at their addresses as they shall appear on
the Security register. Upon receiving such notice of
resignation, the Company shall promptly appoint a
successor trustee or trustees by written instrument,
in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment
within 60 days after the mailing of such notice of
resignation to the affected Securityholders, the
resigning Trustee may petition any court of compe-
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tent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona
fide holder of a Security for at least six months
may, subject to the provisions of Section 5.09, on
behalf of himself and all others similarly situated,
petition any such court for the appointment of a
successor trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the
provisions of Section 6.08 after written
request therefor by the Company or by any
Securityholder who has been a bona fide
holder of a Security or Securities for at
least six months, or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section
6.09 and shall fail to resign after written
request therefor by the Company or by any
such Securityholder, or
(3) the Trustee shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent,
or a receiver of the Trustee or of its
property shall be appointed, or any public
officer shall take charge or control of the
Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or
liquidation,
then, in any such case, the Company may remove the
Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or,
subject to the provisions of Section 5.09, any
Securityholder who has been a bona fide holder of a
Security for at least six months may, on behalf of
himself and all others similarly situated, petition
any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor
trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal
amount of the Securities at the time outstanding may
at any time remove the Trustee and nominate a
successor trustee, which shall be deemed appointed as
successor trustee unless within 10 days after such
nomination the Company objects thereto or if no
successor trustee shall have been so
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appointed and shall have accepted appointment within
30 days after such removal, in which case the Trustee
so removed or any Securityholder, upon the terms and
conditions and otherwise as in subsection (a) of this
Section 6.10 provided, may petition any court of
competent jurisdiction for an appointment of a
successor trustee.
(d) Any resignation or removal of the Trustee and
appointment of a successor trustee pursuant to any of
the provisions of this Section 6.10 shall become
effective upon acceptance of appointment by the
successor trustee as provided in Section 6.11.
SECTION 6.11. Acceptance by Successor Trustee.
Any successor trustee appointed as provided in Section 6.10
shall execute, acknowledge and deliver to the Company and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor
trustee, the trustee ceasing to act shall, upon payment of any amounts then due
it pursuant to the provisions of Section 6.06, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of
the trustee so ceasing to act and shall duly assign, transfer and deliver to
such successor trustee all property and money held by such retiring trustee
thereunder. Upon request of any such successor trustee, the Company shall
execute any and all instruments in writing for more fully and certainly vesting
in and confirming to such successor trustee all such rights and powers. Any
trustee ceasing to act shall, nevertheless, retain a lien upon all property or
funds held or collected by such trustee to secure any amounts then due it
pursuant to the provisions of Section 6.06.
No successor trustee shall accept appointment as provided in
this Section 6.11 unless at the time of such acceptance such successor trustee
shall be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as
provided in this Section 6.11, the Company shall mail notice of the succession
of such trustee hereunder to the holders of Securities at their addresses as
they shall appear on the Security register. If the Company fails to mail such
notice within 10 days after the acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
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SECTION 6.12. Succession by Merger, etc.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor trustee; and in all such cases such certificates
shall have the full force which the Securities or this Indenture elsewhere
provides that the certificate of the Trustee shall have; provided, however,
that the right to adopt the certificate of authentication of any predecessor
Trustee or authenticate Securities in the name of any predecessor Trustee shall
apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 6.13. Limitation on Rights of Trustee as a
Creditor.
The Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship described in Section 311(b)
of the Trust Indenture Act. A Trustee who has resigned or been removed shall
be subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
SECTION 6.14. Authenticating Agents.
There may be one or more Authenticating Agents appointed by
the Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities
issued upon exchange or transfer thereof as fully to all intents and purposes
as though any such Authenticating Agent had been expressly authorized to
authenticate and deliver Securities; provided, that the Trustee shall have no
liability to the Company for any acts or omissions of the Authenticating Agent
with respect to the authentication and delivery of Securities. Any such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States or of any state or territory
thereof or of the District of Columbia authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of at least
$5,000,000 and being subject to supervision or examination by federal, state,
territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually pursuant to law or the requirements of
such authority, then for the purposes of this Section 6.14 the combined capital
and surplus of such corporation shall be deemed to be its com-
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bined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
such Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14 without the execution or filing of any paper
or any further act on the part of the parties hereto or such Authenticating
Agent.
Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company. The Trustee
may at any time terminate the agency of any Authenticating Agent by giving
written notice of termination to such Authenticating Agent and to the Company.
Upon receiving such a notice of resignation or upon such a termination, or in
case at any time any Authenticating Agent shall cease to be eligible under this
Section 6.14, the Trustee may, and upon the request of the Company shall,
promptly appoint a successor Authenticating Agent eligible under this Section
6.14, shall give written notice of such appointment to the Company and shall
mail notice of such appointment to all Securityholders as the names and
addresses of such holders appear on the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all rights, powers, duties and responsibilities of its predecessor
hereunder, with like effect as if originally named as Authenticating Agent
herein.
The Company, as borrower, agrees to pay to any Authenticating
Agent from time to time reasonable compensation for its services. Any
Authenticating Agent shall have no responsibility or liability for any action
taken by it as such in accordance with the directions of the Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of
a specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument
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or any number of instruments of similar tenor executed by such Securityholders
in person or by agent or proxy appointed in writing, or (b) by the record of
such holders of Securities voting in favor thereof at any meeting of such
Securityholders duly called and held in accordance with the provisions of
Article VIII, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of such Securityholders.
If the Company shall solicit from the Securityholders any
request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for the determination of
Securityholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
action, and for that purpose the outstanding Securities shall be computed as of
the record date; provided, however, that no such authorization, agreement or
consent by such Securityholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Section 6.01, 6.02 and 8.05,
proof of the execution of any instrument by a Securityholder or his agent or
proxy shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee. The ownership of Securities shall be proved by
the Security Register or by a certificate of the Security registrar. The
Trustee may require such additional proof of any matter referred to in this
Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in
the manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Security registrar may deem the person in whose name
such Security shall be registered upon the Security Register to be, and may
treat him as, the absolute owner of such Security (whether or not such Security
shall be overdue) for the purpose of receiving payment of or on account of the
principal of and premium, if any, and (subject to Section 2.06) interest on
such Security and for all other purposes; and neither the Company nor the
Trustee nor any
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Authenticating Agent nor any paying agent nor any transfer agent nor any
Security registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not
Outstanding.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any other obligor on the Securities shall be disregarded and
deemed not to be outstanding for the purpose of any such determination;
provided that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only Securities
which a Responsible Officer of the Trustee actually knows are so owned shall be
so disregarded. Securities so owned which have been pledged in good faith may
be regarded as outstanding for the purposes of this Section 7.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not the Company or any such other
obligor or Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor.
In the case of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 7.01, of the taking of any action by the
holders of the percentage in aggregate principal amount of the Securities
specified in this Indenture in connection with such action, any holder of a
Security (or any Security issued in whole or in part in exchange or
substitution therefor), subject to Section 7.01, the serial number of which is
shown by the evidence to be included in the Securities the holders of which
have consented to such action may, by filing written notice with the Trustee at
its principal office and upon proof of holding as provided in Section 7.02,
revoke such action so far as concerns such Security (or so far as concerns the
principal amount represented by any exchanged or substituted Security). Except
as aforesaid any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Security, and of any Security issued in exchange or substitution
therefor, irrespective of whether or not any notation in regard thereto is made
upon such Security or any Security issued in exchange or substitution therefor.
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ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.
A meeting of Securityholders may be called at any time and
from time to time pursuant to the provisions of this Article VIII for any of
the following purposes:
(a) to give any notice to the Company or to the Trustee,
or to give any directions to the Trustee, or to
consent to the waiving of any default hereunder and
its consequences, or to take any other action
authorized to be taken by Securityholders pursuant to
any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor
trustee pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the
provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or
on behalf of the holders of any specified aggregate
principal amount of such Securities under any other
provision of this Indenture or under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders
to take any action specified in Section 8.01, to be held at such time and at
such place in the Borough of Manhattan, The City of New York, as the Trustee
shall determine. Notice of every meeting of the Securityholders, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Securities Register. Such notice shall
be mailed not less than 20 nor more than 180 days prior to the date fixed for
the meeting.
SECTION 8.03. Call of Meetings by Company or
Securityholders.
In case at any time the Company pursuant to a resolution of
the Board of Directors, or the holders of at least 10% in aggregate principal
amount of the Securities then outstanding, shall have requested the Trustee to
call a meeting of Securityholders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then the Company or such Securityholders may determine
the
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time and the place in said Borough of Manhattan for such meeting and may call
such meeting to take any action authorized in Section 8.01, by mailing notice
thereof as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a
Person shall (a) be a holder of one or more Securities or (b) a Person
appointed by an instrument in writing as proxy by a holder of one or more
Securities. The only Persons who shall be entitled to be present or to speak
at any meeting of Securityholders shall be the Persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Securityholders, in regard to proof of the holding of Securities and
of the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 8.03, in which case
the Company or the Securityholders calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by majority vote of the
meeting.
Subject to the provisions of Section 8.04, at any meeting each
holder of Securities or proxy therefor shall be entitled to one vote for each
$1,000 principal amount of Securities held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not outstanding and ruled by the chairman of the meeting
to be not outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Securities held by him or instruments in writing as
aforesaid duly designating him as the person to vote on behalf of other
Securityholders. Any meeting of Securityholders duly called pursuant to the
provisions of Section 8.02 or 8.03 may be adjourned from time to time by a
majority of those present, and the meeting may be held as so adjourned without
further notice.
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SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of
holders of Securities shall be by written ballots on which shall be subscribed
the signatures of such holders or of their representatives by proxy and the
serial number or numbers of the Securities held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record in duplicate
of the proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
mailed as provided in Section 8.02. The record shall show the serial numbers
of the Securities voting in favor of or against any resolution. The record
shall be signed and verified by the affidavits of the permanent chairman and
secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting. The holders of the
Series A Capital Securities and the Series B Capital Securities shall vote for
all purposes as a single class.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders.
The Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time amend the Indenture, without the
consent of the Securityholders, for one or more of the following purposes:
(a) to evidence the succession of another Person to the
Company, or successive successions, and the
assumption by the successor Person of the covenants,
agreements and obligations of the Company pursuant to
Article X hereof;
(b) to add to the covenants of the Company such further
covenants, restrictions or conditions for the
protection of the Securityholders as the Board of
Directors and the Trustee shall consider to be for
the protection of the Securityholders, and to make
the occurrence, or the
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occurrence and continuance, of a default in any of
such additional covenants, restrictions or conditions
a default or an Event of Default permitting the
enforcement of all or any of the remedies provided in
this Indenture as herein set forth; provided,
however, that in respect of any such additional
covenant, restriction or condition such amendment may
provide for a particular period of grace after
default (which period may be shorter or longer than
that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such
default or may limit the remedies available to the
Trustee upon such default;
(c) to provide for the issuance under this Indenture of
Securities in coupon form (including Securities
registrable as to principal only) and to provide for
exchangeability of such Securities with the
Securities issued hereunder in fully registered form
and to make all appropriate changes for such purpose;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental
indenture which may be defective or inconsistent with
any other provision contained herein or in any
supplemental indenture, or to make such other
provisions in regard to matters or questions arising
under this Indenture; provided that any such action
shall not materially adversely affect the interests
of the holders of the Securities;
(e) to evidence and provide for the acceptance of
appointment hereunder by a successor trustee with
respect to the Securities;
(f) to make provision for transfer procedures,
certification, book-entry provisions, the form of
restricted securities legends, if any, to be placed
on Securities, and all other matters required
pursuant to Section 2.07 or otherwise necessary,
desirable or appropriate in connection with the
issuance of Securities to holders of Capital
Securities in the event of a distribution of
Securities by ML Capital Trust following a
Dissolution Event;
(g) to qualify or maintain qualification of this
Indenture under the Trust Indenture Act;
(h) to enable the Company and the Trust to conduct an
Exchange Offer as contemplated by the Registration
Rights Agreement, provided that any such action shall
not materially adversely affect the interests of the
holders of the Securities; or
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(i) to make any change that does not adversely affect the
rights of any Securityholder in any material respect.
The Trustee is hereby authorized to join with the Company in
the execution of any supplemental indenture to effect such amendment, to make
any further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to the Indenture authorized by the provisions of
this Section 9.01 may be executed by the Company and the Trustee without the
consent of the holders of any of the Securities at the time outstanding,
notwithstanding any of the provisions of Section 9.02.
SECTION 9.02. With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of
the holders of a majority in aggregate principal amount of the Securities at
the time outstanding, the Company, when authorized by a Board Resolution, and
the Trustee may from time to time and at any time amend the Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the
rights of the holders of the Securities; provided, however, that no such
amendment shall without the consent of the holders of each Security then
outstanding and affected thereby (i) change the Maturity Date of any Security,
or reduce the rate or extend the time of payment of interest thereon (except as
contemplated by Article XVI), or reduce the principal amount thereof, or reduce
any amount payable on redemption thereof, or make the principal thereof or any
interest or premium thereon payable in any coin or currency other than that
provided in the Securities, or impair or affect the right of any Securityholder
to institute suit for payment thereof, or (ii) reduce the aforesaid percentage
of Securities the holders of which are required to consent to any such
amendment to the Indenture, provided, however, that if the Securities are held
by ML Capital Trust, such amendment shall not be effective until the holders of
a majority in liquidation amount of Trust Securities shall have consented to
such amendment; provided, further, that if the consent of the holder of each
outstanding Security is required, such amendment shall not be effective until
each holder of the Trust Securities shall have consented to such amendment.
Upon the request of the Company accompanied by a copy of a
resolution of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture affecting
such amendment, and upon the filing with the Trustee of evidence of the consent
of Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
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<PAGE> 62
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this Section, the
Trustee shall transmit by mail, first class postage prepaid, a notice, prepared
by the Company, setting forth in general terms the substance of such
supplemental indenture, to the Securityholders as their names and addresses
appear upon the Security Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
It shall not be necessary for the consent of the
Securityholders under this Section 9.02 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act; Effect
of Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions
of this Article IX shall comply with the Trust Indenture Act. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article IX, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Securities shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
SECTION 9.04. Notation on Securities.
Securities authenticated and delivered after the execution of
any supplemental indenture affecting such series pursuant to the provisions of
this Article IX may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may be prepared and
executed by the Company, authenticated by the Trustee or the Authenticating
Agent and delivered in exchange for the Securities then outstanding.
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SECTION 9.05. Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and
6.02, may receive, in addition to the document required by Section 13.06, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX.
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain
Terms.
Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of the Company with or
into any other Person (whether or not affiliated with the Company, as the case
may be), or successive consolidations or mergers in which the Company or its
successor or successors, as the case may be, shall be a party or parties, or
shall prevent any sale, conveyance, transfer or lease of the property of the
Company, or its successor or successors as the case may be, as an entirety, or
substantially as an entirety, to any other Person (whether or not affiliated
with the Company, or its successor or successors, as the case may be)
authorized to acquire and operate the same; provided, that (a) the Company is
the surviving Person, or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
conveyance, transfer or lease of property is made is a Person organized and
existing under the laws of the United States or any State thereof or the
District of Columbia, and (b) upon any such consolidation, merger, sale,
conveyance, transfer or lease, the due and punctual payment of the principal of
(and premium, if any) and interest on the Securities according to their tenor
and the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be kept or performed by the Company shall be
expressly assumed, by supplemental indenture (which shall conform to the
provisions of the Trust Indenture Act, as then in effect) satisfactory in form
to the Trustee executed and delivered to the Trustee by the Person formed by
such consolidation, or into which the Company shall have been merged, or by the
Person which shall have acquired such property, as the case may be, (c) after
giving effect to such consolidation, merger, sale, conveyance, transfer or
lease, no Default or Event of Default shall have occurred and be continuing and
(d) such consolidation, merger, sale, conveyance, transfer or lease does not
cause the Securities to be downgraded by a nationally recognized statistical
rating organization.
SECTION 10.02. Successor Corporation to be Substituted for
Company.
In case of any such consolidation, merger, conveyance or
transfer and upon the assumption by the successor corporation, by supplemental
indenture, executed and
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delivered to the Trustee and satisfactory in form to the Trustee, of the due
and punctual payment of the principal of and premium, if any, and interest on
all of the Securities and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed or
observed by the Company, such successor Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein as the party of the first part, and the Company thereupon shall be
relieved of any further liability or obligation hereunder or upon the
Securities. Such successor Person thereupon may cause to be signed, and may
issue either in its own name or in the name of ML Bancorp, Inc., any or all of
the Securities issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee or the Authenticating Agent; and,
upon the order of such successor Person instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee or the Authenticating Agent shall authenticate and deliver any
Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee or the Authenticating Agent for
authentication, and any Securities which such successor Person thereafter shall
cause to be signed and delivered to the Trustee or the Authenticating Agent for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Indentures had been issued at the date of the execution hereof.
SECTION 10.03. Opinion of Counsel to be Given Trustee.
The Trustee, subject to the provisions of Sections 6.01 and
6.02, may receive an Opinion of Counsel as conclusive evidence that any
consolidation, merger, sale, conveyance, transfer or lease, and any assumption,
permitted or required by the terms of this Article X complies with the
provisions of this Article X.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for
cancellation all Securities theretofore authenticated (other than any
Securities which shall have been destroyed, lost or stolen and which shall have
been replaced as provided in Section 2.08) and not theretofore cancelled, or
(b) all the Securities not theretofore cancelled or delivered to the Trustee
for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving
of notice of redemption, and the Company shall deposit with the Trustee, in
trust, funds sufficient to pay on the Maturity Date or upon redemption all of
the Securities (other than any Securities which shall have
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<PAGE> 65
been destroyed, lost or stolen and which shall have been replaced as provided
in Section 2.08) not theretofore cancelled or delivered to the Trustee for
cancellation, including principal and premium, if any, and interest (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if
any, due or to become due to the Maturity Date or redemption date, as the case
may be, but excluding, however, the amount of any moneys for the payment of
principal of or premium, if any, or interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, on the Securities (1)
theretofore repaid to the Company in accordance with the provisions of Section
11.04, or (2) paid to any State or to the District of Columbia pursuant to its
unclaimed property or similar laws, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect except for the
provisions of Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04
hereof, which shall survive until such Securities shall mature and be paid.
Thereafter, Sections 6.06, 6.10 and 11.04 shall survive, and the Trustee, on
demand of the Company accompanied by any Officers' Certificate and an Opinion
of Counsel and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture, the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Securities.
SECTION 11.02. Deposited Moneys and U.S. Government
Obligations to be Held in Trust by Trustee.
Subject to the provisions of Section 11.04, all moneys and
U.S. Government Obligations deposited with the Trustee pursuant to Sections
11.01 or 11.05 shall be held in trust and applied by it to the payment, either
directly or through any paying agent (including the Company if acting as its
own paying agent), to the holders of the particular Securities for the payment
of which such moneys or U.S. Government Obligations have been deposited with
the Trustee, of all sums due and to become due thereon for principal, premium,
if any, and interest.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 11.05 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the holders of outstanding Securities.
SECTION 11.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all
moneys then held by any paying agent of the Securities (other than the Trustee)
shall, upon written demand of the Company, be repaid to it or paid to the
Trustee, and thereupon such paying agent shall be released from all further
liability with respect to such moneys.
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<PAGE> 66
SECTION 11.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any paying
agent for payment of the principal of or premium, if any, or interest on
Securities and not applied but remaining unclaimed by the holders of Securities
for two years after the date upon which the principal of or premium, if any, or
interest (including Compounded Interest and Additional Sums, if any) or
Liquidated Damages, if any, on such Securities, as the case may be, shall have
become due and payable, shall be repaid to the Company by the Trustee or such
paying agent on written demand; and the holder of any of the Securities shall
thereafter look only to the Company for any payment which such holder may be
entitled to collect and all liability of the Trustee or such paying agent with
respect to such moneys shall thereupon cease.
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S.
Government Obligations.
The Company shall be deemed to have been Discharged (as
defined below) from its obligations with respect to the Securities on the 91st
day after the applicable conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be
deposited irrevocably with the Trustee or the
Defeasance Agent (as defined below) as trust funds in
trust, specifically pledged as security for, and
dedicated solely to, the benefit of the holders of
the Securities (i) money in an amount, or (ii) U.S.
Government Obligations which through the payment of
interest and principal in respect thereof in
accordance with their terms will provide, not later
than one day before the due date of any payment,
money in an amount, or (iii) a combination of (i) and
(ii), sufficient, in the opinion (with respect to
(ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee and
the Defeasance Agent, if any, to pay and discharge
each installment of principal of and interest and
premium, if any, on the outstanding Securities on the
dates such installments of principal, interest or
premium are due;
(2) if the Securities are then listed on any national
securities exchange, the Company shall have delivered
to the Trustee and the Defeasance Agent, if any, an
Opinion of Counsel to the effect that the exercise of
the option under this Section 11.05 would not cause
such Securities to be delisted from such exchange;
(3) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on
the date of such deposit; and
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(4) the Company shall have delivered to the Trustee and
the Defeasance Agent, if any, an Opinion of Counsel
to the effect that holders of the Securities will not
recognize income, gain or loss for United States
federal income tax purposes as a result of the
exercise of the option under this Section 11.05 and
will be subject to United States federal income tax
on the same amount and in the same manner and at the
same times as would have been the case if such option
had not been exercised, and such opinion shall be
based on a statute so providing or be accompanied by
a private letter ruling to that effect received from
the United States Internal Revenue Service or a
revenue ruling pertaining to a comparable form of
transaction to that effect published by the United
States Internal Revenue Service.
"Discharged" means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by, and obligations
under, the Securities and to have satisfied all the obligations under this
Indenture relating to the Securities (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except (A)
the rights of holders of Securities to receive, from the trust fund described
in clause (1) above, payment of the principal of and the interest and premium,
if any, on the Securities when such payments are due; (B) the Company's
obligations with respect to the Securities under Sections 2.07, 2.08, 5.02 and
11.04; and (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder.
"Defeasance Agent" means another financial institution which
is eligible to act as Trustee hereunder and which assumes all of the
obligations of the Trustee necessary to enable the Trustee to act hereunder.
In the event such a Defeasance Agent is appointed pursuant to this Section, the
following conditions shall apply:
(1) The Trustee shall have approval rights over the
document appointing such Defeasance Agent and the
document setting forth such Defeasance Agent's rights
and responsibilities;
(2) The Defeasance Agent shall provide verification to
the Trustee acknowledging receipt of sufficient money
and/or U. S. Government Obligations to meet the
applicable conditions set forth in this Section
11.05.
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ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate
Obligations.
No recourse for the payment of the principal of or premium, if
any, or interest on any Security, or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture, or in any Security, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor Person to the Company, either
directly or through the Company or any successor Person to the Company, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and
as a consideration for, the execution of this Indenture and the issue of the
Securities.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors.
All the covenants, stipulations, promises and agreements in
this Indenture contained by the Company shall bind its successors and assigns
whether so expressed or not.
SECTION 13.02. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of
2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power
so surrendered shall terminate both as to the Company, as the case may be, and
as to any successor Person.
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SECTION 13.04. Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture
is required or permitted to be given or served by the Trustee or by the holders
of Securities on the Company may be given or served by being deposited postage
prepaid by first class mail, registered or certified mail, overnight courier
service or conformed telecopy addressed (until another address is filed by the
Company with the Trustee for the purpose) to the Company at Two Aldwyn Center,
Lancaster Avenue and Route 320, Villanova, Pennsylvania 19085, Attention:
Brian M. Hartline, Senior Vice President, Chief Financial Officer, Secretary
and Treasurer. Any notice, direction, request or demand by any Securityholder
to or upon the Trustee shall be deemed to have been sufficiently given or made,
for all purposes, if given or made in writing at the office of the Trustee, 101
Barclay Street, 21st Floor West, New York, New York 10286, Attention:
Corporate Trust, Trustee Administration (unless another address is provided by
the Trustee to the Company for such purpose). Any notice or communication to a
Securityholder shall be mailed by first class mail to his or her address shown
on the register kept by the Security Registrar. Failure to mail a notice or
communication to a Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders.
SECTION 13.05. Governing Law.
This Indenture and each Security shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of said State,
without regard to conflicts of laws principles thereof.
SECTION 13.06. Evidence of Compliance with Conditions
Precedent.
Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that in the
opinion of the signers all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture (except certificates delivered pursuant
to Section 3.05) shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to
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whether or not, in the opinion of such person, such condition or covenant has
been complied with.
SECTION 13.07. Business Days.
In any case where the date of payment of principal of or
premium, if any, or interest on the Securities will not be a Business Day, the
payment of such principal of or premium, if any, or interest on the Securities
need not be made on such date but may be made on the next succeeding Business
Day, with the same force and effect as if made on the date of payment and no
interest shall accrue for the period from and after such date, except that if
such next succeeding Business Day falls in the next succeeding calendar year,
then such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
SECTION 13.08. Trust Indenture Act to Control.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such imposed duties shall
control.
SECTION 13.09. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the
articles and sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.10. Execution in Counterparts.
This Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
SECTION 13.11. Separability.
In case any one or more of the provisions contained in this
Indenture or in the Securities shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Indenture or of
the Securities, but this Indenture and the Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
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SECTION 13.12. Assignment.
The Company will have the right at all times to assign any of
its respective rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided that, in the event of
any such assignment, the Company will remain remain primarily liable for all
such obligations. Subject to the foregoing, the Indenture is binding upon and
inures to the benefit of the parties thereto and their respective successors
and assigns. This Indenture may not otherwise be assigned by the parties
thereto.
SECTION 13.13. Acknowledgement of Rights.
The Company acknowledges that, with respect to any Securities
held by ML Capital Trust or a trustee of such trust, if the Property Trustee of
such Trust fails to enforce its rights under this Indenture as the holder of
the Securities held as the assets of ML Capital Trust any holder of Capital
Securities may institute legal proceedings directly against the Company to
enforce such Property Trustee's rights under this Indenture without first
instituting any legal proceedings against such Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay principal of or premium, if any, or interest on the Securities
when due, the Company acknowledges that a holder of Capital Securities may
directly institute a proceeding for enforcement of payment to such holder of
the principal of or premium, if any, or interest on the Securities having a
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such holder on or after the respective due date specified in the
Securities.
ARTICLE XIV
REDEMPTION OF SECURITIES -- MANDATORY AND
OPTIONAL SINKING FUND
SECTION 14.01. Special Event Redemption.
If, prior to the Initial Optional Redemption Date, a Special
Event has occurred and is continuing then, notwithstanding Section 14.02(a) but
subject to Section 14.02(c), the Company shall have the right, at any time
within 90 days following the occurrence of such Special Event and prior to the
Initial Optional Redemption Date, upon (i) not less than 45 days written notice
to the Trustee and (ii) not less than 30 days nor more than 60 days written
notice to the Securityholders, to redeem the Securities, in whole (but not in
part), at the Special Event Redemption Price. Following a Special Event, the
Company shall take such action as is necessary to promptly determine the
Special Event Redemption Price, including without limitation the appointment by
the Company of a Quotation Agent. The Special Event Redemption Price shall be
paid prior to 12:00 noon, New York time, on the date of such redemption or such
earlier time as the Company determines, provided that
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the Company shall deposit with the Trustee an amount sufficient to pay the
Special Event Redemption Price by 10:00 a.m., New York time, on the date such
Special Event Redemption Price is to be paid. The Company shall provide the
Trustee with written notice of the Special Event Redemption Price promptly
after the calculation thereof, which notice shall include any calculation made
by the Quotation Agent in connection with the determination of the Special
Event Redemption Price.
SECTION 14.02. Optional Redemption by Company.
(a) Subject to the provisions of this Article XIV, the
Company shall have the right to redeem the Securities, in whole or in part,
from time to time, on or after the Initial Optional Redemption Date, at the
redemption prices set forth below (expressed as percentages of principal) plus,
in each case, accrued and unpaid interest thereon (including Compounded
Interest and Additional Sums, if any) and Liquidated Damages, if any, to the
applicable date of redemption (the "Optional Redemption Price") if redeemed
during the 12-month period beginning March 1 of the years indicated below.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2007 104.937%
2008 104.443%
2009 103.950%
2010 103.456%
2011 102.962%
2012 102.469%
2013 101.975%
2014 101.481%
2015 100.987%
2016 100.494%
2017 and thereafter 100.000%
</TABLE>
If the Securities are only partially redeemed pursuant to this
Section 14.02, the Securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the date fixed for redemption from the
outstanding Securities not previously called for redemption, provided, however,
that with respect to Securityholders that would be required to hold Securities
with an aggregate principal amount of less than $100,000 but more than an
aggregate principal amount of zero as a result of such pro rata redemption, the
Company shall redeem Securities of each such Securityholder so that after such
redemption such
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Securityholder shall hold Securities either with an aggregate principal amount
of at least $100,000 or such Securityholder no longer holds any Securities and
shall use such method (including, without limitation, by lot) as the Company
shall deem fair and appropriate, provided, further, that any such proration may
be made on the basis of the aggregate principal amount of Securities held by
each Securityholder and may be made by making such adjustments as the Company
deems fair and appropriate in order that only Securities in denominations of
$1,000 or integral multiples thereof shall be redeemed. The Optional
Redemption Price shall be paid prior to 12:00 noon, New York time, on the date
of such redemption or at such earlier time as the Company determines, provided
that the Company shall deposit with the Trustee an amount sufficient to pay the
Optional Redemption Price by 10:00 a.m., New York time, on the date such
Optional Redemption Price is to be paid.
(b) Notwithstanding the first sentence of Section 14.02,
upon the entry of an order for dissolution of the ML Capital Trust by a court
of competent jurisdiction, the Securities thereafter will be subject to
optional redemption, in whole only, but not in part, on or after March 1, 2007,
at the optional redemption prices set forth in Section 14.02 and otherwise in
accordance with this Article XIV.
(c) Any redemption of Securities pursuant to Section
14.01 or Section 14.02 shall be subject to the receipt by the Company of any
required regulatory approval.
SECTION 14.03. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking
fund.
SECTION 14.04. Notice of Redemption; Selection of
Securities.
In case the Company shall desire to exercise the right to
redeem all, or, as the case may be, any part of the Securities in accordance
with their terms, it shall fix a date for redemption and shall mail a notice of
such redemption at least 30 and not more than 60 days prior to the date fixed
for redemption to the holders of Securities so to be redeemed as a whole or in
part at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the holder receives such notice. In any case, failure to give such
notice by mail or any defect in the notice to the holder of any Security
designated for redemption as a whole or in part shall not affect the validity
of the proceedings for the redemption of any other Security.
Each such notice of redemption shall specify the CUSIP number
of the Securities to be redeemed, the date fixed for redemption, the redemption
price at which the Securities are to be redeemed (or the method by which such
redemption price is to be calculated), the place or places of payment that
payment will be made upon presentation and surrender of the Securities, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, and that on and after said date interest thereon or on
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the portions thereof to be redeemed will cease to accrue. If less than all the
Securities are to be redeemed the notice of redemption shall specify the
numbers of the Securities to be redeemed. In case any Security is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will be
issued.
By 10:00 a.m. New York time on the redemption date specified
in the notice of redemption given as provided in this Section, the Company will
deposit with the Trustee or with one or more paying agents an amount of money
sufficient to redeem on the redemption date all the Securities so called for
redemption at the appropriate Redemption Price, together with accrued interest
to the date fixed for redemption.
The Company will give the Trustee notice not less than 45 days
prior to the redemption date as to the aggregate principal amount of Securities
to be redeemed and the Trustee shall select, in such manner as in its sole
discretion it shall deem appropriate and fair, the Securities or portions
thereof (in integral multiples of $1,000, except as otherwise set forth in the
applicable form of Security) to be redeemed.
SECTION 14.05. Payment of Securities Called for Redemption.
If notice of redemption has been given as provided in Section
14.04, the Securities or portions of Securities with respect to which such
notice has been given shall become due and payable on the date and at the place
or places stated in such notice at the applicable Redemption Price, together
with interest accrued to the date fixed for redemption (subject to the rights
of holders of Securities on the close of business on a regular record date in
respect of an Interest Payment Date occurring on or prior to the redemption
date), and on and after said date (unless the Company shall default in the
payment of such Securities at the Redemption Price, together with interest
accrued to said date) interest (including Compounded Interest and Additional
Sums, if any) and Liquidated Damages, if any, on the Securities or portions of
Securities so called for redemption shall cease to accrue. On presentation and
surrender of such Securities at a place of payment specified in said notice,
the said Securities or the specified portions thereof shall be paid and
redeemed by the Company at the applicable Redemption Price, together with
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, accrued thereon to the date fixed for redemption
(subject to the rights of holders of Securities on the close of business on a
regular record date in respect of an Interest Payment Date occurring on or
prior to the redemption date).
Upon presentation of any Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Security
or Securities of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.
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ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate.
The Company covenants and agrees, and each holder of
Securities issued hereunder likewise covenants and agrees, that the Securities
shall be issued subject to the provisions of this Article XV; and each holder
of a Security, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, premium, if
any, and interest (including Compounded Interest and Additional Sums, if any)
and Liquidated Damages, if any, on all Securities issued hereunder shall, to
the extent and in the manner hereinafter set forth, be subordinated and junior
in right of payment to all Senior Indebtedness, whether outstanding at the date
of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence
of any Default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the
Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case,
no payment shall be made by the Company with respect to the principal
(including redemption payments) of or premium, if any, or interest on the
Securities.
In the event of the acceleration of the maturity of the
Securities, then no payment shall be made by the Company with respect to the
principal (including redemption payments) of or premium, if any, or interest on
the Securities until the holders of all Senior Indebtedness outstanding at the
time of such acceleration shall receive payment in full of such Senior
Indebtedness (including any amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraphs of this Section 15.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing, within 90 days of
such payment of the amounts then
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due and owing on such Senior Indebtedness and only the amounts specified in
such notice to the Trustee shall be paid to the holders of such Senior
Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding-up or liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Senior
Indebtedness of the Company shall first be paid in full, or payment thereof
provided for in money in accordance with its terms, before any payment is made
by the Company on account of the principal (and premium, if any) or interest
(including Compounded Interest and Additional Sums, if any) and Liquidated
Damages, if any, on the Securities; and upon any such dissolution or winding-up
or liquidation or reorganization, any payment by the Company, or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, to which the Securityholders or the Trustee would be entitled to
receive from the Company, except for the provisions of this Article XV, shall
be paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Securityholders or by the Trustee under the Indenture if received by them or
it, directly to the holders of Senior Indebtedness of the Company (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
such Senior Indebtedness in full, in money or money's worth, after giving
effect to any concurrent payment or distribution to or for the holders of such
Senior Indebtedness, before any payment or distribution is made to the
Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness is paid in full, or provision is
made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of such Senior Indebtedness or their representative
or representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing such Senior Indebtedness may have been
issued, as their respective interests may appear, as calculated by the Company,
for application to the payment of all Senior Indebtedness remaining unpaid to
the extent necessary to pay all such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness.
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For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article XV with respect to the Securities to the payment of Senior Indebtedness
that may at the time be outstanding, provided that (i) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another Person or the liquidation or
dissolution of the Company following the sale, conveyance, transfer or lease of
its property as an entirety, or substantially as an entirety, to another Person
upon the terms and conditions provided for in Article X of this Indenture shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 15.03 if such other Person shall, as a part of such
consolidation, merger, sale, conveyance, transfer or lease, comply with the
conditions stated in Article X of this Indenture. Nothing in Section 15.02 or
in this Section 15.03 shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 6.06 of this Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all Senior Indebtedness, the
rights of the Securityholders shall be subrogated to the rights of the holders
of such Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company, as the case may be, applicable to such
Senior Indebtedness until the principal of (and premium, if any) and interest
on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders
or the Trustee would be entitled except for the provisions of this Article XV,
and no payment over pursuant to the provisions of this Article XV to or for the
benefit of the holders of such Senior Indebtedness by Securityholders or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness of the Company, and the holders of the Securities, be
deemed to be a payment by the Company to or on account of such Senior
Indebtedness. It is understood that the provisions of this Article XV are and
are intended solely for the purposes of defining the relative rights of the
holders of the Securities, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
Nothing contained in this Article XV or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness of the
Company, and the holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the holders of the Securities
the principal of (and premium, if any) and interest (including Compounded
Interest and Additional Sums, if any) and Liquidated Damages, if any, on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is
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intended to or shall affect the relative rights of the holders of the
Securities and creditors of the Company, as the case may be, other than the
holders of Senior Indebtedness of the Company, as the case may be, nor shall
anything herein or therein prevent the Trustee or the holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under the Indenture, subject to the rights, if any, under this Article XV of
the holders of such Senior Indebtedness in respect of cash, property or
securities of the Company, as the case may be, received upon the exercise of
any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article XV, the Trustee, subject to the provisions of
Article VI of this Indenture, and the Securityholders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Securityholders,
for the purposes of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, as the case may be, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article XV.
SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance
thereof authorizes and directs the Trustee on such Securityholder's behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article XV and appoints the Trustee such
Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article XV. Notwithstanding the
provisions of this Article XV or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provisions of this Article XV, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder or holders of Senior Indebtedness
or from any trustee therefor; and before the receipt of any such written
notice, the Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 15.06 at least two Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of (or premium, if any) or
interest (including Compounded Interest and
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Additional Sums, if any) and Liquidated Damages, if any, on any Security),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness of the Company (or a trustee on behalf of such holder), as the
case may be, to establish that such notice has been given by a holder of such
Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of such Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article XV, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article XV, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Upon any payment or distribution of assets of the Company
referred to in this Article XV, the Trustee and the Securityholders shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, liquidating trustee,
custodian, receiver, assignee for the benefit of creditors, agent or other
person making such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
SECTION 15.07. Rights of the Trustee; Holders of Senior
Indebtedness.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article XV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article XV, and
no implied covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against
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the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Article
VI of this Indenture, the Trustee shall not be liable to any holder of such
Senior Indebtedness if it shall pay over or deliver to Securityholders, the
Company or any other Person money or assets to which any holder of such Senior
Indebtedness shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act
on the part of the Company, as the case may be, or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company,
as the case may be, with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Securityholders, without incurring responsibility to the Securityholders and
without impairing or releasing the subordination provided in this Article XV or
the obligations hereunder of the holders of the Securities to the holders of
such Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same or any agreement
under which such Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company, as the case may be, and
any other Person.
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ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing,
the Company shall have the right, at any time and from time to time during the
term of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding 10 consecutive
semi-annual periods, including the first such semi-annual period during such
extension period (the "Extended Interest Payment Period"), during which
Extended Interest Payment Period no interest shall be due and payable; provided
that no Extended Interest Payment Period shall end on a date other than an
Interest Payment Date or extend beyond the Maturity Date. To the extent
permitted by applicable law, interest, the payment of which has been deferred
because of the extension of the interest payment period pursuant to this
Section 16.01, will bear interest thereon at the Coupon Rate compounded
semi-annually for each semi-annual period of the Extended Interest Payment
Period ("Compounded Interest"). At the end of the Extended Interest Payment
Period, the Company shall pay all interest accrued and unpaid on the
Securities, including any Additional Sums and Compounded Interest (together,
"Deferred Interest") that shall be payable to the holders of the Securities in
whose names the Securities are registered in the Security Register on the first
record date preceding the end of the Extended Interest Payment Period. Before
the termination of any Extended Interest Payment Period, the Company may
further defer payments of interest by further extending such period, provided
that such period, together with all such previous and further extensions within
such Extended Interest Payment Period, shall not exceed 10 consecutive
semi-annual periods, including the first such semi-annual period during such
Extended Interest Payment Period, end on a date other than an Interest Payment
Date or extend beyond the Maturity Date of the Securities. Upon the
termination of any Extended Interest Payment Period and the payment of all
Deferred Interest then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be
due and payable during an Extended Interest Payment Period, except at the end
thereof, but the Company may prepay at any time all or any portion of the
interest accrued during an Extended Interest Payment Period.
SECTION 16.02. Notice of Extension.
(a) If the Property Trustee is the only registered holder of
the Securities at the time the Company selects an Extended Interest Payment
Period, the Company shall give written notice to the Administrative Trustees,
the Property Trustee and the Trustee of its selection of such Extended Interest
Payment Period five Business Days before the earlier of (i) the next succeeding
date on which Distributions on the Trust Securities issued by the Trust are
payable, or (ii) the date the Trust is required to give notice of the record
date, or the date such Distributions are payable, to any national securities
exchange or to holders
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of the Capital Securities issued by the Trust, but in any event at least five
Business Days before such record date.
(b) If the Property Trustee is not the only holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give the holders of the Securities and the Trustee written
notice of its selection of such Extended Interest Payment Period at least 10
Business Days before the earlier of (i) the next succeeding Interest Payment
Date, or (ii) the date the Company is required to give notice of the record or
payment date of such interest payment to any national securities exchange.
(c) The semi-annual period in which any notice is given
pursuant to paragraphs (a) or (b) of this Section 16.02 shall be counted as one
of the 10 semi-annual periods permitted in the maximum Extended Interest
Payment Period permitted under Section 16.01.
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The Bank of New York hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written.
ML BANCORP, INC.
By /s/ Brian M. Hartline
---------------------
Name: Brian M. Hartline
Title: Executive Vice President, Chief
Financial Officer
and Secretary
THE BANK OF NEW YORK,
as Trustee
By /s/ Byron Merino
----------------
Name: Byron Merino
Title: Assistant Treasurer
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EXHIBIT A
(FORM OF FACE OF SECURITY)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR
(E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND (ii) PURSUANT TO CLAUSE (D),
TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE COMPANY.
SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON
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TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 (100
SECURITIES). ANY SUCH TRANSFER OF SECURITIES IN A BLOCK HAVING AN AGGREGATE
PRINCIPAL AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE
RECEIPT OF PRINCIPAL, PREMIUM (IF ANY) OR INTEREST OF SUCH SECURITIES, AND SUCH
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT
PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR (ii) THE ACQUISITION AND HOLDING OF THIS SECURITY BY IT IS NOT
PROHIBITED BY EITHER SECTION 406 OF ERISA OR SECTION 4975 OF THE U.S. INTERNAL
REVENUE CODE OF 1986, AS AMENDED, OR EXEMPT FROM ANY SUCH PROHIBITION.
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No. CUSIP No.
ML BANCORP, INC.
9.875% SERIES A JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURE DUE MARCH 1, 2027
ML Bancorp, Inc., a Pennsylvania corporation (the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
____________________, as Property Trustee for ML Capital Trust I or registered
assigns, the principal sum of _____________ on March 1, 2027 (the "Maturity
Date"), unless previously redeemed, and to pay interest on the outstanding
principal amount hereof from March 10, 1997, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, semi-annually (subject to deferral as set forth
herein) in arrears on March 1 and September 1 of each year, commencing
September 1, 1997, at the rate of 9.875% per annum until the principal hereof
shall have become due and payable, and on any overdue principal and premium, if
any, and (without duplication and to the extent that payment of such interest
is enforceable under applicable law) on any overdue installment of interest at
the same rate per annum compounded semi-annually. The amount of interest
payable on any Interest Payment Date shall be computed on the basis of a
360-day year of twelve 30-day months and, for any period less than a full
calendar month, the number of days elapsed in such month. In the event that
any date on which the principal of (or premium, if any) or interest on this
Security is payable is not a Business Day, then the payment payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that if such next succeeding Business Day falls in the next calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date. Pursuant to the
Indenture, in certain circumstances the Company will be required to pay
Additional Sums and Compounded Interest (each as defined in the Indenture) with
respect to this Security. Pursuant to the Registration Rights Agreement, in
certain limited circumstances the Company will be required to pay Liquidated
Damages (as defined in the Registration Rights Agreement) with respect to this
Security.
The interest installment so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities, as defined in said Indenture) is registered at the
close of business on the regular record date for such interest installment,
which shall be at the close of business on the 15th day of the month preceding
the month in which the relevant interest payment date falls. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to
be payable to the holders on such regular record date and may be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof
A-3
<PAGE> 87
shall be given to the holders of Securities not less than 10 days prior to such
special record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
The principal of (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if
any, on this Security shall be payable at the office or agency of the Trustee
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that, payment of interest may be made at the
option of the Company by (i) check mailed to the holder at such address as
shall appear in the Security Register or (ii) by transfer to an account
maintained by the Person entitled thereto, provided that proper written
transfer instructions have been received by the relevant record date.
Notwithstanding the foregoing, so long as the Holder of this Security is the
Property Trustee, the payment of the principal of (and premium, if any) and
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on this Security will be made at such place and to
such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each holder
of this Security, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his or
her attorney-in-fact for any and all such purposes. Each holder hereof, by his
or her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
A-4
<PAGE> 88
The provisions of this Security are continued on the reverse
side hereof and such provisions shall for all purposes have the same effect as
though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed and sealed.
Dated: , 1997
----------------
ML BANCORP, INC.
By:
-------------------------
Name:
Title:
Attest:
By:
-----------------------
Name:
Title:
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By
--------------------
Authorized Signatory
A-5
<PAGE> 89
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of March
10, 1997 (the "Indenture"), duly executed and delivered between the Company and
The Bank of New York, as Trustee (the "Trustee"), to which Indenture reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Securities.
Upon the occurrence and continuation of a Special Event prior
to March 1, 2007 (the "Initial Optional Redemption Date"), the Company shall
have the right, at any time within 90 days following the occurrence of such
Special Event, to redeem this Security in whole (but not in part) at the
Special Event Redemption Price. "Special Event Redemption Price" shall mean,
with respect to any redemption of the Securities following a Special Event, an
amount in cash equal to the Make Whole Amount. The "Make Whole Amount" shall
mean an amount equal to the greater of (i) 100% of the principal amount to be
redeemed or (ii) the sum, as determined by a Quotation Agent, of the present
values of remaining scheduled payments of principal and interest, discounted to
the prepayment date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate, plus, in the case of
each of clauses (i) and (ii), any accrued and unpaid interest thereon
(including Compounded Interest and Additional Sums, if any) and Liquidated
Damages, if any, to the date of such redemption.
In addition, the Company shall have the right to redeem this
Security, in whole or in part, at any time on or after the Initial Optional
Redemption Date (an "Optional Redemption"), at the redemption prices set forth
below (expressed as percentages of principal to be redeemed) plus, in each
case, accrued and unpaid interest thereon (including Additional Sums and
Compounded Interest, if any) and Liquidated Damages, if any, to the applicable
date of redemption (the "Optional Redemption Price") if redeemed during the
12-month period beginning March 1 of the years indicated below.
A-6
<PAGE> 90
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2007 104.937%
2008 104.443%
2009 103.950%
2010 103.456%
2011 102.962%
2012 102.469%
2013 101.975%
2014 101.481%
2015 100.987%
2016 100.494%
2017 and thereafter 100.000%
</TABLE>
The Optional Redemption Price or the Special Event Redemption
Price, as the case requires, shall be paid prior to 12:00 noon, New York time,
on the date of such redemption or at such earlier time as the Company
determines, provided, that the Company shall deposit with the Trustee an amount
sufficient to pay the applicable Redemption Price by 10:00 a.m., New York City,
on the date such Redemption Price is to be paid. Any redemption pursuant to
this paragraph will be made upon not less than 30 days nor more than 60 days
notice. If the Securities are only partially redeemed by the Company pursuant
to an Optional Redemption, the particular Securities to be redeemed shall be
selected on a pro rata basis not more than 60 days prior to the date fixed for
redemption from the outstanding Securities not previously called for
redemption, provided, however, that with respect to Securityholders that would
be required to hold Securities with an aggregate principal amount of less than
$100,000 but more than an aggregate principal amount of zero as a result of
such pro rata redemption, the Company shall redeem Securities of each such
Securityholder so that after such redemption such Securityholder shall hold
Securities either with an aggregate principal amount of at least $100,000 or
such Securityholder no longer holds any Securities and shall use such method
(including, without limitation, by lot) as the Company shall deem fair and
appropriate, provided, further, that any such proration may be made on the
basis of the aggregate principal amount of Securities held by each
Securityholder thereof and may be made by making such adjustments as the
Company deems fair and appropriate in order that only Securities in
denominations of $1,000 or integral multiples thereof shall be redeemed.
A-7
<PAGE> 91
In the event of redemption of this Security in part only, a
new Security or Securities for the unredeemed portion hereof will be issued in
the name of the holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any redemption of Securities by
the Company shall be subject to the receipt of any required regulatory
approval.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all of the Securities
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of a majority in aggregate
principal amount of the Securities at the time outstanding, as defined in the
Indenture, to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such supplemental indenture shall,
without the consent of each holder of Securities then outstanding and affected
thereby, (i) change the Maturity Date of any Securities, or reduce the
principal amount thereof, or reduce any amount payable on redemption thereof,
or reduce the rate or extend the time of payment of interest thereon (subject
to Article XVI of the Indenture), or make the principal of, or interest or
premium on, the Securities payable in any coin or currency other than U.S.
dollars, or impair or affect the right of any holder of Securities to institute
suit for the payment thereof, or (ii) reduce the aforesaid percentage of
Securities, the holders of which are required to consent to any such
supplemental indenture. The Indenture also contains provisions permitting the
holders of a majority in aggregate principal amount of the Securities at the
time outstanding affected thereby, on behalf of all of the holders of the
Securities, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture,
and its consequences, except a default in the payment of the principal of or
premium, if any, or interest on any of the Securities or a default in respect
of any covenant or provision under which the Indenture cannot be modified or
amended without the consent of each holder of Securities then outstanding. Any
such consent or waiver by the holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such Holder and
upon all future holders and owners of this Security and of any Security issued
in exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest (including Compounded Interest and Additional
Sums, if any) and Liquidated Damages, if any, on this Security at the time and
place and at the rate and in the money herein prescribed.
A-8
<PAGE> 92
So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right, at any time and from time to time
during the term of the Securities, to defer payments of interest by extending
the interest payment period of such Securities for a period not exceeding 10
consecutive semi-annual periods, including the first such semi-annual period
during such extension period, and not extending beyond the Maturity Date of the
Securities (an "Extended Interest Payment Period") or ending on a date other
than an Interest Payment Date, at the end of which period the Company shall pay
all interest then accrued and unpaid (together with interest thereon at the
rate specified for the Securities to the extent that payment of such interest
is enforceable under applicable law). Before the termination of any such
Extended Interest Payment Period, the Company may further defer payments of
interest by further extending such Extended Interest Payment Period, provided
that such Extended Interest Payment Period, together with all such previous and
further extensions within such Extended Interest Payment Period, (i) shall not
exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extended Interest Payment Period, (ii) shall not end on any
date other than an Interest Payment Date, and (iii) shall not extend beyond the
Maturity Date of the Securities. Upon the termination of any such Extended
Interest Payment Period and the payment of all accrued and unpaid interest and
any additional amounts then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements.
The Company has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any Subsidiary of the
Company if such guarantee ranks pari passu or junior in right of payment to the
Securities (other than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Capital Securities Guarantee, (d) as a
result of a reclassification of the Company's capital stock or the exchange or
the conversion of one class or series of the Company's capital stock, for
another class or series of the Company's capital stock, (e) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
exchange or conversion of such capital stock or the security being exchanged or
converted and (f) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Company's benefit plans for its directors,
officers or employees or any of the Company's dividend reinvestment plans) if
at such time (1) there shall have occurred any event of which the Company has
actual knowledge that (a) is or, with the giving of notice or the lapse of
time, or both, would be, an Event of Default and (b) in respect of which the
Company shall not have taken reasonable steps to cure, (2) if the Securities
are held by ML Capital Trust, the Company shall be in default with respect to
its
A-9
<PAGE> 93
payment obligations under the Capital Securities Guarantee or (3) the Company
shall have given notice of its election of the exercise of its right to extend
the interest payment period and any such extension shall be continuing.
Subject to (i) the receipt of any required regulatory approval
and (ii) the receipt by the Company of an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of Capital Securities,
the Company will have the right at any time to liquidate the ML Capital Trust
and cause the Securities to be distributed to the holders of the Trust
Securities in liquidation of the Trust.
The Securities are issuable only in registered form without
coupons in denominations of $1,000.00 and any integral multiple thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or
the Trustee duly executed by the holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Securities of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
relation thereto.
Prior to due presentment for registration of transfer of this
Security, the Company, the Trustee, any authenticating agent, any paying agent,
any transfer agent and the registrar may deem and treat the holder hereof as
the absolute owner hereof (whether or not this Security shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any authenticating agent nor any paying agent nor
any transfer agent nor any registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of
or premium, if any, or interest on this Security, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
Person, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.
A-10
<PAGE> 94
All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICT OF LAW PROVISIONS THEREOF.
A-11
<PAGE> 1
Exhibit 4.6
Series A Capital Securities Guarantee Agreement, dated as of March 10, 1997,
relating to the Series A Capital Securities of ML Capital Trust I
<PAGE> 2
EXHIBIT 4.6
====================================
SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
ML Bancorp, Inc.
Dated as of March 10, 1997
====================================
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------------------
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------------------------------
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------------------------
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------------------------------------------
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------------------------------------------
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------------------------------------------
SECTION 2.6 Events of Default; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------------------
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------------
SECTION 2.8 Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------------
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . 7
-------------------------------------------------------------
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------------------------------------------
SECTION 3.3. Not Responsible for Recitals or Issuance of Series A Capital Securities Guarantee . . . . . . . . . . . 11
---------------------------------------------------------------------------------
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------------------------------------
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities Guarantee Trustee . . . . . . . . . . . . . 12
----------------------------------------------------------------------------
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------
SECTION 5.2 Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.3 Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------------------
SECTION 5.4 Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------
SECTION 5.5 Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------------
SECTION 5.6 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------
SECTION 5.7 Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------------
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------------------
SECTION 6.2 Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------
ARTICLE VII
TERMINATION
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------
SECTION 8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---------------
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------------------
SECTION 9.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------
SECTION 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------
SECTION 9.4 Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------
SECTION 9.5 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-------
SECTION 9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-------------
</TABLE>
ii
<PAGE> 5
SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Series A Capital Securities
Guarantee"), dated as of March 10, 1997, is executed and delivered by ML
Bancorp, Inc., a Pennsylvania corporation (the "Guarantor"), and The Bank of
New York, a New York banking corporation, as trustee (the "Capital Securities
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Series A Capital Securities (as defined herein) of ML
Capital Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of March 10, 1997, among the trustees of
the Issuer, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 50,000 capital securities, having an aggregate
liquidation amount of $50,000,000, such capital securities being designated the
Series A 9.875% Capital Securities (collectively the "Series A Capital
Securities") and, in connection with an Exchange Offer (as defined in the
Declaration), has agreed to execute and deliver the Series B Capital Securities
Guarantee (as defined in the Declaration) for the benefit of holders of the
Series B Capital Securities (as defined in the Declaration); and
WHEREAS, as incentive for the Holders to purchase the Series A
Capital Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Series A Capital Securities Guarantee,
to pay to the Holders the Guarantee Payments (as defined below) and to make
certain other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Series A Capital Securities Guarantee, for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event
of Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments under
the Common Securities Guarantee are subordinated, to the extent and in the
manner set forth in the Common Securities Guarantee, to the rights of holders
of Series A Capital Securities and the Series B Capital Securities to receive
Guarantee Payments under this Series A Capital Securities Guarantee and the
Series B Capital Securities Guarantee, as the case may be;
NOW, THEREFORE, in consideration of the purchase by each
Holder, which purchase the Guarantor hereby acknowledges shall benefit the
Guarantor, the Guarantor executes and delivers this Series A Capital Securities
Guarantee for the benefit of the Holders.
<PAGE> 6
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Series A Capital Securities Guarantee, unless the
context otherwise requires:
(a) Capitalized terms used in this Series A Capital
Securities Guarantee but not defined in the preamble
above have the respective meanings assigned to them
in this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Series A Capital Securities
Guarantee have the same meaning when used in this
Series A Capital Securities Guarantee unless
otherwise defined in this Series A Capital Securities
Guarantee;
(c) a term defined anywhere in this Series A Capital
Securities Guarantee has the same meaning throughout;
(d) all references to "the Series A Capital Securities
Guarantee" or "this Series A Capital Securities
Guarantee" are to this Series A Capital Securities
Guarantee as modified, supplemented or amended from
time to time;
(e) all references in this Series A Capital Securities
Guarantee to Articles and Sections are to Articles
and Sections of this Series A Capital Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the
same meaning when used in this Series A Capital
Securities Guarantee, unless otherwise defined in
this Series A Capital Securities Guarantee or unless
the context otherwise requires; and
(g) a reference to the singular includes the plural and
vice versa.
"Affiliate" has the same meaning as given to that term in Rule
405 under the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in The City of New York or
Villanova, Pennsylvania are authorized or required by law or executive order to
close.
"Capital Securities Guarantee Trustee" means The Bank of New
York, a New York banking corporation, until a Successor Capital Securities
Guarantee Trustee has been appointed
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and has accepted such appointment pursuant to the terms of this Series A
Capital Securities Guarantee and thereafter means each such Successor Capital
Securities Guarantee Trustee.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Capital
Securities Guarantee Trustee at which the corporate trust business of the
Capital Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this
Agreement is located at 101 Barclay Street, New York, New York 10286.
"Covered Person" means any Holder of Series A Capital
Securities.
"Debentures" means the series of subordinated debt securities
of the Guarantor designated the Series A 9.875% Junior Subordinated Deferrable
Interest Debentures due March 1, 2027 held by the Property Trustee (as defined
in the Declaration) of the Issuer.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Series A Capital Securities
Guarantee, provided, however, that except with respect to a default in payment
of any Guarantee Payment, the Guarantor shall have received notice of default
and shall not have cured such default within 60 days after receipt of such
notice.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Series A Capital
Securities, to the extent not paid or made by the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Declaration) that are required to
be paid on such Series A Capital Securities to the extent the Issuer has funds
on hand legally available therefor at such time, (ii) the redemption price,
including all accumulated and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds on hand legally
available therefor at such time, with respect to any Series A Capital
Securities called for redemption by the Issuer and (iii) upon a voluntary or
involuntary termination and liquidation of the Issuer (other than in connection
with the distribution of Debentures to the Holders in exchange for Series A
Capital Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid
Distributions on the Series A Capital Securities to the date of payment, to the
extent the Issuer has funds on hand legally available therefor, and (b) the
amount of assets of the Issuer remaining available for distribution to Holders
in liquidation of the Issuer. If an Event of Default has occurred and is
continuing, no Guarantee Payments under the Common Securities Guarantee with
respect to the Common Securities or any guarantee payment under any Other
Common Securities Guarantees shall be made until the Holders shall be paid in
full the Guarantee Payments to which they are entitled under this Series A
Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Series A Capital Securities; provided, however,
that, in determining whether the holders of the requisite percentage of Series
A Capital Securities have given any request, notice,
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consent or waiver hereunder, "Holder" shall not include the Guarantor or any
Person known to a Responsible Officer of the Capital Securities Guarantee
Trustee to be an Affiliate of the Guarantor.
"Indemnified Person" means the Capital Securities Guarantee
Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Capital Securities
Guarantee Trustee.
"Indenture" means the Indenture dated as of March 10, 1997,
among the Guarantor (the "Debenture Issuer") and The Bank of New York, as
trustee (the "Indenture Trustee"), pursuant to which the Debentures are to be
issued to the Property Trustee of the Issuer.
"Indenture Event of Default" shall mean any event specified in
Section 5.01 of the Indenture.
"Majority in liquidation amount of the Series A Capital
Securities" means, except as provided by the Declaration or by the Trust
Indenture Act, a vote by Holder(s) of more than 50% of the aggregate
liquidation amount of all Series A Capital Securities.
"Officers' Certificate" means, with respect to the Guarantor,
a certificate signed by any of the Chairman, a Vice Chairman, the Chief
Executive Officer, the President, a Vice President, the Comptroller, the
Secretary or an Assistant Secretary of the Guarantor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Series A Capital Securities Guarantee (other than pursuant
to Section 314(d)(4) of the Trust Indenture Act) shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(c) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same
meaning as "Other Guarantees" as defined in the Common Securities Guarantee.
"Other Debentures" means all junior subordinated debentures
issued by the Guarantor from time to time and sold to trusts to be established
by the Guarantor (if any), in each case similar to the Issuer.
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"Other Guarantees" means all guarantees to be issued by the
Guarantor with respect to capital securities (if any) similar to the Series A
Capital Securities issued by other trusts to be established by the Guarantor
(if any), in each case similar to the Issuer.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 10, 1997, by and among the Guarantor, the Issuer
and the initial purchasers named therein as such agreement may be amended,
modified or supplemented from time to time.
"Responsible Officer" means, with respect to the Capital
Securities Guarantee Trustee, any officer within the Corporate Trust Office of
the Capital Securities Guarantee Trustee with direct responsibility for the
administration of this Series A Capital Securities Guarantee 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 Capital Securities Guarantee Trustee" means a
successor Capital Securities Guarantee Trustee possessing the qualifications to
act as Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Securities" means the Common Securities and the Series
A Capital Securities and Series B Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Series A Capital Securities Guarantee is subject
to the provisions of the Trust Indenture Act that are required to be part of
this Series A Capital Securities Guarantee and shall, to the extent applicable,
be governed by such provisions; and
(b) if and to the extent that any provision of this
Series A Capital Securities Guarantee limits, qualifies or conflicts with the
duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act,
such imposed duties shall control.
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SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Capital Securities Guarantee
Trustee (unless the Capital Securities Guarantee Trustee is otherwise the
registrar of the Capital Securities) with a list, in such form as the Capital
Securities Guarantee Trustee may reasonably require, of the names and addresses
of the Holders ("List of Holders") as of such date, (i) within one Business Day
after 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
Capital Securities Guarantee Trustee, provided, that the Guarantor shall not be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Capital Securities
Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.
(b) The Capital Securities Guarantee Trustee shall comply
with its obligations under Sections 311(a), 311(b) and Section 312(b) of the
Trust Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
Within 60 days after May 15 of each year, commencing May 15,
1997, the Capital Securities Guarantee Trustee shall provide to the Holders
such reports as are required by Section 313 of the Trust Indenture Act, if any,
in the form and in the manner provided by Section 313 of the Trust Indenture
Act. The Capital Securities Guarantee Trustee shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such documents, reports and information as required by
Section 314 (if any) and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act, provided that such compliance
certificate shall be delivered on or before 120 days after the end of each
fiscal year of the Guarantor. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only and the Capital Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Capital
Securities Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Series A Capital Securities Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust
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Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Series A
Capital Securities may, by vote, on behalf of all Holders, waive any past Event
of Default and its consequences. Upon such waiver, any such Event of Default
shall cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Series A Capital
Securities Guarantee, but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice
(a) The Capital Securities Guarantee Trustee shall,
within 90 days after the occurrence of a default with respect to this Capital
Securities Guarantee, mail by first class postage prepaid, to all Holders,
notices of all defaults actually known to a Responsible Officer, unless such
defaults have been cured before the giving of such notice, provided, that,
except in the case of default in the payment of any Guarantee Payment, the
Capital Securities Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital Securities
Guarantee Trustee shall have received written notice from the Guarantor, or a
Responsible Officer charged with the administration of this Series A Capital
Securities Guarantee shall have obtained actual knowledge, of such Event of
Default.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described
in this Series A Capital Securities Guarantee for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
(a) This Series A Capital Securities Guarantee shall be
held by the Capital Securities Guarantee Trustee for the benefit of the
Holders, and the Capital Securities Guarantee
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Trustee shall not transfer this Series A Capital Securities Guarantee to any
Person except a Holder exercising his or her rights pursuant to Section 5.4(b)
or to a Successor Capital Securities Guarantee Trustee on acceptance by such
Successor Capital Securities Guarantee Trustee of its appointment to act as
Successor Capital Securities Guarantee Trustee. The right, title and interest
of the Capital Securities Guarantee Trustee shall automatically vest in any
Successor Capital Securities Guarantee Trustee, and such vesting and succession
of title shall be effective whether or not conveyancing documents have been
executed and delivered pursuant to the appointment of such Successor Capital
Securities Guarantee Trustee.
(b) If an Event of Default actually known to a
Responsible Officer has occurred and is continuing, the Capital Securities
Guarantee Trustee shall enforce this Series A Capital Securities Guarantee for
the benefit of the Holders.
(c) The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of
Default that may have occurred, shall undertake to perform only such duties as
are specifically set forth in this Series A Capital Securities Guarantee, and
no implied covenants shall be read into this Series A Capital Securities
Guarantee against the Series A Capital Securities Guarantee Trustee. In case
an Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to a Responsible Officer, the Capital
Securities Guarantee Trustee shall exercise such of the rights and powers
vested in it by this Series A Capital Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Series A Capital Securities
Guarantee shall be construed to relieve the Capital Securities Guarantee
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Capital
Securities Guarantee Trustee shall be determined solely by the
express provisions of this Series A Capital Securities
Guarantee, and the Capital Securities Guarantee Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Series A
Capital Securities Guarantee, and no implied covenants or
obligations shall be read into this Series A Capital
Securities Guarantee against the Capital Securities Guarantee
Trustee; and
(B) in the absence of bad faith on the part of
the Capital Securities Guarantee Trustee, the Capital
Securities Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished
to the Capital Securities Guarantee Trustee and conforming to
the requirements of this Series A Capital
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Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically
required to be furnished to the Capital Securities Guarantee
Trustee, the Capital Securities Guarantee Trustee shall be
under a duty to examine the same to determine whether or not
they conform to the requirements of this Series A Capital
Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Capital Securities
Guarantee Trustee was negligent in ascertaining the pertinent facts
upon which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders of a
Majority in liquidation amount of the Series A Capital Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Capital Securities Guarantee Trustee,
or exercising any trust or power conferred upon the Capital Securities
Guarantee Trustee under this Series A Capital Securities Guarantee;
and
(iv) no provision of this Series A Capital Securities
Guarantee shall require the Capital Securities Guarantee Trustee to
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 Capital Securities Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Series A Capital Securities Guarantee or indemnity,
reasonably satisfactory to the Capital Securities Guarantee Trustee,
against such risk or liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from
acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Series A Capital Securities Guarantee may be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Series A
Capital Securities Guarantee, the Capital Securities Guarantee Trustee
shall deem it desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the Capital
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Securities Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the
Guarantor.
(iv) The Capital Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof).
(v) The Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The Capital
Securities Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Series A Capital
Securities Guarantee from any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by
this Series A Capital Securities Guarantee at the request or direction
of any Holder, unless such Holder shall have provided to the Capital
Securities Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Capital Securities Guarantee Trustee, against the
costs, expenses (including attorneys' fees and expenses and the
expenses of the Capital Securities Guarantee Trustee's agents,
nominees or custodians) and liabilities that might be incurred by it
in complying with such request or direction, including such reasonable
advances as may be requested by the Capital Securities Guarantee
Trustee; provided that, nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Capital Securities Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Series A Capital
Securities Guarantee.
(vii) The Capital Securities Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Capital Securities Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit.
(viii) The Capital Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Capital Securities Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
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(ix) Any action taken by the Capital Securities Guarantee
Trustee or its agents hereunder shall bind the Holders, and the
signature of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action.
No third party shall be required to inquire as to the authority of the
Capital Securities Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Series A Capital
Securities Guarantee, both of which shall be conclusively evidenced by
the Capital Securities Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Series A Capital
Securities Guarantee the Capital Securities Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder, the Capital
Securities Guarantee Trustee (i) may request instructions from the
Holders of a Majority in liquidation amount of the Series A Capital
Securities, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received and
(iii) shall be protected in conclusively relying on or acting in
accordance with such instructions.
(xi) The Capital Securities Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in
good faith, without negligence, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Series A Capital Securities Guarantee.
(b) No provision of this Series A Capital Securities
Guarantee shall be deemed to impose any duty or obligation on the Capital
Securities Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any jurisdiction in
which it shall be illegal, or in which the Capital Securities Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Capital
Securities Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Series A Capital
Securities Guarantee
The recitals contained in this Series A Capital Securities
Guarantee shall be taken as the statements of the Guarantor, and the Capital
Securities Guarantee Trustee does not assume any responsibility for their
correctness. The Capital Securities Guarantee Trustee makes no representation
as to the validity or sufficiency of this Series A Capital Securities
Guarantee.
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ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined
capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority referred
to above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Capital Securities Guarantee
Trustee shall cease to be eligible to so act under Section 4.1(a), the Capital
Securities Guarantee Trustee shall immediately resign in the manner and with
the effect set out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or
shall acquire any "conflicting interest" within the meaning of Section 310(b)
of the Trust Indenture Act, the Capital Securities Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act, subject to the penultimate paragraph thereof.
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities
Guarantee Trustee
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
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(c) The Capital Securities Guarantee Trustee shall hold
office until a Successor Capital Securities Guarantee Trustee shall have been
appointed or until its removal or resignation. The Capital Securities
Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Capital Securities
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Capital Securities Guarantee Trustee has been
appointed and has accepted such appointment by instrument in writing executed
by such Successor Capital Securities Guarantee Trustee and delivered to the
Guarantor and the resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee
shall have been appointed and accepted appointment as provided in this Section
4.2 within 60 days after delivery of an instrument of removal or resignation,
the Capital Securities Guarantee Trustee resigning or being removed may
petition any court of competent jurisdiction for appointment of a Successor
Capital Securities Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Capital Securities Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be
liable for the acts or omissions to act of any Successor Capital Securities
Guarantee Trustee.
(f) Upon termination of this Series A Capital Securities
Guarantee or removal or resignation of the Capital Securities Guarantee Trustee
pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities
Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee
accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Series A Capital Securities Guarantee and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a
proceeding first against the Issuer or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor,
notice of redemption and all other notices and demands.
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SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this Series A Capital Securities Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Series A Capital
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer
of all or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Series A Capital
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Series A Capital Securities
(other than an extension of time for payment of Distributions, Redemption
Price, Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the Series A
Capital Securities, or any action on the part of the Issuer granting indulgence
or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Series A Capital Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred;
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor with
respect to the Guarantee Payments shall be absolute and unconditional under any
and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
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SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of
the Series A Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Capital
Securities Guarantee Trustee in respect of this Series A Capital Securities
Guarantee or exercising any trust or power conferred upon the Capital
Securities Guarantee Trustee under this Series A Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Series A Capital Securities Guarantee, any Holder may institute a
legal proceeding directly against the Guarantor to enforce the Capital
Securities Guarantee Trustee's rights under this Series A Capital Securities
Guarantee, without first instituting a legal proceeding against the Issuer, the
Capital Securities Guarantee Trustee or any other person or entity. The
Guarantor waives any right or remedy to require that any action be brought
first against the Issuer or any other person or entity before proceeding
directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Series A Capital Securities Guarantee creates a guarantee
of payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to such Holders
by the Guarantor under this Series A Capital Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Series A Capital
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Series A Capital Securities Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Series A
Capital Securities, and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this
Series A Capital Securities Guarantee notwithstanding the occurrence of any
event referred to in subsections (a) through (h), inclusive, of Section 5.3
hereof.
15
<PAGE> 20
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Series A Capital Securities remain outstanding,
the Guarantor shall not (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Guarantor's capital stock (which includes common and preferred
stock), (ii) make any payment of principal of, or premium, if any, or interest
on or repay, repurchase or redeem any debt securities of the Guarantor
(including any Other Debentures) that rank pari passu with or junior in right
of payment to the Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Guarantor of the debt securities of any subsidiary of
the Guarantor (including Other Guarantees) if such guarantee ranks pari passu
with or junior in right of payment to the Debentures (other than (a) dividends
or distributions in shares of, or options, warrants, rights to subscribe for or
purchase shares of, common stock of the Guarantor, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Series A Capital Securities Guarantee and the Series B Capital Securities
Guarantee, (d) as a result of a reclassification of the Guarantor's capital
stock or the exchange or the conversion of one class or series of the
Guarantor's capital stock for another class or series of the Guarantor's
capital stock, (e) the purchase of fractional interests in shares of the
Guarantor's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged and (f)
purchases of common stock related to the issuance of common stock or rights
under any of the Guarantor's benefit plans for its directors, officers or
employees or any of the Guarantor's dividend reinvestment plans) if at such
time (i) there shall have occurred any event of which the Guarantor has actual
knowledge that (a) is, or with the giving of notice or the lapse of time, or
both, would be an Indenture Event of Default and (b) in respect of which the
Guarantor shall not have taken reasonable steps to cure, (ii) if such
Debentures are held by the Property Trustee, the Guarantor shall be in default
with respect to its payment of any obligations under this Series A Capital
Securities Guarantee or (iii) the Guarantor shall have given notice of its
election of the exercise of its right to extend the interest payment period
pursuant to Section 16.01 of the Indenture and any such extension shall be
continuing.
SECTION 6.2 Ranking
This Series A Capital Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to Senior Indebtedness (as defined in the Indenture), to
the same extent and in the same manner that the Debentures are subordinated to
Senior Indebtedness pursuant to the Indenture, (ii) pari passu with the
Debentures, the Other Debentures, the Series B Capital Securities Guarantee,
the Common Securities Guarantee and any Other Guarantee and any Other Common
Securities Guarantee, and (iii) senior to the Guarantor's capital stock.
16
<PAGE> 21
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Series A Capital Securities Guarantee shall terminate (i)
upon full payment of the Redemption Price (as defined in the Declaration) of
all Series A Capital Securities, (ii) upon liquidation of the Issuer, the full
payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders and the holders of Common
Securities or (iii) upon exchange of all the Series A Capital Securities for
the Series B Capital Securities in the Exchange Offer and the execution and
delivery of the Series B Capital Securities Guarantee. Notwithstanding the
foregoing, this Series A Capital Securities Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid under the Series A Capital Securities or
under this Series A Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Series A Capital Securities Guarantee and in a manner that such Indemnified
Person reasonably believed to be within the scope of the authority conferred on
such Indemnified Person by this Series A Capital Securities Guarantee or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's negligence or
willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the
17
<PAGE> 22
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
itself against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 8.2 shall survive the
termination of this Series A Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Series A
Capital Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of Holders
will be required), this Series A Capital Securities Guarantee may only be
amended with the prior approval of the Holders of a Majority in liquidation
amount of the Series A Capital Securities (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined).
The provisions of the Declaration with respect to consents to amendments
thereof (whether at a meeting or otherwise) shall apply to the giving of such
approval.
SECTION 9.3 Notices
All notices provided for in this Series A Capital Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other address
as the Issuer may give notice of to the Holders and the Capital Securities
Guarantee Trustee):
ML Capital Trust I
c/o ML Bancorp, Inc.
Two Aldwyn Center
Lancaster Avenue and Route 320
Villanova, Pennsylvania 19085
Attention: Brian M. Hartline
Administrative Trustee
Telecopy: (610) 526-6227
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<PAGE> 23
(b) If given to the Capital Securities Guarantee Trustee, at the
Capital Securities Guarantee Trustee's mailing address set forth below (or such
other address as the Capital Securities Guarantee Trustee may give notice of to
the Holders and the Issuer):
The Bank of New York
101 Barclay Street
21st Floor West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5917
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders and the Capital Securities Guarantee Trustee):
ML Bancorp, Inc.
Two Aldwyn Center
Lancaster Avenue and Route 320
Villanova, Pennsylvania 19085
Attention: Brian M. Hartline
Executive Vice President, Chief
Financial Officer and Secretary
Telecopy: (610) 526-6227
(d) If given to any Holder, at the address set forth on
the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Exchange Offer
In the event an Exchange Offer Registration Statement (as
defined in the Registration Rights Agreement) becomes effective and the Issuer
issues any Series B Capital Securities in the Exchange Offer, the Guarantor
will enter into a new capital securities guarantee agreement, in substantially
the same form as this Series A Capital Securities Guarantee, with respect to
the Series B Capital Securities.
19
<PAGE> 24
SECTION 9.5 Benefit
This Series A Capital Securities Guarantee is solely for the
benefit of the Holders and, subject to Section 3.1(a), is not separately
transferable from the Series A Capital Securities.
SECTION 9.6 Governing Law
THIS SERIES A CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
THIS SERIES A CAPITAL SECURITIES GUARANTEE is executed as of
the day and year first above written.
ML BANCORP, INC., as Guarantor
By: /s/ Brian M. Hartline
---------------------------------------------
Name: Brian M. Hartline
Title: Executive Vice President,
Chief Financial Officer
and Secretary
THE BANK OF NEW YORK, as Capital
Securities Guarantee Trustee
By: /s/ Byron Merino
---------------------------------------------
Name: Byron Merino
Title: Assistant Treasurer
20
<PAGE> 1
Exhibit 4.7
Common Securities Guarantee Agreement, dated as of March 10, 1997,
relating to the Common Securities of ML Capital Trust I
<PAGE> 2
EXHIBIT 4.7
====================================
COMMON SECURITIES GUARANTEE AGREEMENT
ML Bancorp, Inc.
Dated as of March 10, 1997
====================================
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------------------
ARTICLE II
GUARANTEE
SECTION 2.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------
SECTION 2.2. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------------
SECTION 2.3. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------------
SECTION 2.4. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------
SECTION 2.5. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------
SECTION 2.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------
SECTION 2.7. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------------------
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. Limitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------------------------
SECTION 3.2. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------
ARTICLE IV
TERMINATION
SECTION 4.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------------------
SECTION 5.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------
SECTION 5.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------
SECTION 5.4. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------
SECTION 5.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------
</TABLE>
<PAGE> 4
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"),
dated as of March 10, 1997, is executed and delivered by ML Bancorp, Inc., a
Pennsylvania corporation (the "Guarantor"), for the benefit of the Holders (as
defined herein) from time to time of the Common Securities (as defined herein)
of ML Capital Trust I, a Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of March 10, 1997, among the Trustees of
the Issuer named therein, the Guarantor, as sponsor, and the holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof 1,547 common securities designated the
9.875% Common Securities (the "Common Securities"), having an aggregate stated
liquidation amount of $1,547,000;
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth in this Common Securities Guarantee, to pay to the Holders
the Guarantee Payments (as defined herein) and to make certain other payments
on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Series A Capital Securities Guarantee") for the
benefit of the holders of the Series A Capital Securities (as defined in the
Declaration) and upon consummation of the Exchange Offer (as defined in the
Declaration) will execute and deliver a guarantee agreement (the "Series B
Capital Securities Guarantee") for the benefit of the holders of the Series B
Capital Securities (as defined in the Declaration), each in substantially
identical terms to this Common Securities Guarantee, except that if an Event of
Default (as defined in the Declaration) has occurred and is continuing, the
rights of Holders to receive Guarantee Payments under this Common Securities
Guarantee are subordinated to the rights of holders of Capital Securities to
receive Guarantee Payments under the Series A Capital Securities Guarantee and
the Series B Capital Securities Guarantee, as the case may be;
NOW, THEREFORE, in consideration of the purchase by each
Holder, which purchase the Guarantor hereby acknowledges shall benefit the
Guarantor, the Guarantor executes and delivers this Common Securities Guarantee
for the benefit of the Holders.
<PAGE> 5
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation
In this Common Securities Guarantee, unless the context
otherwise requires:
(a) Capitalized terms used in this Common Securities
Guarantee but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Common Securities Guarantee have the same meaning
when used in this Common Securities Guarantee unless otherwise defined
in this Common Securities Guarantee;
(c) a term defined anywhere in this Common Securities
Guarantee has the same meaning throughout;
(d) all references to "the Common Securities Guarantee"
or "this Common Securities Guarantee" are to this Common Securities
Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to
Articles and Sections are to Articles and Sections of this Common
Securities Guarantee unless otherwise specified; and
(f) a reference to the singular includes the plural and
vice versa.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Common Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions that are required to be paid on such Common Securities to the
extent the Issuer has funds on hand legally available therefor at such time,
(ii) the redemption price, including all accrued and unpaid Distributions to
the date of redemption (the "Redemption Price") to the extent the Issuer has
funds on hand legally available therefor at such time, with respect to any
Common Securities called for redemption by the Issuer and (iii) upon a
voluntary or involuntary termination and liquidation of the Issuer (other than
in connection with the distribution of Debentures to the Holders in exchange
for Common Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid
Distributions on the Common Securities to the date of payment, to the extent
the Issuer has funds on hand legally available therefor, and (b) the amount of
assets of the Issuer remaining available for distribution to Holders in
liquidation of the Issuer (in either case, the "Liquidation Distribution"). If
an Event of Default has occurred and is continuing, no Guarantee Payments with
respect to the Common Securities shall be made until holders of Capital
2
<PAGE> 6
Securities shall be paid in full the Guarantee Payments to which they are
entitled under the Series A Capital Securities Guarantee and the Series B
Capital Securities Guarantee.
"Holder" means any holder, as registered on the books and
records of the Issuer, of any Common Securities.
"Other Guarantees" means all guarantees to be issued by the
Guarantor with respect to common securities (if any) similar to the Common
Securities issued by other trusts to be established by the Guarantor (if any),
in each case similar to the Issuer.
ARTICLE II
GUARANTEE
SECTION 2.1. Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 2.2. Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Common Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 2.3. Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this Common Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Common
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of
all or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums
3
<PAGE> 7
payable under the terms of the Common Securities or the extension of
time for the performance of any other obligation under, arising out
of, or in connection with, the Common Securities (other than an
extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Debentures permitted
by the Indenture);
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Common Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other similar
proceedings affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Common Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a
guarantor, it being the intent of this Section 2.3 that the
obligations of the Guarantor with respect to the Guarantee Payments
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 2.4. Rights of Holders
The Guarantor expressly acknowledges that any Holder may
institute a legal proceeding directly against the Guarantor to enforce its
rights under this Common Securities Guarantee, without first instituting a
legal proceeding against the Issuer or any other Person.
SECTION 2.5. Guarantee of Payment
This Common Securities Guarantee creates a guarantee of
payment and not of collection.
4
<PAGE> 8
SECTION 2.6. Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to such Holders
by the Guarantor under this Common Securities Guarantee; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Common Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Common Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 2.7. Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Common
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.3 hereof.
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. Limitation of Transactions
So long as any Common Securities remain outstanding, the
Guarantor will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Guarantor's capital stock (which includes common stock and preferred
stock), (ii) make any payment of principal of, or premium, if any, or interest
on or repay, repurchase or redeem any debt securities of the Guarantor
(including Other Debentures) that rank pari passu with or junior in right of
payment to the Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Guarantor of the debt securities of any subsidiary of the
Guarantor (including under Other Guarantees) if such guarantee ranks pari passu
with or junior in right of payment to the Debentures (other than (a) dividends
or distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, common stock of the Guarantor, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Series A Capital Securities Guarantee and the Series B Capital Securities
Guarantee, (d) as a result of a reclassification of the Guarantor's capital
stock or the exchange or conversion of one class or series of the
5
<PAGE> 9
Guarantor's capital stock for another class or series of the Guarantor's
capital stock, (e) the purchase of fractional interests in shares of the
Guarantor's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged and (f)
purchases of common stock related to the issuance of common stock or rights
under any of the Guarantor's benefit plans for its directors, officers or
employees or any of the Guarantor's dividend reinvestment plans) if at such
time (i) there shall have occurred any event of which the Guarantor has actual
knowledge that (a) is, or with the giving of notice or the lapse of time, or
both, would be, an Event of Default and (b) in respect of which the Guarantor
shall not have taken reasonable steps to cure, (ii) if such Debentures are held
by the Property Trustee, the Guarantor shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee or (iii) the
Guarantor shall have given notice of its election of the exercise of its right
to extend the interest payment period pursuant to Section 16.01 of the
Indenture and any such extension shall be continuing.
SECTION 3.2. Ranking
This Common Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right
of payment to Senior Indebtedness (as defined in the Indenture), to the same
extent and in the same manner that the Debentures are subordinated to Senior
Indebtedness pursuant to the Indenture, (ii) pari passu with the Debentures,
the Other Debentures and with any Other Guarantee, and (iii) senior to the
Guarantor's capital stock.
ARTICLE IV
TERMINATION
SECTION 4.1. Termination
This Common Securities Guarantee shall terminate (i) upon full
payment of the Redemption Price of all Common Securities, (ii) upon the
distribution of all of the Debentures to all the Holders and the holders of the
Capital Securities or (iii) upon full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Issuer.
Notwithstanding the foregoing, this Common Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid under the Common Securities or
under this Common Securities Guarantee.
6
<PAGE> 10
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Successors and Assigns
All guarantees and agreements contained in this Common
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit of the
Holders then outstanding.
SECTION 5.2. Amendments
Except with respect to any changes which do not adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Common Securities Guarantee may only be amended with the prior
approval of the Holders of at least a majority in liquidation amount of all the
outstanding Common Securities. The provisions of Section 12.2 of the
Declaration with respect to meetings of holders of the Securities apply to the
giving of such approval.
SECTION 5.3. Notices
All notices provided for in this Common Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other
address as the Issuer may give notice of to the Holders):
ML Capital Trust I
c/o ML Bancorp, Inc.
Two Aldwyn Center
Lancaster Avenue and Route 320
Villanova, Pennsylvania 19085
Attention: Brian M. Hartline
Administrative Trustee
Telecopy: (610) 526-6227
(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):
7
<PAGE> 11
ML Bancorp, Inc.
Two Aldwyn Center
Lancaster Avenue and Route 320
Villanova, Pennsylvania 19085
Attention: Brian M. Hartline
Executive Vice President, Chief
Financial Officer and Secretary
Telecopy: (610) 526-6227
(c) if given to any Holder, at the address set forth on
the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 5.4. Benefit
This Common Securities Guarantee is solely for the benefit of
the Holders and is not separately transferable from the Common Securities.
SECTION 5.5. Governing Law
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
8
<PAGE> 12
THIS COMMON SECURITIES GUARANTEE is executed as of the day and
year first above written.
ML BANCORP, INC.
By: /s/ Brian M. Hartline
-----------------------------------------
Name: Brian M. Hartline
Title: Executive Vice President, Chief
Financial Officer and Secretary
9
<PAGE> 1
Exhibit 13
1996 Annual Report to Stockholders
<PAGE> 2
WE
MEAN
BUSINESS.
[ML BANCORP LOGO]
ANNUAL REPORT 1997
<PAGE> 3
[GRAPHIC]
<PAGE> 4
ML BANCORP, INC. AND SUBSIDIARIES
STOCK PRICE PERFORMANCE
- Closing Price
[ ] High & Low Price
<TABLE>
<CAPTION>
9/30/94 12/31/94 3/31/95 6/30/95 9/30/95
<S> <C> <C> <C> <C> <C>
Closing Price 7.94 6.75 8.00 9.63 11.57
High & Low Price $8.38/7.63 8.00/6.13 8.07/6.69 9.82/7.88 11.94/9.50
12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97
<S> <C> <C> <C> <C> <C> <C>
Closing Price 11.13 11.94 12.13 14.06 13.88 15.38
High & Low Price 12.32/10.50 12.38/10.88 12.50/11.38 14.06/11.88 14.88/13.88 17.75/13.75
</TABLE>
(quarter ended)
* All price per share information has been adjusted for the Company's
two-for-one stock split that occurred September 6, 1996.
<PAGE> 5
ML BANCORP, INC. AND SUBSIDIARIES
SHAREHOLDER INFORMATION
ML Bancorp, Inc. is a holding company conducting business through its
wholly-owned subsidiary, Main Line Bank. The Bank is a federally-chartered,
FDIC-insured financial institution operating through its full-service business
centers located in the suburbs of Philadelphia, Pennsylvania and its mortgage
loan production offices located in Delaware, Florida, New Jersey and
Pennsylvania. The Company's headquarters are located at Two Aldwyn Center,
Lancaster Avenue & Route 320, Villanova, PA 19085.
TRANSFER AGENT/REGISTRAR:
Chase Mellon Shareholder Services
450 West 33rd Street
New York, NY 10001
SHAREHOLDER INFORMATION:
Requests for annual reports, quarterly reports and related stockholder
literature should be directed to Shareholder Relations, Two Aldwyn Center,
Lancaster Avenue & Rt. 320, Villanova, PA 19085 or (610) 526-6482.
Shareholders needing assistance with stock records, transfers or lost
certificates should contact the Company's transfer agent, Chase Mellon
Shareholder Services, at 1-800-851-9677.
INVESTOR INFORMATION:
Security analysts, retail brokers and individual investors may contact Mr.
Brian M. Hartline, Chief Financial Officer, for information about ML Bancorp,
Inc.
NASDAQ SYMBOL:
Shares of ML Bancorp, Inc.'s common stock are traded nationally under the
symbol "MLBC" in the Over-The-Counter Market and are listed in NASDAQ
Quotations.
ML BANCORP, INC.
DIRECTORS
JOHN R. EPPINGER
Chairman
DAVID B. HASTINGS
Owner and President,
Blue Hill Products
JOHN J. LEAHY
Retired, formerly
Operating Vice President,
Strawbridge & Clothier
HENRY M. LUEDECKE
President,
C. H. Marshall, Inc.
DENNIS S. MARLO
President and
Chief Executive Officer
ALLAN WOOLFORD
Owner, Tredyffrin Information
Systems, Inc.
CORPORATE OFFICERS
DENNIS S. MARLO
President, Chief Executive Officer
and Director
JOSEPH M. BLASTON
Vice President
ROBERT M. CAMPBELL, JR.
Vice President
BRIAN M. HARTLINE
Vice President,
Chief Financial Officer,
Secretary and Treasurer
MAIN LINE BANK
EXECUTIVE OFFICERS
JOHN R. EPPINGER
Chairman
DENNIS S. MARLO
President, Chief Executive Officer
and Director
JOSEPH M. BLASTON
President, Main Line Financial,
a division of Main Line Bank
ROBERT M. CAMPBELL, JR.
Executive Vice President
BRIAN M. HARTLINE
Executive Vice President,
Chief Financial Officer and
Secretary
<PAGE> 6
LETTER
FROM THE PRESIDENT
At ML Bancorp, Inc., holding company for Main Line Bank, we mean business.
In fiscal 1997 we grew shareholder value to an all-time high. We reported our
best earnings as a public company. We significantly increased our commercial
loans and deposits. We created a mortgage division, Main Line Financial, which
is emerging as a market leader. We advanced technological services to customers
and opened six new business centers in expanding markets.
During the past year our stock price appreciated 30 percent and we returned 150
percent of our fiscal 1997 income to our shareholders through a combination of
cash dividends and our share repurchase programs. Our earnings per share and
net income grew 34 percent and 19 percent, respectively. Our stock price to
book value ratio increased from below 100 percent to 118 percent, and we raised
an additional $50 million of debt securities, which will facilitate our future
growth plans without diluting our common shareholder interest.
Our emergence as a full-service business bank was evident by a 17 percent
increase in commercial loan outstandings to $295 million, and a 38 percent
increase in commercial deposits to $43 million. Our competitive product and
service offerings and locally based decision making have earned us a reputation
in the local business community as a desirable alternative to the larger
financial institutions.
We integrated the mortgage banking operations of three area leaders--
Philadelphia Mortgage, Hart Mortgage and Main Line Bank--into Main Line
Financial, a new operating division of Main Line Bank with 10 offices in
Delaware, Florida, New Jersey and Pennsylvania. With loan originations of
nearly $500 million in the past year and with an income-producing residential
loan servicing portfolio of $4.4 billion, Main Line is the region's largest
bank servicer of residential mortgages for governmental agencies and other
investors. Our more than 50,000 loan servicing customers provide additional
opportunities to cross-sell products and services.
We opened six new business centers in the past year and in February 1997, we
announced plans to acquire Commonwealth State Bank and its parent company,
Penncore Financial Services Corporation of Newtown, Pa. After the completion of
the merger, we will have 29 branches in the Greater Philadelphia region
including five offices in the affluent, rapidly growing Bucks County. And we
are not stopping there--we plan to add at least four new business centers
throughout the region each year through the turn of the century.
Our objective is to become the primary relationship bank for businesses and
consumers in our region by offering a wide array of value-oriented products,
services and delivery channels. In addition to providing personalized service
in our business centers, we are offering customers more convenient distribution
sources, including telephone banking, Internet and PC banking, and other forms
of direct banking. Technology is an integral part of our business strategy and
we will continue to provide new banking technologies as they gain market
acceptance.
As we spread the Main Line Bank name into new markets, we increase our
commitment to the communities we serve. Last year we supported more than 160
community and charity groups through monetary donations and our large network
of employee volunteers. We were proud to be recognized for our accomplishments
by winning a 1996 community service award from the Pennsylvania Association of
Community Bankers and receiving our third consecutive "outstanding" Community
Reinvestment Act (CRA) rating from our primary regulator.
Our goal for fiscal 1998 is to make even greater improvements in our financial
performance, market penetration, product offerings, delivery channels, and
community involvement initiatives. We are not looking to join the ranks of the
Fortune 500, but we are committed to going head-to-head with top regional banks
in our market by offering comparable products with superior value and service.
We are dedicated to increasing your shareholder value. We are serious about
our position as a full-service business bank. We are committed to becoming the
premier financial services provider in the Greater Philadelphia region.
WE MEAN BUSINESS.
/s/ DENNIS S. MARLO
Dennis S. Marlo
President and Chief Executive Officer
[PHOTO]
1
<PAGE> 7
<TABLE>
<CAPTION>
Commercial Loan Portfolio by Industry
<S> <C>
Finance, Insurance & Real Estate 33%
Services 24%
Retail 14%
Manufacturing 10%
High-Tech 7%
Wholesale 6%
Construction 5%
Other 1%
</TABLE>
Main Line Bank provides services to commercial customers in industries as
diverse as retail, hospitality, healthcare, food service, real estate, and
high-technology. With a legal lending limit of $20 million, we have the
capacity to meet the credit needs of most businesses in our market.
[PHOTO]
Main Line is a full-service business bank. We have helped build the Greater
Philadelphia business community and have gained a reputation as a source of
products and services that help businesses grow and remain competitive in a
global economy.
MARKET GROWTH
The consolidation that has occurred among the larger regional banks has created
a tremendous opportunity for forward thinking community banks to capitalize on
the business market left underserved by the mergers. In fiscal 1997 we made
great strides toward becoming the premier financial services provider to these
small- and mid-sized companies.
Through our aggressive new business development strategies, sophisticated cash
management products and exemplary service, our commercial customer base grew 63
percent during the past year.
We have prospered in providing financial services to industries as diverse as
retail, hospitality, healthcare, food service, real estate, and
high-technology. With a legal lending limit of $20 million, we have the
capacity to meet the credit needs of most businesses in our market, and our
geographic expansion places a Main Line office close to virtually any company
in Philadelphia's northern and western suburbs.
2
<PAGE> 8
[PHOTO]
Business Quest '97, the Bank's fiscal 1997 business development program, sent
commercial lenders and business center managers knocking on doors in the local
business community. The program generated significant new business loans and
deposits.
<TABLE>
<CAPTION>
Loan Outstandings
(in millions)
3/31/94 3/31/95 3/31/96 3/31/97
<S> <C> <C> <C> <C>
Commercial Business $8.2 $30 $69.6 $84
Small Business $1.6 $4.2 $8.5 $15.8
</TABLE>
Through aggressive marketing and new business development initiatives, Main
Line's commercial business loan outstandings increased 21 percent to $84 million
and small-business loan outstandings almost doubled to $16 million in fiscal
1997.
NEW BUSINESS DEVELOPMENT
In fiscal 1997 we embarked on a new business development program called
Business Quest '97, with the objective of acquiring new business accounts and
expanding existing customer relationships. Armed with leads of potential
business customers, our business center managers and commercial lenders began
knocking on doors in our business communities. And their efforts paid off. By
year end, Business Quest generated significant dollars for the Bank through new
business checking accounts and new loans booked.
In conjunction with Business Quest, we began producing BusinessLine, a
newsletter that provides financial advice and money-saving ideas to business
managers. The publication is distributed quarterly to thousands of existing and
potential business customers throughout the region and includes a business
reply card that has resulted in new business banking relationships.
Looking to fiscal 1998 and beyond, we recently developed a team of 10 market
area managers who are fully dedicated to generating new business relationships
for the Bank. Each area manager serves a designated market based on commercial
demographics and business center locations, and works with our business center
managers and commercial loan officers to build commercial banking alliances
with new and existing clients.
Main Line now has more employees devoted to new business development than any
comparable-sized financial institution in the region.
3
<PAGE> 9
[PHOTO]
BusinessMax, our PC-based cash management product, gives business customers a
powerful tool to manage their accounts with ease and accuracy from their
desktops. BusinessMax allows companies to issue and receive payments
electronically and provides 24-hour access to timely account information.
[PHOTO]
MediBanking, private banking services for healthcare professionals, is one of
Main Line's new programs targeted toward specific market segments. MediBanking
offers healthcare practitioners professional and personal banking products and
services designed to make their banking more convenient and their practices
more profitable.
THE PRODUCT MIX
In fiscal 1997 we developed several new products and services designed to
better serve our business customers and complement our standard cash management
and credit offerings.
Our PC-based cash management product, BusinessMax, allows users to perform all
their primary banking functions from their desktops using a proven software
program in a highly secure environment. Our business customers have found that
BusinessMax saves time and money by providing information at their fingertips
and streamlining their current paper-intensive cash management systems. Another
effective cash management service we offer is controlled disbursement, which
notifies business customers when a check is going to clear before it is
processed.
Our MediBanking program offers private banking services for healthcare
professionals. Participating members receive access to professional and
personal banking services designed to make their banking more convenient and
their practices more profitable. Our dedicated bankers provide personal
attention to each client and will even make "house calls" to a practitioner's
home or office.
In fiscal 1998 we will introduce a full line of private banking services that
will provide credit, deposit, and investment and trust options to affluent
clients and their related professional entities.
4
<PAGE> 10
<TABLE>
<CAPTION>
Business Checking Account Growth
(in number of accounts)
<S> <C>
3/31/94 825
3/31/95 1286
3/31/96 2027
3/31/97 2846
</TABLE>
The number of Main Line's business checking accounts increased 40 percent in
fiscal 1997. Our business checking accounts offer low fees and access to
services such as a business money market account, sweep account, zero balance
account, lock box service, direct deposit of employee payroll, and next-day
availability of all check deposits.
[PHOTO]
Our business customers find us to be an extremely good value for our cash
management products, competitive fee structure, business expertise and locally
based decision making. Our goal is to develop a synergetic working relationship
with each business client and to provide well-designed products with reasonable
fees and a level of personal service that's all too rare in banking today.
VALUE THROUGH SERVICE
Main Line is a value-driven institution and nowhere is value more evident than
in the form of service. We provide customers with the products they need, the
features they expect, and the service they deserve. Our goal is to develop a
synergetic working relationship with each business client and to provide
well-designed products with reasonable fees and a level of personal service
that's all too rare in banking today.
We provide business services such as next-day availability of all check
deposits, account reconciliation through check images and computer files of
checks paid each month, domestic and international wire transfer, night
depository, combined statements, and Express Line 24-hour telephone banking.
Business account customers have access to preferred banking, which offers their
employees a special package of banking discounts and benefits including free
checking, free traveler's checks and loan rate discounts. Merchant credit
card/MAC services and lock box services are available at competitive rates.
We are committed to helping businesses meet their current and future goals. Our
professional loan officers are experts at structuring the best financing to
meet a borrower's needs, and because all lending decisions are made at our
Villanova headquarters, we can provide the quick turnaround that today's
business managers require.
When it comes to providing local companies with the financial tools they need
to succeed, WE MEAN BUSINESS.
5
<PAGE> 11
[PHOTO]
Main Line's mortgage division, Main Line Financial, helps families throughout
the region realize the dream of home ownership.
Our wide array of mortgage loans, flexible programs and personal service
resulted in a 235 percent increase in loan productions in fiscal 1997, from
$200 million to $470 million.
<TABLE>
<CAPTION>
Loan Servicing Growth
(in billions)
<S> <C>
3/31/94 $.9
3/31/95 $1.7
3/31/96 $2.4
3/31/97 $4.4
</TABLE>
Main Line Financial services $4.4 billion in mortgage loans for customers
throughout the United States--the largest investor loan servicing portfolio of
any bank in the Greater Philadelphia region.
A MORTGAGE BANKING LEADER
Main Line Financial is a mortgage powerhouse. Our mortgage division boasts the
largest investor loan servicing portfolio of any bank in the Greater
Philadelphia region--$4.4 billion in loans serviced for more than 50,000
customers throughout the United States.
We offer consumers a wide array of fixed, adjustable, balloon and FHA/VA
mortgages, swing loans, construction loans, and home equity loans for up to $1
million on selected programs. Our new EZ Link mortgaging system helps buyers
learn how much house they can afford before they buy, and a pre-approval
program helps them close the deal. With automated loan underwriting, we can
approve a loan within 48 hours and our new loan origination system, which will
be installed in fiscal 1998, will provide loan officers with increased
efficiency and the latest state-of-the-art "front-end" system.
At Main Line Bank, we strive to help all families realize the dream of home
ownership. Our HomeFirst program offers reduced interest rates, minimum down
payments, low fees and flexible underwriting guidelines to help first-time,
low- to moderate-income buyers purchase a home. And we now offer the Home Buyer
Equity Fund, a grant program sponsored by the Federal Home Loan Bank of
Pittsburgh that assists first-time buyers with down payment and closing costs
by providing up to a 3-to-1 match in grant funds for every dollar in savings.
It's no wonder our primary regulator recently awarded us our third consecutive
"outstanding" Community Reinvestment Act (CRA) rating for our record of meeting
community credit needs.
When it comes to mortgage banking, WE MEAN BUSINESS.
6
<PAGE> 12
[PHOTO]
Customers can get product, service and branch location information from our
World Wide Web page. The Internet site allows users to view our NASDAQ stock
price and stock performance chart.
Expanded Internet PC banking services are planned for next year.
[PHOTO]
Main Line Bank opened six new business centers in fiscal 1997 and introduced a
new prototype building design to increase recognition of branch locations. We
now have 24 business centers in the Greater Philadelphia region and we plan to
add five additional branches in fiscal 1998.
CONSUMER BANKING OPTIONS
Main Line opened six new business centers in fiscal 1997 for a total of 24
branches throughout Philadelphia's northern and western suburbs. Additional
branches in Oxford Valley and Warminster, Bucks County, and in Horsham,
Montgomery County, will open in the first half of fiscal 1998. Our planned
acquisition of Commonwealth State Bank will add two additional Bucks County
locations--Newtown and Yardley--in the same time period.
Through market expansion and our full spectrum of consumer banking products, we
increased our number of core checking accounts by 17 percent last year and
increased consumer loans by 28 percent for a total of $154 million outstanding.
Several products and services were introduced in fiscal 1997 to attract new
customers and provide existing customers with new banking options. Our popular
3-month EasyAccess certificate of deposit allows customers to withdraw funds
penalty-free after only seven days, and our Loan Connection lets consumers
apply for a variety of loans over the telephone and receive conditional
approval in just 10 minutes. We also instituted check imaging, which increases
efficiency and turnaround time by providing customers electronic images of
canceled checks rather than the originals. In addition to our FDIC insured
checking and savings products, we offer tax-deferred annuities, mutual funds,
equities and life insurance through our alliance with Main Line Investment
Services.
Main Line Bank provides 24-hour account information and funds transfer
capabilities through our telephone-based Express Line service, and our World
Wide Web page (www.mainlinebank.com) allows customers to access product and
service information, including business center locations and hours of
operation, via the Internet. We plan to expand our Internet PC banking services
in fiscal 1998.
To our thousands of consumer banking customers who demand the latest banking
options with the best value and service, WE MEAN BUSINESS.
7
<PAGE> 13
[PHOTO]
[] BUSINESS CENTER LOCATIONS
BUCKS COUNTY
HILLTOWN
NEWTOWN
(Commonwealth State Bank)
CONVERTING FALL 1997
OXFORD VALLEY
WARMINSTER
OPENING SUMMER 1997
YARDLEY
(Commonwealth State Bank)
CONVERTING FALL 1997
CHESTER COUNTY
DEVON
EXTON
GOSHEN
PAOLI
WEST CHESTER
DELAWARE COUNTY
BROOMALL
COLLINGDALE
DREXEL HILL
HAVERTOWN
MEDIA
NEWTOWN SQUARE
SPRINGFIELD
VILLANOVA
WAYNE
MONTGOMERY COUNTY
ABINGTON
ARDMORE
BLUE BELL
BRYN MAWR
COLLEGEVILLE
CONSHOHOCKEN
DRESHER
HORSHAM
KING OF PRUSSIA
LANSDALE
- - LOAN PRODUCTION OFFICES
DELAWARE
WILMINGTON
FLORIDA
NAPLES
NEW JERSEY
EDISON
VOORHEES
WEST TRENTON
PENNSYLVANIA
CAMP HILL
EASTON
HORSHAM
LANCASTER
ROSEMONT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Five Year Review and
Price Per Share
of Common Stock 9
Management's Discussion
and Analysis 10
Independent
Auditors' Report 19
Consolidated Financial
Statements 20
Notes to Consolidated
Financial Statements 25
Directors, Officers
and Shareholder Inside
Information back
cover
</TABLE>
8
<PAGE> 14
ML BANCORP, INC. AND SUBSIDIARIES
FIVE YEAR REVIEW OF SELECTED FINANCIAL DATA AND
PRICE PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Dollars in Thousands, except for earnings per share and percentages
.............................................................................................................................
AT OR FOR THE YEARS ENDED MARCH 31, 1997 1996 1995 1994 1993
=============================================================================================================================
<S> <C> <C> <C> <C>
Total Assets $1,959,847 $1,765,812 $1,563,452 $1,001,037 $989,308
- -----------------------------------------------------------------------------------------------------------------------------
Loans Receivable, Net 835,243 786,824 575,280 294,324 290,380
- -----------------------------------------------------------------------------------------------------------------------------
Investments and Mortgage-Related Securities, Net 1,015,189 898,413 926,448 666,838 648,724
- -----------------------------------------------------------------------------------------------------------------------------
Customer Accounts 873,357 861,016 693,988 679,525 618,693
- -----------------------------------------------------------------------------------------------------------------------------
Borrowings 893,703 748,206 705,231 256,795 304,881
- -----------------------------------------------------------------------------------------------------------------------------
Equity 135,704 140,337 141,300 53,978 57,056
- -----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 54,179 43,762 36,749 22,820 25,014
- -----------------------------------------------------------------------------------------------------------------------------
Provision for Loan Losses 5,310 4,000 3,400 1,113 3,169
- -----------------------------------------------------------------------------------------------------------------------------
Non-Interest Income 15,706 7,269 3,412 8,616 7,196
- -----------------------------------------------------------------------------------------------------------------------------
Non-Interest Expense 48,860 (1) 29,139 23,093 21,000 20,253
- -----------------------------------------------------------------------------------------------------------------------------
Net Income 13,810 11,620 8,694 1,862 7,488
=============================================================================================================================
Primary Earnings per Share $1.23 $0.92 $0.46 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Fully Diluted Earnings per Share 1.22 0.91 0.46 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Cash Earnings per Share (2) 1.59 1.07 0.53 -- --
=============================================================================================================================
Net Interest Margin 3.06% 2.79% 2.90% 2.39% 2.74%
- -----------------------------------------------------------------------------------------------------------------------------
Efficiency Ratio 63.76 56.59 55.50 66.80 62.88
- -----------------------------------------------------------------------------------------------------------------------------
Return on Average Assets 0.74 0.71 0.66 0.19 0.79
- -----------------------------------------------------------------------------------------------------------------------------
Return on Average Equity 9.73 7.88 8.22 3.17 14.81
=============================================================================================================================
Non-performing Assets as a Percent of Total Assets (3) 0.55 0.59 0.57 1.23 2.49
- -----------------------------------------------------------------------------------------------------------------------------
Allowance for Loan Losses as a Percent of
Non-performing Loans (3) 156.86 156.20 134.74 137.50 55.16
=============================================================================================================================
</TABLE>
(1) Includes one-time FDIC insurance assessment of $4.8 million.
(2) Earnings per share adjusted for goodwill amortization and stock benefit
plans expense.
(3) Asset Quality Ratios are end-of-period ratios. With the exception of
end-of-period ratios, all ratios are based on average daily balances during
the indicated periods.
The following table shows market price information for the Company's Common
Stock.
The prices set forth below represent the high, low and closing prices on the
NASDAQ National Market System during the periods indicated.
<TABLE>
<CAPTION>
..............................................................................................................................
PRICE PER SHARE
==============================================================================================================================
QUARTERLY PERIOD ENDED HIGH LOW CLOSE
==============================================================================================================================
<S> <C> <C> <C>
September 30, 1994 $8.38 $7.63 $7.94
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 8.00 6.13 6.75
- ------------------------------------------------------------------------------------------------------------------------------
March 31, 1995 8.07 6.69 8.00
- ------------------------------------------------------------------------------------------------------------------------------
June 30, 1995 9.82 7.88 9.63
- ------------------------------------------------------------------------------------------------------------------------------
September 30, 1995 11.94 9.50 11.57
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 12.32 10.50 11.13
- ------------------------------------------------------------------------------------------------------------------------------
March 31, 1996 12.38 10.88 11.94
- ------------------------------------------------------------------------------------------------------------------------------
June 30, 1996 12.50 11.38 12.13
- ------------------------------------------------------------------------------------------------------------------------------
September 30, 1996 14.06 11.88 14.06
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1996 14.88 13.88 13.88
- ------------------------------------------------------------------------------------------------------------------------------
March 31, 1997 17.75 13.75 15.38
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* All share information has been adjusted for the Company's two-for-one stock
split which occurred September 6, 1996.
9
<PAGE> 15
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
ML Bancorp, Inc. (the "Company") is the holding company of its wholly owned
subsidiary, Main Line Bank (the "Bank"). For purposes of this discussion, ML
Bancorp, Inc., including its wholly owned subsidiaries, will be referred to as
the Company. The Company provides business, mortgage and consumer banking
services through 24 business centers in Bucks, Chester, Delaware and Montgomery
counties and 10 mortgage loan production offices which are located in Delaware,
Florida, New Jersey, and Pennsylvania.
The following discussion provides an overview of the general business,
financial condition and results of operations of the Company and should be read
in conjunction with the Company's consolidated financial statements presented
elsewhere herein. Accordingly, the discussion below with respect to results of
operations relates primarily to the Bank, and the financial data for the period
prior to the conversion to a federally chartered stock savings bank, which was
completed on August 11, 1994, also reflects financial data of the Bank.
The operating results of the Company depend primarily upon its net interest
income, which is determined by the difference between interest income on
interest-earning assets, principally loans, mortgage-related securities and
investments, and interest expense on interest-bearing liabilities, which
principally consist of customer accounts and borrowings. The Company's net
income is also affected by its provision for loan losses, as well as the level
of its other income, including mortgage banking income, net gains or losses on
sale of assets available for sale and its operating expenses, such as
compensation and employee benefits, net occupancy expense, federal deposit
insurance and miscellaneous other expenses, and income taxes.
The Company entered into a definitive agreement to acquire Penncore Financial
Services Corporation ("Penncore") the holding company for Commonwealth State
Bank ("Commonwealth") a $138 million, state-chartered bank in Bucks County,
Pennsylvania on February 4, 1997. The transaction, which is not expected to
materially affect earnings of the Company, is subject to regulatory and
Penncore shareholder approval and is projected to be consummated during the
second quarter of fiscal 1998.
ASSET AND LIABILITY MANAGEMENT
The principal objective of the Company's asset and liability management
function is to maximize the Company's net interest income, maintaining a level
of risk appropriate given the Company's business focus, operating environment,
capital and liquidity requirements and performance objectives, establish
prudent asset concentration guidelines and manage the risk consistent with
Board of Directors approved guidelines. Through such management, the Company
seeks to reduce the vulnerability of its operations to changes in interest
rates and to monitor the ratio of interest-rate sensitive assets to
interest-rate sensitive liabilities within specified maturities or repricing
dates. The Company's actions in this regard are taken under the guidance of the
Asset/Liability Management Committee ("ALCO"), which is chaired by the Chief
Financial Officer and comprised principally of members of the Company's senior
management. The ALCO meets once a month to review, among other things, the
sensitivity of the Company's assets and liabilities to interest rate changes,
the book and market values of assets and liabilities, unrealized gains and
losses, purchase and sale activity and maturities of investments and
borrowings. In connection therewith, the ALCO generally reviews the Company's
liquidity, cash flow needs, maturities of investments, deposits and borrowings
and current market conditions and interest rates. A pricing subcommittee meets
weekly to make pricing and funding decisions with respect to the Company's
retail deposits and selected consumer loans.
The Company's primary ALCO monitoring tool is asset/liability simulation
models, which are prepared at a minimum on a quarterly basis and are designed
to capture the dynamics of balance sheet, rate and spread movements and to
quantify variations in net interest income under different interest rate
environments. The Company also utilizes market-value analysis, which addresses
the change in equity value arising from movements in interest rates. The
estimated market value of equity is the difference in the market value of the
Company's assets and liabilities. The extent to which assets have gained or
lost value in relation to the gains or losses of liabilities determines the
appreciation or depreciation in equity on a market-value basis. Market value
analysis is intended to evaluate the impact of immediate and sustained
interest-rate shifts of the current yield curve upon the market value of the
current balance sheet.
A more conventional but limited ALCO monitoring tool involves an analysis of
the extent to which assets and liabilities are "interest rate sensitive" and
measuring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity "gap" is defined as the difference between interest-earning assets
and interest-bearing liabilities maturing or repricing within a given time
period.
10
<PAGE> 16
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The repricing and maturities of the Corporation's interest-earnings assets and
interest-bearing liabilities at March 31, 1997, are set forth in the following
table:
<TABLE>
<CAPTION>
....................................................................................................................................
LESS THAN ONE TO OVER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
====================================================================================================================================
<S> <C> <C> <C> <C>
Interest earning assets: (1)
Real estate loans (2) $ 173,162 $ 113,849 $108,669 $ 395,680
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial loans (2) 146,977 91,981 64,684 303,642
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer loans (2) 75,085 43,607 26,613 145,305
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities (2) 352,768 323,517 274,193 950,478
- ------------------------------------------------------------------------------------------------------------------------------------
Investment securities 48,061 23,893 -- 71,954
- ------------------------------------------------------------------------------------------------------------------------------------
$ 796,053 $ 596,847 $474,159 $1,867,059
====================================================================================================================================
Interest-bearing liabilities:
Money market and interest bearing (3)
demand accounts (4) $ 156,322 $ -- $ -- $ 156,322
- ------------------------------------------------------------------------------------------------------------------------------------
Savings accounts (4) 91,269 -- -- 91,269
- ------------------------------------------------------------------------------------------------------------------------------------
Time deposits 342,966 122,228 1,349 466,543
- ------------------------------------------------------------------------------------------------------------------------------------
FHLB advances 247,918 164,750 24,750 437,418
- ------------------------------------------------------------------------------------------------------------------------------------
Senior notes -- -- 50,000 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other borrowed funds 292,740 204,093 -- 496,833
- ------------------------------------------------------------------------------------------------------------------------------------
$1,131,215 $ 491,071 $ 76,099 $1,698,385
====================================================================================================================================
Excess (deficiency) of interest-earning
assets over interest-bearing liabilities $ (335,162) $ 105,776 $398,060 $ 168,674
====================================================================================================================================
Cumulative excess (deficiency) of interest-
earning assets over interest-bearing liabilities $ (335,162) $(229,386) $168,674 $ --
====================================================================================================================================
</TABLE>
(1) Adjustable-rate loans are included in the period in which interest rates
are next scheduled to adjust rather than in the period in which they are due,
and fixed-rate loans are included in the periods in which they are scheduled to
be repaid, based on scheduled amortization, in each case as adjusted to take
into account estimated prepayments based on portfolio experience.
(2) Reflects estimated prepayments in the current interest rate environment.
(3) Does not include non-interest-bearing customer accounts.
(4) Although the Company's negotiable order of withdrawal ("NOW") accounts and
passbook savings accounts are subject to immediate withdrawal, management
considers a substantial amount of such accounts to be core customer accounts
having significantly longer effective maturities based on the Company's
retention of such customer accounts in changing interest rate environments.
CHANGES IN FINANCIAL CONDITION
GENERAL. The Company's total assets increased by $194 million or 11.0% to $2
billion during the fiscal year ended March 31, 1997. Asset growth occurred
primarily in loans receivable, mortgage servicing rights and securities
available for sale, which were partially offset by a modest decline in
mortgage-related securities. The growth of $198.7 million or 12.2% in total
liabilities and Corporation-obligated mandatorily redeemable capital securities
("trust preferred securities") was attributable to increases in securities sold
under agreements to repurchase, advances from the Federal Home Loan Bank
("FHLB") of Pittsburgh, customer accounts and newly issued trust preferred
securities. See Note 16 to the Consolidated Financial Statements for further
information regarding trust preferred securities. Stockholders' equity declined
$4.6 million or 3.3% during the year resulting from the acquisition of treasury
stock and dividend payments that more than offset net earnings for the year.
SECURITIES AND SECURITIES AVAILABLE FOR SALE. Securities and securities
available for sale, which include mortgage-related securities, mortgage-related
debt and equity securities, investments and securities available for sale,
increased by $116.8 million or 13.0% to $1.0 billion at March 31, 1997, from
$898.4 million at March 31, 1996. The $116.8 million change is the net effect
of the following: (1) mortgage-related securities and debt and equity
securities held in portfolio declined by $18.9 million to $385.3 million at
March 31, 1997, from $404.2 million at March 31, 1996; (2) mortgage-related
securities and debt and equity securities available for sale increased by
$128.5 million or 27.4% to $597.8 million at March 31, 1997, from $469.3
million at March 31, 1996; and (3) investments increased by $7.1 million to
$32.1 million at March 31, 1997, from $25.0 million at March 31, 1996. The
above changes occurred as a result of purchases of securities more than
offsetting repayments and sales, as well as purchases associated with the
initial investment of the trust preferred securities.
11
<PAGE> 17
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LOANS AVAILABLE-FOR-SALE AND LOANS RECEIVABLE, NET. Aggregate loans receivable
(loans receivable, net and loans available for sale) totaled $835.2 million at
March 31, 1997, an increase of $48.4 million or 6.2% from $786.8 million at
March 31, 1996, due to a $38.7 million or 5.6% increase in loans receivable,
net and a $9.7 million increase in loans available for sale. Loan growth of
$32.4 million or 29.4% occurred in consumer loans, primarily home equity loans
which are secured by the residential property. Also contributing to the
increase was a $21.9 million or 18.3% increase in commercial real estate and
multi-family loans; a $14.4 million or 20.7% increase in commercial business
loans and a $5.7 million increase in construction loans. This growth was
partially offset by a $25.6 million or 6.0% decrease in the residential
mortgage portfolio which was attributable to ALCO's strategy to de-emphasize
residential loans in the portfolio.
NON-PERFORMING ASSETS. At March 31, 1997, non-performing assets totaled $10.7
million or 0.55% of total assets, amounting to a $300,000 or 3% increase from
$10.4 million or 0.6% of total assets at March 31, 1996. Non-performing loans
increased by $1.0 million or 12% to $9.4 million at March 31, 1997, due
primarily to the addition of one commercial loan that was partially offset by a
decline in non-performing construction loans. The non-performing loans at March
31, 1997, were comprised of $3.4 million in commercial business loans, $1.3
million in consumer loans, and $4.5 million in residential mortgages.
Other real estate owned net decreased to $1.3 million as of March 31, 1997, as
compared to $2.0 million as of March 31, 1996, due primarily to the sale of a
segment of these assets.
The Company's allowance for loan losses amounted to $14.7 million at March 31,
1997, or 156.9% of non-performing loans and 1.8% of gross loans receivable
(including loans available for sale). At March 31, 1996, the allowance for loan
losses amounted to 156.2% of non-performing loans and 1.7% of gross loans
receivable (including loans available for sale). It is the policy of management
to maintain an allowance for losses based upon the general economic climate,
the type of lending activity of the Company, the prior loss experience, and
other factors associated with the repayment of loans.
Total chargeoffs were $3.8 million and $1.2 million for the years ended March
31, 1997 and 1996, respectively. The increase in 1997 was associated with one
large commercial business loan chargeoff.
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights increased by $27.9 million
to $49.7 million at March 31, 1997, representing a 127.4% increase above the
prior year. The increase was comprised of the following: $19.4 million increase
associated with the Philadelphia Mortgage Corporation ("Philadelphia Mortgage")
acquisition, $13.3 million increase due to purchases of other mortgage
servicing rights, and originated mortgage servicing rights of $3.1 million
which were partially offset by amortization and an increase in the impairment
reserve which aggregated $8.0 million during the year.
CUSTOMER ACCOUNTS. Customer accounts increased by $12.3 million or 1.4% to
$873.4 million at March 31, 1997. Non-interest checking accounts increased
$37.1 million or 45.3% primarily due to the increase in business checking and
custodial accounts. The increase in balances of lower cost of fund accounts
were offset by decreases in balances of higher cost of fund accounts. Money
market accounts decreased by $13.4 million or 13.1% and certificate of deposit
accounts decreased by $37 million or 7.3% due to the reduction of higher
yielding certificate accounts.
BORROWINGS. Total borrowings increased by $145.5 million or 19.4% to $893.7
million at March 31, 1997, from $748.2 million at March 31, 1996. The Company's
borrowings are primarily comprised of advances from the FHLB and reverse
repurchase agreements. Reverse repurchase agreements are commitments the
Company enters into to sell securities under terms which require it to
repurchase the same securities by a specified date. Such agreements represent
an attractive funding source for the Company. The Company's borrowings are used
to fund lending and investment activities, withdrawals from customer accounts,
and other disbursements which occur in the normal course of business.
FHLB advances increased $61.4 million or 16.3% to $437.4 million at March 31,
1997, from $376 million at March 31, 1996. Reverse repurchase agreements
increased by $84.1 million or 22.6% to $456.3 million at March 31, 1997, from
$372.2 million at March 31, 1996.
EQUITY. Total equity at March 31, 1997, was $135.7 million or 6.9% of total
assets, compared to $140.3 million or 7.9% of total assets at March 31, 1996.
The resulting equity decline of $4.6 million during the year ended March 31,
1997, was comprised of the repurchase of 1,218,000 shares or 10.0% of the
Company's then outstanding common stock at an aggregate cost of $16.6 million,
and dividends paid to common shareholders totaling $4.1 million, which were
partially offset by net income of $13.8 million, and the $2.8 million of
amortization related to stock benefit plans. The Company's market value
position relative to its mortgage-related, debt and equity securities
classified as assets available for sale, net of income taxes, went from an
unrealized gain of $120,000 at March 31, 1996, to an unrealized loss of
$403,000 at March 31, 1997, unfavorably impacting equity by $523,000.
12
<PAGE> 18
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the periods and at the date indicated,
information regarding the Company's average balance sheet. Information is based
on average daily balances during the periods presented.
<TABLE>
<CAPTION>
Dollars in Thousands
....................................................................................................................................
YEARS ENDED MARCH 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995
-------------------------------- ------------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Mortgage loans:
Residential (1) $ 393,093 $ 31,924 8.12% $ 366,363 $ 29,303 8.00% $ 208,126 $16,164 7.77%
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial 134,926 12,153 9.01 100,801 9,318 9.24 71,694 6,590 9.19
- ------------------------------------------------------------------------------------------------------------------------------------
Construction loans 63,353 7,304 11.53 37,455 4,883 13.04 16,522 2,028 12.27
- ------------------------------------------------------------------------------------------------------------------------------------
Other:
Consumer loans:
Home equity loans and
lines of credit 109,978 9,976 9.07 82,715 7,689 9.30 71,863 6,306 8.78
- ------------------------------------------------------------------------------------------------------------------------------------
Unsecured lines of credit 2,737 348 12.71 3,282 399 12.16 3,854 414 10.74
- ------------------------------------------------------------------------------------------------------------------------------------
Other (1) 27,992 2,751 9.83 22,411 2,045 9.12 19,072 1,539 8.07
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial business 73,022 5,595 7.66 49,133 3,966 8.07 21,333 1,671 7.83
====================================================================================================================================
Total loans receivable 805,101 70,051 8.70 662,160 57,603 8.70 412,464 34,712 8.42
====================================================================================================================================
Mortgage-related securities (1) 876,969 61,556 7.02 821,436 57,216 6.97 753,745 49,058 6.51
- ------------------------------------------------------------------------------------------------------------------------------------
Investment securities (1) 82,033 5,151 6.28 77,199 5,098 6.60 89,501 5,671 6.34
- ------------------------------------------------------------------------------------------------------------------------------------
Other interest-earning assets 7,182 561 7.81 8,283 504 6.08 13,608 792 5.82
====================================================================================================================================
Total interest-earning assets 1,771,285 $137,319 7.75% 1,569,078 $120,421 7.67% 1,269,318 $90,233 7.11%
====================================================================================================================================
Non-interest-earning assets 104,913 -- -- 59,059 -- -- 41,267 -- --
====================================================================================================================================
Total assets $1,876,198 -- -- $1,628,137 -- -- $1,310,585 -- --
====================================================================================================================================
Interest-bearing liabilities:
Customer Accounts $ 866,226 $ 33,623 3.88% $ 759,335 $ 32,555 4.29% $ 693,803 $25,742 3.72%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLB advances 405,921 24,365 6.00 $ 361,128 22,775 6.31 $ 320,572 18,078 5.64
- ------------------------------------------------------------------------------------------------------------------------------------
Other borrowings 444,785 25,151 5.65 343,139 21,329 6.22 177,735 9,664 5.37
====================================================================================================================================
Total interest-bearing
liabilities 1,716,932 $ 83,139 4.84% 1,463,602 $ 76,659 5.24% 1,192,110 $53,484 4.49%
====================================================================================================================================
Non-interest-bearing liabilities 17,355 -- -- 17,163 -- -- 12,666 -- --
====================================================================================================================================
Total liabilities 1,734,287 -- -- 1,480,765 -- -- 1,204,776 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Equity 141,911 -- -- 147,372 -- -- 105,809 -- --
====================================================================================================================================
Total liabilities and equity $1,876,198 -- -- $1,628,137 -- -- $1,310,585 -- --
====================================================================================================================================
Net interest-earning assets $ 54,353 -- -- $ 105,476 -- -- $ 77,208 -- --
====================================================================================================================================
Net interest income/
interest rate spread -- $ 54,180 2.91% -- $ 43,762 2.43% -- $36,749 2.62%
====================================================================================================================================
Net yield on interest-earning
assets (2) -- -- 3.06% -- -- 2.79% -- -- 2.90%
====================================================================================================================================
Ratio of interest-earning assets
to interest-bearing liabilities -- -- 103.17% -- -- 107.21% -- -- 106.48%
====================================================================================================================================
</TABLE>
(1) Includes assets available for sale.
(2) Net interest income divided by interest-earning assets.
13
<PAGE> 19
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table describes the extent to which changes in interest rates and
changes in volume of interest-related assets and liabilities have affected the
Company's interest income and expense during the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information provided on changes attributable to (i) changes in volume (change
in volume multiplied by prior year rate), (ii) changes in rate (change in rate
multiplied by prior year volume), and (iii) total change in rate and volume.
The combined effect of changes in both rate and volume has been allocated
proportionately to the change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Dollars in Thousands
....................................................................................................................................
YEARS ENDED MARCH 31, 1997 VS. 1996 1996 VS. 1995
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
----------------------------------------------- --------------------------------------------
TOTAL INCREASE TOTAL INCREASE
RATE VOLUME (DECREASE) RATE VOLUME (DECREASE)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Interest-earnings assets:
Loans receivable:
Mortgage loans:
Residential (1) $ 456 $2,165 $ 2,621 $ 598 $12,541 $13,139
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial (232) 3,067 2,835 22 2,706 2,728
- ------------------------------------------------------------------------------------------------------------------------------------
Construction (486) 2,907 2,421 257 2,598 2,855
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer loans:
Home equity loans and lines of credit (181) 2,468 2,287 444 939 1,383
- ------------------------------------------------------------------------------------------------------------------------------------
Unsecured lines of credit 19 (70) (51) 56 (71) (15)
- ------------------------------------------------------------------------------------------------------------------------------------
Other (1) 101 605 706 195 311 506
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial loans (190) 1,819 1,629 31 2,264 2,295
====================================================================================================================================
Total loans receivable (513) 12,961 12,448 1,603 21,288 22,891
====================================================================================================================================
Mortgage-related securities (1) 445 3,895 4,340 4,456 3,702 8,158
- ------------------------------------------------------------------------------------------------------------------------------------
Investment securities (1) (193) 246 53 313 (886) (573)
- ------------------------------------------------------------------------------------------------------------------------------------
Other interest-earning assets 107 (50) 57 58 (346) (288)
====================================================================================================================================
Total interest-earning assets (154) 17,052 16,898 6,430 23,758 30,188
====================================================================================================================================
Interest-bearing liabilities:
Customer Accounts (2,191) 3,261 1,070 3,561 2,598 6,159
- ------------------------------------------------------------------------------------------------------------------------------------
FHLB advances (1,615) 3,520 1,905 2,510 2,187 4,697
====================================================================================================================================
Other borrowings (1,082) 4,587 3,505 2,652 9,667 12,319
====================================================================================================================================
Total interest-bearing liabilities (4,888) 11,368 6,480 8,723 14,452 23,175
====================================================================================================================================
Increase (decrease) in net
interest income $4,734 $5,684 $10,418 $(2,293) $ 9,306 $ 7,013
====================================================================================================================================
</TABLE>
(1) Includes assets available for sale.
NET INCOME. The Company reported net income of $13.8 million or $1.22 per fully
diluted share for the year ended March 31, 1997. The $2.2 million or 18.8%
improvement in net income over the prior comparable period was attributable to
a $9.1 million or 23.0% increase in net interest income after provision for
loan losses, an increase of $8.4 million in non-interest income primarily
associated with mortgage banking fees and the positive after-tax impact of a
$3.8 million tax bad debt reserve recapture. Partially offsetting these
earnings enhancements were a one-time special FDIC insurance assessment of $4.8
million, an increase in non-interest expenses due to six new banking centers
and higher expense levels associated with the mortgage banking operations.
For the year ended March 31, 1996, the Company reported net income of $11.6
million or $0.91 per fully diluted share as compared to net income of $8.7
million or $0.49 per share for the year ended March 31, 1995. The increase of
$2.9 million or 33.7% was primarily due to a $6.4 million or 19.2% increase in
net interest income after provision for loan losses and a $3.9 million or
113.0% increase in non-interest income, which were partially offset by a $6.0
million or 26.2% increase in non-interest expenses and a $1.3 million or 26.1%
increase in provision for taxes.
NET INTEREST INCOME. Net interest income before provision for loan losses
amounted to $54.2 million during the year ended March 31, 1997, a $10.4 million
or 23.8% increase over the comparable period in 1996. During the 1997 period, a
$16.9 million or 14.0% increase in total interest income more than offset a $6.5
million or 8.5% increase in total interest expense. Net interest income before
provision for loan losses amounted to $43.8 million during the year ended March
31, 1996, a $7.0 million or 19.1% increase over the comparable period in 1995.
During the 1996 period, a $30.2 million or 33.5% increase in total interest
income more than offset a $23.2 million or 43.3% increase in total interest
expense.
14
<PAGE> 20
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total interest income increased by $16.9 million for the year ended March 31,
1997, over the prior comparable period. The increase is primarily attributable
to a $10.3 million increase in interest income on loans and a $10.7 million
increase in interest income from assets available for sale. Growth in average
balances of commercial real estate loans and construction loans of $60.0
million, consumer loans of $32.3 million, commercial business loans of $23.9
million and residential real estate loans of $26.7 million (including loans
available for sale) accounted for the majority of the increase. Also
contributing to the increase in interest income was the growth of $60.4 million
of securities (including securities available for sale). The average yield on
total loans receivable remained constant at 8.70% from year to year as the 12
basis point improvement to 8.12% in residential loans was entirely offset by
modest yield declines in other loan categories. The yield on total
interest-earning assets improved to 7.75% during fiscal 1997 as compared to
7.67% in the previous year due to the addition of higher yielding assets,
primarily in mortgage-related securities (5 basis points, with 100 basis points
equaling 1.0%).
The $30.2 million increase in total interest income during the year ended March
31, 1996, over the prior comparable period was primarily due to a $20.2 million
or 60.2% increase in interest income earned on loans receivable and an
aggregate $12.4 million or 23.9% increase in interest income earned on
mortgage-related, debt and equity securities and assets available for sale.
This increase was caused by a $249.7 million or 60.5% increase in the average
balance of total loans receivable (including assets available for sale), and a
$67.7 million or 9.0% increase in the average balance of total mortgage-related
securities (including assets available for sale), coupled with rate increases
in yields earned on the total loans receivable portfolio and the aggregate
mortgage-related securities portfolio of 28 and 46 basis points, respectively.
The $6.5 million or 8.5% increase in interest expense during the year ended
March 31, 1997, over the prior comparable period was due to increases in
interest expense of $1.1 million on customer accounts, $1.6 million in FHLB
advances, and $3.8 million in other borrowings. Although the average balance of
total customer accounts increased by $106.9 million for 1997 over 1996, the
average rate paid on these accounts decreased by 41 basis points to 3.88% for
the year ended March 31, 1997. The $1.6 million increase in interest on FHLB
advances was also the result of a combination of higher average balances,
increasing by $44.8 million for 1997 compared to the prior year, offset by
lower rates, decreasing 31 basis points to 6.00% for 1997. Interest expense on
other borrowings declined by $3.1 million as a result of a $101.6 million
increase in average balances offset by a 57 basis point decline in rates.
Total interest expense increased by $23.2 million or 43.3% for the year ended
March 31, 1996, over the prior comparable period. The increase was partly
attributable to a $12.3 million increase in interest expense on other borrowed
money, mainly reverse repurchase agreements, due primarily to a $177.2 million
or 98.5% increase in the average balance, and to a lesser extent, an increase
in the yield paid. Additionally, the increase in total interest expense was
caused by a $6.8 million or 26.5% increase in interest expense on customer
accounts and a $4.7 million or 26.0% increase in interest expense on FHLB
advances. In the fourth quarter of fiscal 1996, the Company prepaid
approximately $20.0 million in FHLB advances, extending the maturity by
approximately two years and reducing its cost of funds by approximately 225
basis points.
PROVISION FOR LOAN LOSSES
The Company establishes provisions for loan losses, which are charged to
earnings, in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate based upon an assessment of prior loss experience,
the volume and type of lending presently being conducted by the Company,
industry standards, past due loans, economic conditions in the Company's market
area generally and other factors related to the collectibility of the Company's
loan portfolio. For the year ended March 31, 1997, the provision for loan
losses amounted to $5.3 million, an increase of $1.3 or 32.8% from the
comparable 1996 period. For the year ended March 31, 1996, the provision for
loan losses amounted to $4.0 million, an increase of $600,000 or 17.6% from the
comparable 1995 period. The increased provision during the year ended March 31,
1997, was the result of an additional provision of $1.3 million in the third
quarter related principally to a deteriorated commercial business loan. At
March 31, 1997, the allowance for loan losses amounted to 156.9% of total
non-performing loans and 1.8% of gross loans receivable, as compared to 156.2%
and 1.7%, respectively at March 31, 1996.
Although management utilizes its best judgment in providing for possible
losses, there can be no assurance that the Company will not have to increase
its provisions for loan losses in the future as a result of adverse changes in
non-performing loans or for other reasons, which could adversely affect the
Company's results of operations. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the
Company's provision for loan losses and the carrying value of its other
non-performing assets based on their judgments about information available to
them at the time of their examination.
NON-INTEREST INCOME. Total non-interest income more than doubled for the second
consecutive year reflecting the Company's efforts to increase its reliance on
fee-based income. Total non-interest income was $15.7 million for the year
ended March 31, 1997, an $8.4 million or 116% increase over the comparable
prior period. The largest component of this increase was $7.8 million relating
to mortgage banking operations. This increase was primarily caused by a $2.6
million increase in loan servicing fee income and a $5.8 million increase in
gains on the sale of loans. At March 31, 1997, the Company serviced $4.4
billion of real estate loans, which are not included in the consolidated
financial statements, for investors. The total amount of loans serviced for
others was $2.4 billion at March 31, 1996. During 1997 the Company acquired
Philadelphia Mortgage which was subsequently integrated into the Company's
newest division, Main Line Financial, a division of Main Line Bank.
Total non-interest income more than doubled to $7.3 million for the year ended
March 31, 1996, as compared to $3.4 million for the comparable period in 1995.
The $3.9 million increase is primarily attributable to gains on sales of
mortgage-related and equity securities of $255,000 in the current period
compared to a $2.0 million net loss recognized in 1995, and a $2.3 million
improvement in income from mortgage banking operations. The increase was due
primarily to the Company's adoption of SFAS No. 122 in the amount of $760,000.
Also, the Company sold a higher percentage of originated loans, servicing
released, in the secondary market, compared to the prior year, thus resulting
in increased gains. Partially offsetting these gains was a $514,000 increase in
loss on sale of other real estate owned.
15
<PAGE> 21
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NON-INTEREST EXPENSE. Total non-interest expense for the year ended March 31,
1997, were $48.9 million, up $19.7 million or 67.7% from $29.1 million at March
31, 1996. The largest components of this increase were a $7.6 million increase
in compensation and employee benefits expense, a $4.7 million increase in
Federal Deposit insurance premiums, and a $3.2 million increase in the
amortization of goodwill. The $7.6 million increase in compensation and
employee benefits expense relates primarily to the increase in personnel needed
to staff the Company's six new business centers and the nine new loan
production offices of Main Line Financial acquired during the latter part of
the previous year. The Federal Deposit insurance premiums increase of $4.7
million is the direct result of a one time special assessment by the Federal
Deposit Insurance Corporation as part of legislation adopted to recapitalize
the Savings Association Insurance Fund. As a result of the special assessment,
the Company's federal insurance premiums decreased from $0.23 per $100 of
deposits to $0.06 per $100 of deposits in the fourth fiscal quarter of 1997.
The Company anticipates paying this reduced premium for the foreseeable future.
This reduction in federal insurance premiums will favorably impact expense for
fiscal 1998. The $3.2 million increase in amortization of goodwill during 1997
was the result of recognizing the first full year of amortization expense
relating to the acquisitions of Suburban Federal Savings Bank ("Suburban"),
Hart Mortgage Company ("Hart Mortgage") and Philadelphia Mortgage.
For the year ended March 31, 1996, non-interest expenses totaled $29.1 million,
an increase of $6.0 million or 26.2% over the prior comparable period.
Compensation and employee benefits increased by $1.8 million or 15.2% from
$12.1 million for the year ended March 31, 1995, to $13.9 million for the year
ended March 31, 1996. The change was attributable primarily to increases in
expenses related to stock benefit plans, the addition of personnel from the
Suburban and Hart Mortgage acquisitions, and new business center openings.
Advertising expense increased by $1.1 million to $1.9 million at March 31,
1996, due to increased emphasis in various consumer and commercial product
campaigns and new business center openings. The Company's continued expansion
of its business center network and acquisitions was the primary reason for the
$993,000 or 30.9% increase in net occupancy costs, which totaled $4.2 million
for the year ended March 31, 1996. Operating expenses also increased due to the
amortization of goodwill and other intangible assets related to the purchases
of a certificate of deposit portfolio and the Suburban and Hart Mortgage
acquisitions in 1996. Included in the overall $1.2 million increase in other
operating expenses is a $462,000 prepayment penalty related to the debt
restructuring, and various other expenses related to the Suburban and Hart
Mortgage operations since acquisition, as well as a full year of expenses
related to being a publicly held company.
INCOME TAXES. For the year ended March 31, 1997, income tax expense totaled
$1.9 million or 12.1% of pre-tax earnings compared to $6.3 million or 35.1% of
pre-tax earnings for the year ended March 31, 1996. The decrease of $4.4
million or 69.8% is primarily attributable to federal legislation enacted
during the year that provided for a reduction in the amount of income tax
liability that would be incurred upon conversion to a commercial bank and lower
pre-tax earnings during the year.
Legislation enacted under the Small Business Job Protection Act ("Act") of 1996
provided for the Bank to recapture into income the portion of its tax bad debt
reserves that exceed its base year reserves (i.e., tax reserves for years
beginning before 1988). The Company had previously established a deferred tax
liability related to recapture of both the base year reserves and the excess
base year reserves, in anticipation of changing the Bank's charter to that of a
commercial bank. As a result of the signing of the Act, the Company recognized
approximately $3.8 million of after-tax income (net of state tax expense) due
to the reversal of the previously established base year tax bad reserve
liability.
The Company incurred income tax expense of $6.3 million or 35.1% of pre-tax
earnings, during the year ended March 31, 1996, compared to $5.0 million during
fiscal 1995. The primary reason for the $1.3 million increase was due to
additional pre-tax earnings for fiscal 1996.
LIQUIDITY
THE COMPANY'S PRIMARY SOURCES OF FUNDS ARE CUSTOMER ACCOUNTS, BORROWINGS,
REPAYMENTS, PREPAYMENTS AND MATURITIES OF OUTSTANDING LOANS AND
MORTGAGE-RELATED SECURITIES, SALES OF ASSETS AVAILABLE FOR SALE, MATURITIES OF
INVESTMENT SECURITIES AND OTHER SHORT-TERM INVESTMENTS, AND FUNDS PROVIDED FROM
OPERATIONS. WHILE SCHEDULED LOAN AND MORTGAGE-RELATED SECURITIES REPAYMENTS AND
MATURING INVESTMENT SECURITIES AND SHORT-TERM INVESTMENTS ARE RELATIVELY
PREDICTABLE SOURCES OF FUNDS, CUSTOMER ACCOUNT FLOWS AND LOAN PREPAYMENTS ARE
GREATLY INFLUENCED BY THE MOVEMENT OF INTEREST RATES IN GENERAL, ECONOMIC
CONDITIONS AND COMPETITION.
THE COMPANY MANAGES THE PRICING OF ITS CUSTOMER ACCOUNTS TO MAINTAIN BALANCES
DEEMED APPROPRIATE AND DESIRABLE. BECAUSE THE COMPANY'S CUSTOMER ACCOUNTS
REPRESENT APPROXIMATELY 49.2% OF ITS TOTAL LIABILITIES AT MARCH 31, 1997, THE
COMPANY HAS ALSO UTILIZED OTHER BORROWING SOURCES, NAMELY FHLB ADVANCES AND
REVERSE REPURCHASE AGREEMENTS, WHICH IN THE AGGREGATE REPRESENT APPROXIMATELY
50.4% OF TOTAL LIABILITIES AT MARCH 31, 1997. IN ADDITION TO ITS ABILITY TO
OBTAIN ADVANCES FROM THE FHLB UNDER SEVERAL DIFFERENT CREDIT PROGRAMS, THE
COMPANY HAS ESTABLISHED A LINE OF CREDIT WITH THE FHLB WHICH CAN BE USED FROM
TIME TO TIME FOR LIQUIDITY PURPOSES. AS AN ADDITIONAL SOURCE OF FUNDS, THE
COMPANY HAS ACCESS TO THE FEDERAL RESERVE BANK DISCOUNT WINDOW.
Liquidity management is both a daily and long-term function. Excess liquidity
is generally invested in short-term investments such as FHLB overnight
deposits. On a longer-term basis, the Company maintains a strategy of investing
in various mortgage-related securities and lending products. During the year
ended March 31, 1997, the Bank used its sources of funds to primarily fund loan
commitments and maintain a substantial portfolio of mortgage-related
securities. At March 31, 1997, the total approved loan commitments outstanding
amounted to $68.6 million. At the same date, commitments under unused lines and
letters of credit amounted to $84.6 million and the unadvanced portion of
construction loans approximated $59.9 million. Certificates of deposit
scheduled to mature in one year or less at March 31, 1997, totaled $337.0
million. Management believes that the Company has adequate resources, including
principal prepayments and repayments of loans and mortgage-related securities,
to fund all of its commitments to the extent required. In addition, although
the Company has extended commitments to fund loans or lines and letters of
credit, historically, the Company has not been required to fund all of its
outstanding commitments. Management believes that a significant portion of
maturing customer accounts will remain with the Company.
16
<PAGE> 22
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is required by the Office of Thrift Supervision ("OTS") to maintain
average daily balances of liquid assets and short-term liquid assets (as
defined) in amounts equal to 5% and 1%, respectively, of net withdrawable
deposits and borrowings payable in one year or less to assure its ability to
meet demand for withdrawals and repayment of short-term borrowings. The
liquidity requirements may vary from time to time at the direction of the OTS
depending upon economic conditions and deposit flows. The Company generally
maintains a liquidity ratio between 5% and 7% of its net withdrawable deposits
and borrowings payable in one year or less. The Bank's average monthly
liquidity ratio and short-term liquid assets ratio for March 1997 amounted to
6.57% and 4.61%, respectively.
CAPITAL RESOURCES
The OTS requires that the Company meet minimum regulatory tangible, core and
risk-based capital requirements. These standards currently require institutions
such as the Bank to maintain a "tangible" capital ratio equal to 1.5% of
adjusted total assets, "core" (or "leverage") capital equal to 3.0% of adjusted
total assets, "Tier I" capital equal to 4.0% of adjusted total assets and
"risk-based" capital (a combination of core and "supplementary" capital) equal
to 8.0% of "risk-weighted" assets. At March 31, 1997, the Company exceeded all
regulatory capital requirements. Management anticipates that the Bank will
continue to exceed all regulatory capital requirements. See Note 17 to the
Consolidated Financial Statements for additional information regarding the
Bank's regulatory capital compliance.
ML Bancorp, Inc. ("Bancorp"), as a separately incorporated company, does not
have any significant operations other than serving as sole stockholder of the
Bank. On an unconsolidated basis, Bancorp does not have paid employees. The
Bancorp's assets primarily consist of its investment in the Bank and has no
material sources of income other than the earnings of the Bank. The only
expenses incurred by Bancorp relate to its reporting obligations under the
Securities and Exchange Act of 1934, and related expenses as a publicly traded
company. Bancorp will be directly reimbursed by the Bank for all such expenses.
Management believes that Bancorp currently has adequate liquidity available to
respond to its obligations as the Bancorp itself engages only in limited
business operations independent of the Bank and its subsidiaries and therefore,
does not require a substantial amount of liquid assets. Under applicable
federal regulations, the Bank may pay dividends within certain limits and only
after notice to OTS.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements of the Company and related notes
presented herein have been prepared in accordance with generally accepted
accounting principles ("GAAP") which require the measurement of financial
position and operating results principally in terms of historical dollars,
without considering changes in the relative purchasing power of money over time
due to inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than interest rates.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes
accounting and reporting standards for stock-based employee compensation plans.
In general, this statement requires a fair value based method of accounting for
stock-based awards or similar equity instruments and encourages all entities to
adopt this method of accounting for all employee stock compensation plans. In
the event that fair value accounting is not adopted, SFAS 123 requires proforma
disclosure of net income and earnings per share as if fair value accounting had
been adopted. The Company has not adopted the fair value accounting option of
SFAS 123, but has instead provided the required proforma disclosures, as
permitted in the current fiscal year.
17
<PAGE> 23
ML BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125").
This statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components approach,
after a transfer of financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and derecognizes
financial assets it no longer controls and liabilities that have been
extinguished. The approach focuses on the assets and liabilities that exist
after the transfer. If a transfer does not meet the criteria for a sale, the
transfer is accounted for as a secured borrowing with pledge of collateral. The
Company adopted SFAS 125 prospectively, on January 1, 1997, and the impact on
earnings was not material.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". This
statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, "Earnings Per Share", and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and the denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation. This statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted.
This statement requires restatement of all prior period EPS data presented.
The Company has not yet determined the effect, if any, the adoption of this
statement will have on its EPS disclosure.
QUARTERLY RESULTS OF OPERATION. The following is a summary of the quarterly
results of operations for the years ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
QUARTERS ENDED
--------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1997 YEAR ENDED MARCH 31, 1996
--------------------------------------------------------------------------------------------------
JUN 30 SEP 30 DEC 31 MAR 31 JUN 30 SEP 30 DEC 31 MAR 31
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $33,526 $34,606 $35,326 $33,860 $28,984 $29,898 $29,706 $31,833
- ---------------------------------------------------------------------------------------------------------------------------------
Interest expense 20,456 21,341 21,419 19,923 18,456 19,288 19,099 19,816
=================================================================================================================================
Net interest income 13,070 13,265 13,907 13,937 10,528 10,610 10,607 12,017
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 1,000 1,010 2,300 1,000 1,000 1,000 1,000 1,000
=================================================================================================================================
Net interest income after
provision for loan losses 12,070 12,255 11,607 12,937 9,528 9,610 9,607 11,017
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest income 4,164 4,186 3,311 4,045 1,164 1,914 1,755 2,436
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest expense 11,559 15,979 10,105 11,217 6,423 6,490 6,657 9,569
=================================================================================================================================
Income before income taxes 4,675 462 4,813 5,765 4,269 5,034 4,705 3,884
- ---------------------------------------------------------------------------------------------------------------------------------
Income taxes (benefit) 1,430 (3,638) 1,784 2,329 1,548 1,964 1,641 1,119
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 3,245 $ 4,100 $ 3,029 $ 3,436 $ 2,721 $ 3,070 $ 3,064 $ 2,765
=================================================================================================================================
Earnings per common and
common equivalent share 0.27 0.35 0.27 0.31 0.21 0.22 0.24 0.23
=================================================================================================================================
Earnings per common share -
assuming full dilution 0.27 0.35 0.27 0.31 0.21 0.22 0.24 0.23
=================================================================================================================================
</TABLE>
For the fourth fiscal quarter ended March 31, 1997, net interest income after
provision for loan losses increased by $1.9 million or 17.4% over the
comparable quarter of fiscal 1996. The increase is primarily attributable to
the growth in average earning assets of approximately $77 million, coupled with
an improvement in the net interest spread from the fourth quarter of fiscal
1996.
Non-interest income grew by $1.6 million or 66.1% for the quarter ended March
31, 1997, mainly as a result of mortgage banking activity associated with the
Philadelphia Mortgage acquisition and purchases of mortgage servicing rights.
Non-interest expenses increased by $1.6 million to $11.2 million for the
quarter ended March 31, 1997. Higher operating costs, mostly compensation and
occupancy expenses, were incurred primarily as a result of new banking offices
and the previously noted expanded mortgage banking business.
18
<PAGE> 24
ML BANCORP, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ML Bancorp, Inc.
We have audited the accompanying consolidated statements of financial condition
of ML Bancorp, Inc. and subsidiaries (the "Company") as of March 31, 1997 and
1996, and the related consolidated statements of operations, changes in
stockholders' equity and cash flow for each of the years in the three-year
period ended March 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ML Bancorp, Inc.
and subsidiaries as of March 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
April 22, 1997
[KPMG PEAT MARWICK LLP LOGO]
19
<PAGE> 25
ML BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1997 and 1996
<TABLE>
<CAPTION>
Dollars in Thousands, except share and per share data
.................................................................................................................................
YEARS ENDED MARCH 31,
-------------------------------------------
1997 1996
=================================================================================================================================
<S> <C> <C>
ASSETS
=================================================================================================================================
Cash (including interest-bearing deposits of $7,082 and $11,283
at March 31, 1997 and March 31, 1996, respectively) $ 17,744 $ 23,323
- ---------------------------------------------------------------------------------------------------------------------------------
Assets available for sale:
Securities 597,825 469,321
- ---------------------------------------------------------------------------------------------------------------------------------
Loans 104,708 95,033
- ---------------------------------------------------------------------------------------------------------------------------------
Investments (market value $31,730 and $24,946
at March 31, 1997 and March 31, 1996, respectively) 32,071 24,942
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage-related securities (market value $380,046 and $401,231
at March 31, 1997 and March 31, 1996, respectively) 385,293 404,150
- ---------------------------------------------------------------------------------------------------------------------------------
Loans receivable, net of allowance for loan loss ($14,733 and $13,124
at March 31, 1997 and March 31, 1996, respectively) 730,535 691,791
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued income receivable 12,591 12,085
- ---------------------------------------------------------------------------------------------------------------------------------
Other real estate owned, net 1,332 2,043
- ---------------------------------------------------------------------------------------------------------------------------------
Premises and equipment, at cost less accumulated depreciation
($16,904 and $13,774 at March 31, 1997 and March 31, 1996, respectively) 16,988 14,343
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing rights 49,721 21,865
- ---------------------------------------------------------------------------------------------------------------------------------
Goodwill and other intangible assets 2,751 3,499
- ---------------------------------------------------------------------------------------------------------------------------------
Other assets 8,288 3,417
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,959,847 $1,765,812
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
=================================================================================================================================
Customer Accounts $ 873,357 $ 861,016
- ---------------------------------------------------------------------------------------------------------------------------------
Advances from Federal Home Loan Bank 437,418 376,013
- ---------------------------------------------------------------------------------------------------------------------------------
Securities sold under agreements to repurchase 456,285 372,193
- ---------------------------------------------------------------------------------------------------------------------------------
Advance payments by borrowers for taxes and insurance 3,670 3,533
- ---------------------------------------------------------------------------------------------------------------------------------
Other liabilities 3,413 12,720
=================================================================================================================================
Total liabilities 1,774,143 1,625,475
=================================================================================================================================
Corporation-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Corporation 50,000 --
=================================================================================================================================
Stockholders' Equity:
Preferred stock, no par value, authorized 5,000,000 shares;
no shares issued and outstanding -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock, $.01 par value, authorized 30,000,000 shares;
14,547,600 shares issued 73 73
- ---------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 97,237 95,977
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock acquired by stock benefit plans (7,336) (8,888)
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock, at cost; 3,271,046 and 2,053,000 shares
at March, 31, 1997 and March 31, 1996, respectively (37,147) (20,531)
- ---------------------------------------------------------------------------------------------------------------------------------
Retained earnings 83,280 73,586
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized (loss) gain on securities available for sale (403) 120
=================================================================================================================================
TOTAL STOCKHOLDERS' EQUITY 135,704 140,337
=================================================================================================================================
TOTAL LIABILITIES, MINORITY INTEREST IN SUBSIDIARIES AND STOCKHOLDERS' EQUITY $1,959,847 $1,765,812
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 26
ML BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended March 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
Dollars in Thousands, except share and per share data
.................................................................................................................................
YEARS ENDED MARCH 31,
------------------------------------------------------------------
1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C>
Interest income:
Loans $ 64,022 $ 53,678 $ 33,512
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage-related and investment securities 27,039 30,539 29,340
- ---------------------------------------------------------------------------------------------------------------------------------
Investments 2,073 2,743 2,872
- ---------------------------------------------------------------------------------------------------------------------------------
Assets available for sale 43,623 32,957 23,717
- ---------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits 561 504 792
=================================================================================================================================
TOTAL INTEREST INCOME 137,318 120,421 90,233
=================================================================================================================================
Interest expense:
Customer Accounts 33,623 32,555 25,742
- ---------------------------------------------------------------------------------------------------------------------------------
FHLB advances 24,365 22,775 18,078
- ---------------------------------------------------------------------------------------------------------------------------------
Other borrowings 25,151 21,329 9,664
=================================================================================================================================
TOTAL INTEREST EXPENSE 83,139 76,659 53,484
=================================================================================================================================
Net interest income 54,179 43,762 36,749
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 5,310 4,000 3,400
=================================================================================================================================
Net interest income after provision for loan losses 48,869 39,762 33,349
=================================================================================================================================
Non-interest income:
Retail fees and charges 1,832 1,551 1,615
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage banking operations 12,236 4,420 2,151
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on:
Sales of securities available for sale (58) 255 (2,059)
- ---------------------------------------------------------------------------------------------------------------------------------
Other real estate activities 835 99 611
- ---------------------------------------------------------------------------------------------------------------------------------
Rental income 605 583 676
- ---------------------------------------------------------------------------------------------------------------------------------
Other 256 361 418
=================================================================================================================================
TOTAL NON-INTEREST INCOME 15,706 7,269 3,412
=================================================================================================================================
Non-interest expense:
Compensation and employee benefits $ 21,501 $ 13,892 $ 12,059
- ---------------------------------------------------------------------------------------------------------------------------------
Advertising 1,889 1,939 850
- ---------------------------------------------------------------------------------------------------------------------------------
Data processing 1,814 1,538 1,337
- ---------------------------------------------------------------------------------------------------------------------------------
Federal insurance premiums 6,236 1,549 1,749
- ---------------------------------------------------------------------------------------------------------------------------------
Amortization of goodwill and other intangible assets 4,619 1,412 368
- ---------------------------------------------------------------------------------------------------------------------------------
Net occupancy costs 6,178 4,211 3,218
- ---------------------------------------------------------------------------------------------------------------------------------
Professional fees 891 693 796
- ---------------------------------------------------------------------------------------------------------------------------------
Minority interest in expense of subsidiaries 274 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Other 5,458 3,905 2,716
=================================================================================================================================
TOTAL NON-INTEREST EXPENSE 48,860 29,139 23,093
=================================================================================================================================
Income before income taxes 15,715 17,892 13,668
- ---------------------------------------------------------------------------------------------------------------------------------
Income taxes 1,905 6,272 4,974
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 13,810 $ 11,620 $ 8,694
=================================================================================================================================
PRIMARY EARNINGS PER SHARE $1.23 $0.92 $0.49(1)
=================================================================================================================================
FULLY DILUTED EARNINGS PER SHARE $1.22 $0.91 $0.49(1)
=================================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES-PRIMARY 11,195,279 12,695,358 13,456,962
=================================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES-FULLY DILUTED 11,281,595 12,786,594 13,456,962
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
(1) Earnings per share is calculated since August 11, 1994, the date of the
initial public offering
21
<PAGE> 27
ML BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended March 31, 1997, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Dollars in Thousands
..................................................................................................................................
COMMON STOCK UNREALIZED GAIN (LOSS)
ADDITIONAL ACQUIRED BY ON SECURITIES TOTAL
COMMON PAID-IN STOCK BENEFIT TREASURY AVAILABLE FOR SALE RETAINED STOCKHOLDERS'
STOCK CAPITAL PLANS STOCK (NET OF TAXES) EARNINGS EQUITY
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 $-- -- -- -- (2,494) 56,472 53,978
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock issued 73 95,499 -- -- -- -- 95,572
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock acquired
by stock benefit plans -- -- (11,446) -- -- -- (11,446)
- ----------------------------------------------------------------------------------------------------------------------------------
ESOP stock committed
to be released (1) -- -- 441 -- -- -- 441
- ----------------------------------------------------------------------------------------------------------------------------------
Excess of fair value above
cost of stock benefit plans -- 42 -- -- -- -- 42
- ----------------------------------------------------------------------------------------------------------------------------------
RRP stock amortization (2) -- -- 373 -- -- -- 373
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized loss on mortgage-
securities available for sale -- -- -- -- (706) -- (706)
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (5,648) (5,648)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 8,694 8,694
==================================================================================================================================
Balance at March 31, 1995 $73 95,541 (10,632) (5,648) (3,200) 65,166 141,300
- ----------------------------------------------------------------------------------------------------------------------------------
ESOP stock committed
to be released -- -- 915 -- -- -- 915
- ----------------------------------------------------------------------------------------------------------------------------------
Excess of fair value above
cost of stock benefit plans -- 436 -- -- -- -- 436
- ----------------------------------------------------------------------------------------------------------------------------------
RRP stock amortization -- -- 829 -- -- -- 829
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain on
securities available for sale -- -- -- -- 3,320 -- 3,320
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options -- -- -- 152 -- (6) 146
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock -- -- -- (15,035) -- -- (15,035)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends paid ($0.26 per share) -- -- -- -- -- (3,194) (3,194)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 11,620 11,620
==================================================================================================================================
Balance at March 31, 1996 $73 95,977 (8,888) (20,531) 120 73,586 140,337
- ----------------------------------------------------------------------------------------------------------------------------------
ESOP stock committed to be
released (3) -- -- 930 -- -- -- 930
- ----------------------------------------------------------------------------------------------------------------------------------
Excess of fair value above
cost of stock benefit plans -- 1,260 -- -- -- -- 1,260
- ----------------------------------------------------------------------------------------------------------------------------------
RRP stock amortization (3) -- -- 622 -- -- -- 622
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized loss on mortgage-
securities available for sale -- -- -- -- (523) -- (523)
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options -- -- -- 6 -- -- 6
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (3) -- -- -- (16,622) -- -- (16,622)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends paid ($0.38 per share) -- -- -- -- -- (4,116) (4,116)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 13,810 13,810
==================================================================================================================================
BALANCE AT MARCH 31, 1997 $73 97,237 (7,336) (37,147) (403) 83,280 135,704
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
(1) The Employee Stock Option Plan ("ESOP") provides for the annual
distribution of stock to participating employees based upon years of service.
(2) The Recognition and Retention Plan ("RRP") is a long-term incentive plan
for granting stock awards to executives and directors.
(3) For fiscal year 1997, the changes to stockholders' equity included a
reduction of 1.2 million shares of common stock related to the purchase of
treasury stock and an increase of 168,000 shares of stock associated with the
stock benefit plans (ESOP and RRP).
22
<PAGE> 28
ML BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEARS ENDED MARCH 31,
--------------------------------------------------------------
1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C>
Net cash flows from operating activities:
Net income $ 13,810 $ 11,620 $ 8,694
=================================================================================================================================
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Amortization of:
Goodwill $ 4,619 $ 1,412 $ 368
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred loan origination fees (2,083) (2,345) (1,308)
- ---------------------------------------------------------------------------------------------------------------------------------
Premiums and discounts 3,155 1,063 3,199
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing rights 7,985 3,703 1,535
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock acquired by stock benefit plans 2,818 2,326 856
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 5,310 4,000 3,400
- ---------------------------------------------------------------------------------------------------------------------------------
Net (gain) loss on sale of assets available for sale:
Securities 58 (255) 2,059
- ---------------------------------------------------------------------------------------------------------------------------------
Loans (7,289) (2,129) (87)
- ---------------------------------------------------------------------------------------------------------------------------------
Net (gain) loss on other real estate activities (835) (99) (611)
- ---------------------------------------------------------------------------------------------------------------------------------
Depreciation 2,980 2,156 1,616
- ---------------------------------------------------------------------------------------------------------------------------------
Increase/decrease in:
Loans available for sale (2,386) (67,637) 6,183
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued income receivable (506) (1,401) (4,636)
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred federal income taxes (3,328) (1,540) (1,222)
- ---------------------------------------------------------------------------------------------------------------------------------
Other assets (4,871) (1,717) 913
- ---------------------------------------------------------------------------------------------------------------------------------
Other liabilities (5,211) (6,942) 11,312
=================================================================================================================================
TOTAL ADJUSTMENTS 416 (69,405) 23,577
=================================================================================================================================
Net cash provided (used) by operating activities 14,226 (57,785) 32,271
=================================================================================================================================
Cash flows from investing activities:
Net increase in loans receivable (43,190) (144,510) (289,673)
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of:
FHLB Stock 14,843 12,907 16,382
- ---------------------------------------------------------------------------------------------------------------------------------
Securities available for sale 141,433 100,801 76,541
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from maturities or repayments of:
Mortgage-related securities 56,811 56,735 62,708
- ---------------------------------------------------------------------------------------------------------------------------------
Securities available for sale 107,250 87,333 53,118
- ---------------------------------------------------------------------------------------------------------------------------------
Investments 6,041 30,000 --
- ---------------------------------------------------------------------------------------------------------------------------------
Purchases of:
Mortgage-related securities (39,754) (49,834) (48,887)
- ---------------------------------------------------------------------------------------------------------------------------------
Securities available for sale (379,895) (183,458) (120,268)
- ---------------------------------------------------------------------------------------------------------------------------------
Investments (28,009) (21,681) (305,517)
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing rights
Purchases (32,780) (11,985) (12,316)
- ---------------------------------------------------------------------------------------------------------------------------------
Originations (3,061) (760) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease (increase) in other real estate owned 153 972 3,657
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from other real estate activities 2,612 330 2,338
- ---------------------------------------------------------------------------------------------------------------------------------
Excess of liabilities assumed over assets acquired (3,871) (3,148) --
- ---------------------------------------------------------------------------------------------------------------------------------
Purchases of premises and equipment (5,625) (2,828) (2,377)
=================================================================================================================================
Net cash used by investing activities (207,042) (129,126) (564,294)
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
(continued)
23
<PAGE> 29
ML BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEARS ENDED MARCH 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in customer accounts $ 12,341 $137,010 $ 14,301
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from customer accounts purchased -- 28,925 --
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends paid (4,116) (3,194) --
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from securities sold under
agreements to repurchase 170,575 202,414 385,303
- ---------------------------------------------------------------------------------------------------------------------------------
Payments of securities sold under
agreements to repurchase (86,483) (215,524) --
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from FHLB advances 138,405 166,165 183,651
- ---------------------------------------------------------------------------------------------------------------------------------
Payments of FHLB advances (77,000) (110,080) (120,356)
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease in advance payments
by borrowers for taxes and insurance 137 (454) 2,453
- ---------------------------------------------------------------------------------------------------------------------------------
Net proceeds from issuance of capital securities 50,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net proceeds from issuance of common stock -- -- 95,572
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock acquired by stock benefit plans, net -- -- (11,446)
- ---------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (16,622) (15,035) (5,648)
=================================================================================================================================
Net cash provided by financing activities 187,237 190,227 543,830
=================================================================================================================================
Net increase in cash and cash equivalents (5,579) 3,316 11,807
Cash and cash equivalents:
Beginning of period 23,323 20,007 8,200
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 17,744 $ 23,323 $ 20,007
=================================================================================================================================
Supplemental disclosure:
Cash payments for interest $ 82,824 $ 75,120 $ 51,139
- ---------------------------------------------------------------------------------------------------------------------------------
Cash payments (refunds) for income taxes 5,310 14,498 (700)
- ---------------------------------------------------------------------------------------------------------------------------------
Transfer of loans receivable into other real estate owned 1,219 1,077 529
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash paid for companies acquired -- 3,200 --
- ---------------------------------------------------------------------------------------------------------------------------------
Transfer of mortgage-related securities to securities
available for sale -- 56,828 --
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized (loss) gain on securities available for sale (1,291) 5,576 (1,055)
- ---------------------------------------------------------------------------------------------------------------------------------
Tax effect on unrealized (loss) gain on securities
available for sale (768) 2,256 (349)
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 30
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONVERSION TO CAPITAL STOCK FORM OF OWNERSHIP. On August 11, 1994, Main Line
Bank (the "Bank") converted from a federally chartered mutual savings bank to a
federally chartered stock savings bank with the concurrent formation of ML
Bancorp, Inc. (the "Bancorp"), a unitary savings and loan holding company (the
"Conversion") and issued 7,273,800 shares of its common stock (currently
14,547,600 shares based upon the two-for-one stock split in September, 1996) in
a public offering which resulted in proceeds to Bancorp of $95.6 million, net
of $2.6 million of costs associated with the Conversion.
BUSINESS. Bancorp's principal subsidiary, Main Line Bank, conducts business
from its bank branch system located in Bucks, Chester, Delaware and Montgomery
Counties, Pennsylvania, and its loan production offices in Delaware, Florida,
New Jersey and Pennsylvania. The Bank is subject to competition from other
financial institutions and other companies which provide financial services.
The Bank and Bancorp are subject to the regulations of certain federal agencies
and undergo periodic examinations by those regulatory authorities.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Bancorp, the Bank and the wholly owned subsidiaries (collectively
referred to as the "Company"). All significant intercompany transactions have
been eliminated in consolidation. Additionally, certain reclassifications have
been made in order to conform with the current year's presentation. The
accompanying consolidated financial statements have been prepared on an accrual
basis.
BASIS OF FINANCIAL STATEMENT PRESENTATION. The consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles. In preparing the consolidated 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 statement of financial condition
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, the
valuation of other real estate owned, and the valuation of deferred tax assets
as well as the effect of prepayments on mortgage servicing rights and premiums
and discounts associated with investments and mortgage-related securities.
Management believes that these estimates are adequate. Various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses, valuation of other real estate owned
and other accounting estimates.
CASH. For purposes of the statement of cash flows, cash and cash equivalents
include cash and interest-bearing deposits in other depository institutions.
ASSETS AVAILABLE FOR SALE. Included in assets available for sale are any
investments, loans, debt, and/or mortgage-related securities which the Company
believes may be involved in interest rate risk, liquidity, or other
asset/liability management decisions which might reasonably result in such
assets not being held until maturity. Assets available for sale are carried at
fair value with net unrealized gains and losses included, net of income taxes,
in stockholders' equity.
Loans available for sale are accounted for at the lower of cost or market which
is determined on an aggregate basis, with depreciation, if any, recorded in the
statement of operations. Realized gains and losses on assets available for sale
are computed using the specific identification method.
INVESTMENTS AND MORTGAGE-RELATED SECURITIES. Investments and mortgage-related
securities, including equity securities which are not readily marketable, are
stated at cost, adjusted for the amortization of premiums and the accretion of
discounts using a method which approximates level yield, because management has
the ability and the intent to hold such securities until maturity. The Company
is required to maintain stock in the Federal Home Loan Bank of Pittsburgh
("FHLB") in an amount of 5% of total borrowings from the FHLB. Such stock is
carried by the Company at cost.
LOANS RECEIVABLE. Loans held to maturity are stated at the amount of the unpaid
principal balance net of loan origination fees and certain direct origination
costs. These fees and costs are deferred and amortized over the contractual
life of the related loans using a level yield method. Interest on loans is
credited to income as it is earned. Generally, interest income is not accrued
for loans delinquent 90 days or greater. Payments received on nonaccrual and
impaired loans are generally applied to the outstanding principal balance. The
Bank considers a loan to be impaired when, based on current information and
events, it is probable that they will be unable to collect scheduled payments
of principal or interest when due according to the contractual terms of the
loan agreement. Large groups of smaller-balance, homogeneous loans such as
residential mortgage and consumer loans are collectively evaluated for
impairment and are not included in the impaired loans category. The Company
generally does not recognize interest on impaired loans.
ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan losses is
maintained at a level that management considers adequate to provide for
potential losses based upon an evaluation of known and inherent risks in the
loan portfolio. Management believes that the allowance for possible loan losses
is adequate. Management's periodic evaluation is based upon analysis of the
portfolio, past loss experience, current economic conditions, and other
relevant factors. While management uses the best information available to make
such evaluations, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used in making
the evaluation. In addition, various regulatory agencies as an integral part of
their examination process, periodically review the allowance for possible loan
losses. Such agencies may require the Company to recognize additions to the
allowance for possible loan losses based on their judgments of information
which is available to them at the time of their examination.
OTHER REAL ESTATE OWNED, NET. Real estate acquired through foreclosure is
classified as other real estate owned and is carried at the lower of cost or
fair value, less estimated selling costs. Fair value is generally determined
through the use of independent appraisals. In certain cases, internal cash flow
analyses are used as the basis for fair value, if such amounts are lower than
the appraised values.
PREMISES AND EQUIPMENT. Premises and equipment are carried at cost.
Depreciation and amortization are generally computed on the straight-line
method over their useful lives (30 years for buildings and 3 to 10 years for
furniture and equipment).
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights represent the carrying
value of the rights to service mortgage loans for others. The mortgage
servicing rights are amortized against loan servicing fee income on an
accelerated basis in proportion to, and over the period of, estimated net
future loan servicing fee income, which periods initially do not exceed eight
years.
Servicing fee income is recognized when the related loan payments are
collected. Management evaluates the remaining balances of mortgage servicing
rights to determine if the fair value of the disaggregated servicing rights
indicate that the carrying value is not considered recoverable. Assumptions
utilized in the evaluations are based on current prepayment and investor rates
of return provided by an independent investment advisor.
EARNINGS PER SHARE. All share and per share data have been adjusted to reflect
the Company's two-for-one stock split that was paid on September 6, 1996.
25
<PAGE> 31
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Effective April 1, 1995, the Company adopted SFAS No. 122 "Accounting for
Mortgage Servicing Rights." This standard requires the Bank to recognize
servicing rights as assets, regardless of how such assets were acquired.
Additionally, the Company is required to assess the fair value of these assets
at each reporting date to determine impairment. As a result of the adoption of
SFAS 122, the Company included $760,000 in income from mortgage banking
operations for the year ended March 31, 1996.
Impairment of mortgage servicing rights is assessed quarterly based upon a fair
market valuation of those rights using discounted cash flows based on current
market interest rates. For purposes of measuring impairment, the rights are
stratified based upon the predominant risk characteristics of the underlying
loans relying primarily on interest rate bands or pools. The impairment
recognized is the amount by which the mortgage servicing rights exceed the fair
value for each individual band.
GOODWILL. Goodwill, which represents the excess cost over fair value of assets
acquired and liabilities assumed, is being amortized to expense using the
straight-line method over periods not exceeding 15 years.
INCOME TAXES. Deferred tax assets and liabilities are recognized for the future
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as operating loss and tax credit carryforwards. Deferred tax
assets are recognized for future deductible temporary differences and tax loss
and credit carryforwards if their realization is "more likely than not."
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
2. ASSETS AVAILABLE FOR SALE
Assets available for sale at March 31, 1997 and 1996, consisted of the
following:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEAR ENDED MARCH 31, 1997 YEAR ENDED MARCH 31, 1996
--------------------------------------------------------------------------------------------------
GROSS GROSS CARRYING GROSS GROSS CARRYING
UNREALIZED UNREALIZED (FAIR) UNREALIZED UNREALIZED (FAIR)
SECURITIES COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-related, debt
and equity securities:
Mortgage-related securities:
FHLMC $304,638 -- ($933) $303,705 $234,905 $1,768 ($1,873) $234,800
- ---------------------------------------------------------------------------------------------------------------------------------
FNMA 79,725 729 -- 80,454 114,260 1,683 (425) 115,518
- ---------------------------------------------------------------------------------------------------------------------------------
GNMA 131,580 -- (983) 130,597 41,236 4 (361) 40,879
- ---------------------------------------------------------------------------------------------------------------------------------
Privately-issued 21,250 -- (65) 21,185 39,376 387 (405) 39,358
- ---------------------------------------------------------------------------------------------------------------------------------
Debt securities:
Asset Management
Funds for Financial
Institutions, Inc. 13,030 -- (660) 12,370 12,242 -- (416) 11,826
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government
agency debentures 23,890 -- (360) 23,530 18,084 -- (322) 17,762
- ---------------------------------------------------------------------------------------------------------------------------------
Equity securities 18,817 1,193 -- 20,010 9,006 172 -- 9,178
- ---------------------------------------------------------------------------------------------------------------------------------
Trust preferred securities 5,974 -- -- 5,974 -- -- -- --
=================================================================================================================================
$598,904 1,922 (3,001) 597,825 469,109 4,014 (3,802) 469,321
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1997 YEAR ENDED MARCH 31, 1996
---------------------------------------------------- ---------------------------------------------
GROSS GROSS GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR CARRYING UNREALIZED UNREALIZED FAIR
LOANS VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable:
Residential 93,103 -- -- 93,103 84,501 -- -- 84,501
- ---------------------------------------------------------------------------------------------------------------------------------
Consumer-education 11,605 -- -- 11,605 10,532 -- -- 10,532
=================================================================================================================================
$104,708 -- -- $104,708 $95,033 -- -- $95,033
=================================================================================================================================
</TABLE>
Proceeds from sales of assets available for sale during the year ended March
31, 1997, were $682.3 million. Gross gains of $35.5 million and gross losses of
$28.2 million were realized on those sales.
Proceeds from sales of assets available for sale during the year ended March
31, 1996, were $719.4 million. Gross gains of $6.3 million and gross losses of
$4.8 million were realized on those sales.
Proceeds from sales of assets available for sale during the year ended March
31, 1995, were $284.8 million. Gross gains of $5.1 million, and gross losses of
$7.1 million were realized on those sales.
As of March 31, 1997, the U.S. government agency debt securities have scheduled
maturities of $18.9 million due after one year but within five years and $5.0
million due after five years but within ten years.
Accrued interest receivable on assets available for sale was $4.9 and $4.3
million at March 31, 1997 and 1996, respectively.
26
<PAGE> 32
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
3. INVESTMENTS
Investments at March 31, 1997 and 1996, consisted of the following:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEARS ENDED MARCH 31,
-------------------------------------------------------------------------------------------------
1997 1996
------------------------------------------------ ------------------------------------------------
GROSS GROSS GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity securities:
Federal Home Loan
Bank stock $21,878 -- -- $21,878 $18,802 -- -- $18,802
- ---------------------------------------------------------------------------------------------------------------------------------
Other 258 -- -- 258 140 -- -- 140
- ---------------------------------------------------------------------------------------------------------------------------------
Debt securities:
U.S. government agency notes 9,935 -- 341 9,594 6,000 4 -- 6,004
=================================================================================================================================
$32,071 -- 341 $31,730 $24,942 $4 -- $24,946
=================================================================================================================================
</TABLE>
Proceeds from the sales of investment securities during the years ended March
31, 1997, 1996 and 1995, were $14.8 million, $12.9 million and $16.4 million,
respectively. Such proceeds resulted from mandatory redemptions of FHLB stock.
No gains or losses were realized on those sales.
The FHLB maintains a blanket lien on investment securities as collateral for
borrowings from the FHLB.
Accrued interest receivable on investment securities was $174,000 and $240,000
at March 31, 1997 and 1996, respectively.
4. MORTGAGE-RELATED SECURITIES
Mortgage-related securities at March 31, 1997 and 1996, consisted of the
following:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEARS ENDED MARCH 31,
--------------------------------------------------------------------------------------------------
1997 1996
------------------------------------------------- ------------------------------------------------
GROSS GROSS GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
Federal Home Loan
Mortgage Corporation
(FHLMC) $125,205 -- 2,015 123,190 $149,990 $762 $1,950 $148,802
- ---------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage
Association (FNMA) 124,433 -- 1,513 122,920 150,286 1,501 1,670 150,117
- ---------------------------------------------------------------------------------------------------------------------------------
Government National
Mortgage Association (GNMA) 7,130 142 -- 7,272 8,397 189 -- 8,586
- ---------------------------------------------------------------------------------------------------------------------------------
Privately issued 19,740 -- 79 19,661 1,785 -- 50 1,735
- ---------------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage
obligations 108,785 -- 1,782 107,003 93,692 -- 1,701 91,991
=================================================================================================================================
$385,293 142 5,389 380,046 $404,150 $2,452 $5,371 $401,231
=================================================================================================================================
</TABLE>
There were no sales of mortgage-related securities during the years ended March
31, 1997, 1996 and 1995.
Certain mortgage-related securities are pledged to secure financings as
described in notes 8 and 9. Privately issued mortgage-backed securities are
rated AA or better by bond rating agencies. The loans which collateralize the
mortgage-related securities are geographically disbursed throughout the United
States.
Collateralized mortgage obligations and mortgage-backed securities totaling $70
million and $78.4 million were pledged as additional collateral for municipal
jumbo certificate deposits at March 31, 1997 and 1996, respectively.
Accrued interest receivable on mortgage-related securities was $2.7 million and
$2.9 million at March 31, 1997 and 1996, respectively.
27
<PAGE> 33
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
5. LOANS RECEIVABLE
Loans receivable at March 31, 1997 and 1996, consisted of the following:
<TABLE>
<CAPTION>
Dollars in Thousands
............................................................................
YEARS ENDED MARCH 31,
-----------------------------
1997 1996
============================================================================
<S> <C> <C>
Real estate loans:
One- to four-family $310,456 $344,713
- ----------------------------------------------------------------------------
Construction and land:
Residential 90,618 110,693
- ----------------------------------------------------------------------------
Commercial 38,913 14,625
- ----------------------------------------------------------------------------
Commercial real estate 130,017 109,135
- ----------------------------------------------------------------------------
Multi-family 12,411 11,348
============================================================================
Total real estate loans 582,415 590,514
============================================================================
Other loans:
Consumer:
Home equity and equity lines of credit 131,699 92,139
- ----------------------------------------------------------------------------
Other 10,990 18,115
- ----------------------------------------------------------------------------
Commercial 84,034 69,647
============================================================================
Total other loans 226,723 179,901
============================================================================
Loans receivable, gross 809,138 770,415
============================================================================
Loans in process
(construction loans) (59,916) (61,389)
- ----------------------------------------------------------------------------
Deferred loan fees (3,954) (4,111)
- ----------------------------------------------------------------------------
Allowance for loan losses (14,733) (13,124)
- ----------------------------------------------------------------------------
Loans receivable, net $730,535 $691,791
============================================================================
</TABLE>
Included in loans receivable are loans past due 90 days or more in the amounts
of $9.4 million, $8.4 million and $6.8 million at March 31, 1997, 1996 and
1995, respectively, that are not accruing interest. Interest income that would
have been recognized on these nonaccrual loans had they been current in
accordance with their original terms is $583,000, $1.1 million and $642,000,
respectively. Interest income that was recognized on these nonaccrual loans is
$132,000, $96,000 and $227,000, respectively.
The Company is principally a local lender and, therefore, has a significant
concentration of loans to borrowers who reside in and/or which are
collateralized by real estate located in the suburban Philadelphia area.
In addition, the Company has a concentration of residential and commercial
construction real estate loans to 6 local real estate developers totaling
approximately $30.6 in additional commitments outstanding and approximately
$40.5 in outstanding balances at March 31, 1997.
6. MORTGAGE SERVICING ACTIVITIES
A summary of mortgage servicing rights activity follows:
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................
YEARS ENDED MARCH 31,
--------------------------------
1997 1996 1995
===============================================================
<S> <C> <C> <C>
Balance, beginning of year $21,865 $12,823 $ 2,042
- ---------------------------------------------------------------
Purchases 32,780 11,985 12,316
- ---------------------------------------------------------------
Originated servicing rights 3,061 760 --
- ---------------------------------------------------------------
Amortization (7,985) (3,703) (1,535)
===============================================================
Balance, end of year $49,721 $21,865 $12,823
===============================================================
</TABLE>
Activity in the allowance for loan losses for the years ended March 31, 1997
and 1996, consisted of the following:
<TABLE>
<CAPTION>
Dollars in Thousands
................................................................
YEARS ENDED MARCH 31,
---------------------------------
1997 1996 1995
================================================================
<S> <C> <C> <C>
Balance, beginning of year $13,124 $ 9,111 $7,337
- ----------------------------------------------------------------
Provision for loan losses 5,310 4,000 3,400
- ----------------------------------------------------------------
Charge-offs (3,791) (1,188) (1,761)
- ----------------------------------------------------------------
Recoveries 90 181 135
- ----------------------------------------------------------------
Allowance acquired -- 1,020 --
================================================================
Balance, end of year $14,733 $13,124 9,111
================================================================
</TABLE>
As of March 31, 1997 and 1996, the recorded investment in the loans for which
impairment has been recognized is $3.3 million and $3.7 million, respectively.
The average investment in such impaired loans was $4.6 million, $4.2 million
and $4.7 million for the years ended March 31, 1997, 1996 and 1995,
respectively. There is no allowance for loan losses pertaining to these
impaired loans because the Company provided and charged-off $312,000 and
$346,000 of such loans during the years ended March 31, 1997 and 1996,
respectively.
An analysis of the activity of loans to directors and officers follows:
<TABLE>
<CAPTION>
Dollars in Thousands
..................................................................................
YEARS ENDED MARCH 31,
-------------------------
1997 1996
==================================================================================
<S> <C> <C>
Balance, beginning of year $674 $601
- ----------------------------------------------------------------------------------
Increase (decrease) due to change
in qualifying officers (117) 118
- ----------------------------------------------------------------------------------
New loans and line of credit advances 42 111
- ----------------------------------------------------------------------------------
Repayments (96) (156)
==================================================================================
Balance, end of year $503 $674
==================================================================================
</TABLE>
Accrued interest receivable on loans receivable was $4.6 million and $4.6
million at March 31, 1997 and 1996, respectively.
During the years ended March 31, 1997, 1996, and 1995, the Company purchased
the servicing rights of whole loans with balances of $2.2 billion, $858.4
million and $801.9 million, respectively.
28
<PAGE> 34
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
6. MORTGAGE SERVICING ACTIVITIES (continued)
Activity in the valuation allowance for mortgage servicing rights for the years
ended March 31, 1997, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
Dollars in Thousands
................................................................
YEARS ENDED MARCH 31,
--------------------------------
1997 1996 1995
================================================================
<S> <C> <C> <C>
Balance, beginning of year $1,200 $ 330 $ --
- ----------------------------------------------------------------
Provision for mortgage
servicing rights in excess
of fair value 1,000 870 330
================================================================
Balance, end of year $2,200 $1,200 $330
================================================================
</TABLE>
The Company services real estate loans for investors which are not included in
the consolidated financial statements. The total amount of such loans serviced
for others was approximately $4.4 billion, $2.4 billion and $1.7 billion at
March 31, 1997, 1996, and 1995 respectively.
The Company is required to remit to investors the monthly principal collected
and scheduled interest payments on most mortgages, including those for which no
interest payments have been received due to delinquency. As of March 31, 1997
and 1996, approximately $469,800 and $249,000, respectively, had been advanced
on delinquent serviced loans. Substantially all of these loans were sold
without recourse and are guaranteed by FHLMC or FNMA.
7. CUSTOMER ACCOUNTS
The major types of customer accounts by weighted interest rates, amounts, and
the percentages of such types to total customer accounts are as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
..........................................................................................................................
YEARS ENDED MARCH 31,
------------------------------------------------------------------------------
1997 1996
---------------------------------------- -------------------------------------
WEIGHTED WEIGHTED
INTEREST % OF INTEREST % OF
RATE AMOUNT TOTAL RATE AMOUNT TOTAL
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing accounts 0.00% $118,836 13.61% 0.00% $ 81,767 9.50%
- --------------------------------------------------------------------------------------------------------------------------
Money market and NOW accounts 2.46 156,325 17.90 2.62 155,115 18.02
- --------------------------------------------------------------------------------------------------------------------------
Passbook and statement savings accounts 2.14 88,574 10.14 2.22 88,011 10.22
==========================================================================================================================
1.58 363,735 41.65 1.85 324,893 37.73
- --------------------------------------------------------------------------------------------------------------------------
Certificates of deposit 5.61 469,073 53.71 5.80 506,104 58.78
- --------------------------------------------------------------------------------------------------------------------------
Repurchase agreements with customers 4.59 40,549 4.64 4.85 30,019 3.49
==========================================================================================================================
3.88% $873,357 100.00% 4.28% $861,016 100.00%
==========================================================================================================================
</TABLE>
A summary of certificates by maturity is as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
.............................................................
YEARS ENDED MARCH 31,
-------------------------
1997 1996
=============================================================
<S> <C> <C>
Within one year $337,081 $318,107
- -------------------------------------------------------------
One to two years 53,453 100,745
- -------------------------------------------------------------
Two to three years 42,778 29,817
- -------------------------------------------------------------
Three to four years 18,817 32,046
- -------------------------------------------------------------
Four to five years 13,433 19,132
- -------------------------------------------------------------
Thereafter 3,511 6,257
=============================================================
$469,073 $506,104
=============================================================
</TABLE>
Interest expense on customer accounts is as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
..............................................................
YEARS ENDED MARCH 31,
--------------------------------
1997 1996 1995
==============================================================
<S> <C> <C> <C>
Money market accounts
and NOW accounts $ 3,861 $ 3,548 $ 3,165
- --------------------------------------------------------------
Passbook and statement
savings accounts 1,874 1,933 2,752
- --------------------------------------------------------------
Certificate accounts 26,327 26,304 19,709
- --------------------------------------------------------------
Repurchase agreements
with customers 1,561 770 116
==============================================================
Total interest expense $33,623 $32,555 $25,742
==============================================================
</TABLE>
Included in customer accounts as of March 31, 1997 and 1996, are accounts
greater than $100,000 of approximately $175.4 million and $151.2 million,
respectively.
29
<PAGE> 35
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
8. ADVANCES FROM FEDERAL HOME LOAN BANK
Under the terms of its collateral agreement with the FHLB, the Company
maintains otherwise unencumbered qualifying assets in an amount at least as
much as its advances from the FHLB. The Company's FHLB stock is also pledged to
secure these advances. At March 31, 1997 and 1996, such advances mature as
follows:
<TABLE>
<CAPTION>
Dollars in Thousands
................................................................................................................................
WEIGHTED YEAR ENDED WEIGHTED YEAR ENDED
AVERAGE MARCH 31, AVERAGE MARCH 31,
DUE BY MARCH 31, INTEREST RATE 1997 INTEREST RATE 1996
================================================================================================================================
<S> <C> <C> <C> <C>
1997 0.00% $ -- 6.01% $229,513
- --------------------------------------------------------------------------------------------------------------------------------
1998 6.15 247,918 6.53 77,000
- --------------------------------------------------------------------------------------------------------------------------------
1999 6.08 27,750 6.07 17,750
- --------------------------------------------------------------------------------------------------------------------------------
2000 5.81 27,000 5.81 27,000
- --------------------------------------------------------------------------------------------------------------------------------
2001 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
2002 5.68 110,000 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Thereafter 7.45 24,750 7.45 24,750
================================================================================================================================
6.08% $437,418 6.21% $376,013
================================================================================================================================
</TABLE>
The Company has entered into a warehouse loan participation program for
residential mortgage loan originations. The available line of credit from this
program totaled $87.5 at March 31, 1997, of which $31.8 and $51.5 million was
outstanding at March 31, 1997 and 1996, respectively. This line of credit
commitment expires in March 1998. The rate paid is determined by a daily
variable advance rate in effect at the FHLB and was 7.23% at March 31, 1997.
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company entered into sales of securities under agreements to repurchase
(the Agreements), which are treated as financings. Information relating to the
Agreements as of March 31, 1997 and 1996, is summarized as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEAR ENDED MARCH 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
LOAN ASSET CARRYING ASSET LOAN WEIGHTED AVERAGE
ASSET MATURITY DATE VALUE MARKET VALUE AMOUNT LOAN RATE
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
FNMA and FHLMC certificates WITHIN 30 DAYS 192,867 193,623 182,192 5.43
- ---------------------------------------------------------------------------------------------------------------------------------
FNMA and FHLMC certificates FROM 31-90 DAYS 48,964 49,272 40,000 6.25
- ---------------------------------------------------------------------------------------------------------------------------------
FNMA, FHLMC and GNMA certificates OVER 90 DAYS 263,066 263,325 234,093 5.63
- ---------------------------------------------------------------------------------------------------------------------------------
$504,897 $506,220 $456,285 5.60%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
LOAN ASSET CARRYING ASSET LOAN WEIGHTED AVERAGE
ASSET MATURITY DATE VALUE MARKET VALUE AMOUNT LOAN RATE
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
FNMA and FHLMC certificates Within 30 days 114,347 114,824 111,605 5.34
- ---------------------------------------------------------------------------------------------------------------------------------
FNMA and FHLMC certificates From 31-90 days 42,636 42,022 38,945 5.86
- ---------------------------------------------------------------------------------------------------------------------------------
FNMA, FHLMC and GNMA certificates Over 90 days 251,594 251,952 221,643 5.90
- ---------------------------------------------------------------------------------------------------------------------------------
$408,577 $408,798 $372,193 5.65%
=================================================================================================================================
</TABLE>
The maximum amount outstanding at any month-end of the Agreements during fiscal
years 1997 and 1996 was $516.6 million and $406.3 million, respectively. The
average amount of outstanding Agreements during fiscal years 1997 and 1996 was
$444.8 million and $343.1 million, respectively.
30
<PAGE> 36
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods, and assumptions are set forth below for the
Company's financial instruments whether or not recognized on the balance sheet,
for which it is practicable to estimate that value. The fair values may not
represent actual values of the financial instruments that could have been
realized as of year end or that will be realized in the future.
CASH AND CASH EQUIVALENTS: For these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
INVESTMENTS AND MORTGAGE-RELATED SECURITIES AND ASSETS AVAILABLE FOR SALE: The
fair value of investments and mortgage-related securities is estimated based on
bid prices published in financial newspapers or bid quotations received from
securities dealers. The carrying amounts of stocks with no stated maturity
approximate fair value because shares may be redeemed at par. The fair value of
loans available for sale is estimated based on forward commitments to sell.
LOANS RECEIVABLE: The fair value of performing loans receivable is estimated by
discounting future cash flows using rates as of March 31, 1997 and 1996, for
which similar loans would be made to borrowers with similar credit history and
maturities.
The fair value for non-performing loans was derived through a discounted cash
flow analysis, which includes the opportunity costs of carrying a
non-performing asset. Estimated discount rates were based on the probability of
loss and the expected time to recovery. Loans with a higher probability of
loss were assigned higher risk premiums and were discounted over longer periods
of time, resulting in lower values.
MORTGAGE SERVICING RIGHTS: The fair value of capitalized excess servicing fees,
originated mortgage servicing rights, and purchased mortgage servicing rights
are estimated by discounting the future cash flows at current market rates
adjusting for prepayments.
ACCRUED INTEREST PAYABLE AND ACCRUED INTEREST RECEIVABLE: The fair value for
accrued interest payable and accrued interest receivable approximates fair
value.
CUSTOMER ACCOUNTS: The fair value of customer accounts with no stated maturity,
such as non-interest-bearing accounts, savings and NOW accounts, and money
market and checking accounts is equal to the amount payable on demand as of
March 31, 1997 and 1996. The fair value of certificates of deposit is based on
the present value of contractual cash flows. The discount rates used to compute
present values are estimated using the rates currently offered for customer
accounts of similar maturities in the Company's marketplace.
BORROWED FUNDS: Rates available to the Company for debt with similar terms and
remaining maturities at the dates presented are used to estimate the fair value
of existing debt.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT: The Company does
not normally charge fees for commitments to extend credit. Interest rates on
commitments to extend credit are normally committed for periods of less than
one month. Fees charged on standby letters of credit and other financial
guarantees are deemed to be immaterial and these guarantees are expected to be
settled at face amount or expire unused. It is impracticable to assign any fair
value to these commitments.
The carrying amount and estimated fair value of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................................................................
YEARS ENDED MARCH 31,
--------------------------------------------------------------------------
1997 1996
----------------------------------- -----------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
=================================================================================================================================
<S> <C> <C> <C> <C>
Financial assets:
Cash $ 17,744 $ 17,744 $ 23,323 $ 23,323
- ---------------------------------------------------------------------------------------------------------------------------------
Investments and
mortgage-related securities 417,364 411,776 429,092 426,177
- ---------------------------------------------------------------------------------------------------------------------------------
Assets available for sale 702,533 702,533 564,354 564,354
- ---------------------------------------------------------------------------------------------------------------------------------
Loans receivable, net 730,535 722,840 691,791 678,726
- ---------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing rights 49,721 54,423 21,865 23,667
- ---------------------------------------------------------------------------------------------------------------------------------
Financial liabilities:
Customer accounts 873,357 876,984 861,016 869,348
- ---------------------------------------------------------------------------------------------------------------------------------
Borrowed funds 893,703 885,089 748,206 747,207
=================================================================================================================================
</TABLE>
31
<PAGE> 37
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
11. INCOME TAXES
Income tax expense (benefit) for the years ended March 31, 1997, 1996, and
1995, is comprised of the following:
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................
YEARS ENDED MARCH 31,
-------------------------------
1997 1996 1995
===============================================================
<S> <C> <C> <C>
Current:
Federal $4,790 $7,812 $6,018
- ---------------------------------------------------------------
State 443 -- 178
===============================================================
Total current tax expense 5,233 7,812 6,196
===============================================================
Deferred:
Federal (3,757) (1,396) (1,220)
- ---------------------------------------------------------------
State 429 (144) (2)
===============================================================
Total deferred tax expense (3,328) (1,540) (1,222)
===============================================================
Income tax expense $1,905 $6,272 $4,974
===============================================================
</TABLE>
The effective income tax rates of 12%, 35% and 36%, for the years ended March
31, 1997, 1996 and 1995, respectively, vary from the applicable statutory
federal income tax rate of 35%, 35% and 35%, respectively, for the following
reasons.
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................................
YEARS ENDED MARCH 31,
-----------------------------------
1997 1996 1995
===============================================================================
<S> <C> <C> <C>
Computed expected tax expense $5,500 $6,262 $4,784
- -------------------------------------------------------------------------------
Increase (decrease) resulting from:
Decrease in valuation allowance
for deferred tax assets -- (700) (700)
- -------------------------------------------------------------------------------
Tax-exempt income (801) (584) (360)
- -------------------------------------------------------------------------------
State tax (benefit) expense,
net of Federal impact 717 (144) 113
- -------------------------------------------------------------------------------
Subsidiary related items -- 1,007 888
- -------------------------------------------------------------------------------
Recapture of tax bad debt reserves (4,129) -- --
- -------------------------------------------------------------------------------
Other, net 618 431 249
===============================================================================
Income tax expense $1,905 $6,272 $4,974
===============================================================================
</TABLE>
The significant components of deferred income tax (benefit) attributable to
income for the years ended March 31, 1997, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................
YEARS ENDED MARCH 31,
---------------------------------
1997 1996 1995
===============================================================
<S> <C> <C> <C>
Deferred tax expense (benefit)
(exclusive of the effects of
the components listed below) $(3,757) $ (840) $ (895)
- ---------------------------------------------------------------
Decrease in beginning of year
balance of the valuation
allowance for deferred
tax assets -- (700) (700)
- ---------------------------------------------------------------
Adjustment to deferred
tax assets and liabilities
for change in tax rates -- -- 68
- ---------------------------------------------------------------
State tax net operating
loss utilization 429 -- 305
===============================================================
$(3,328) $ (1,540) $1,222
===============================================================
</TABLE>
The Small Business Job Protection Act of 1996 ("Act"), enacted on August 20,
1996, provides for the repeal of the tax bad debt deduction computed under the
percentage of taxable income method. The repeal of the use of this method is
effective for tax years beginning after December 31, 1995. Prior to the change
in law, the Bank had qualified under the provisions of the Internal Revenue
Code which permitted it to deduct from taxable income an allowance for bad
debts based on 8% of taxable income.
Upon repeal, the Bank is required to recapture into income, over a six-year
period, the portion of its tax bad debt reserves that exceed its base year
reserves (i.e., tax reserves for tax years beginning before 1988). The base
year tax reserves, which may be subject to recapture if the Bank ceases to
qualify as a bank for federal income tax purposes, are restricted with respect
to certain distributions. The Bank's total tax bad debt reserves at March 31,
1997, are approximately $20.0 million, of which $11.8 million represents the
base year amount and $8.2 is subject to recapture.
The Company had previously established a deferred tax liability during its
fiscal year ended March 31, 1994, related to the base year bad debt reserves in
anticipation of changing the Bank's charter to that of a commercial bank. As a
result of the signing of the Act, the Company recognized $3.8 million of
after-tax income (net of state tax expense) due to the reversal of the base
year bad debt liability. Additionally, the Company has previously recorded a
deferred tax liability for the excess base year reserves to be recaptured;
therefore, this recapture will not impact the statement of operations.
32
<PAGE> 38
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
11. INCOME TAXES (continued)
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 31, 1997 and
1996, are presented below:
<TABLE>
<CAPTION>
Dollars in Thousands
.................................................................................
YEARS ENDED MARCH 31,
------------------------
1997 1996
=================================================================================
<S> <C> <C>
Deferred tax assets:
Uncollected interest $ 217 $ 267
- ---------------------------------------------------------------------------------
Employee benefits 706 974
- ---------------------------------------------------------------------------------
Real estate valuation allowance 174 578
- ---------------------------------------------------------------------------------
Book bad debt reserves 4,876 4,330
- ---------------------------------------------------------------------------------
Purchased mortgage servicing rights 2,079 923
- ---------------------------------------------------------------------------------
Other reserves 398 367
- ---------------------------------------------------------------------------------
Federal tax net operating loss carryforwards 1,499 1,614
- ---------------------------------------------------------------------------------
State tax net operating loss carryforwards 23 452
- ---------------------------------------------------------------------------------
Depreciation 220 --
- ---------------------------------------------------------------------------------
Other 315 459
=================================================================================
Total deferred tax assets 10,507 9,964
=================================================================================
Deferred tax liabilities:
Tax bad debt reserve recapture (2,888) (6,212)
- ---------------------------------------------------------------------------------
Prepaid expenses (603) (599)
- ---------------------------------------------------------------------------------
Loss on mortgages sold (855) (956)
- ---------------------------------------------------------------------------------
Originated mortgage servicing rights (1,398) (262)
- ---------------------------------------------------------------------------------
IRC Sec. 475 mark-to-market items -- (192)
- ---------------------------------------------------------------------------------
Depreciation -- (254)
- ---------------------------------------------------------------------------------
Net unrealized gain of securities
available for sale (206) (70)
- ---------------------------------------------------------------------------------
Other (441) (495)
=================================================================================
Total deferred tax liabilities $(6,391) $(9,040)
=================================================================================
Net deferred tax asset (liability) 4,116 924
=================================================================================
</TABLE>
In 1995, the Company reduced its valuation allowance for deferred tax assets in
the amount of $700,000 due to the liquidation of various subsidiaries during
the year.
In order to fully realize the net deferred tax asset at March 31, 1997 and
1996, the Company will need to generate future taxable income. Based upon the
Company's tax history and the anticipated level of future taxable income,
management of the Company believes the existing net deductible temporary
differences will, more likely than not, reverse in future periods in which the
Company generates net taxable income. There can be no assurance, however, that
the Company will generate any earnings or any specific level of continuing
earnings.
For federal tax purposes, the Company has approximately $4.3 million and $4.6
million of net operating loss carryforwards as of March 31, 1997 and 1996,
respectively. The net operating loss carryforward will expire March 31, 2010 if
not utilized.
For state tax purposes, the Company has approximately $330,000 and $5.8 million
of net operating loss carryforwards as of March 31, 1997 and 1996,
respectively. The $330,000 of the net operating loss carryforward will expire
March 31, 1998, if not utilized.
33
<PAGE> 39
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
12. EMPLOYEE BENEFITS
During the fiscal year ended March 31, 1995, the Company restructured its
defined benefit pension plan ("Pension Plan") by withdrawing from a
multi-employer Pension Plan and starting a single-employer Pension Plan.
Effective August 1, 1994, each active participant was given the option to
transfer their accrued benefit to the new Pension Plan or leave it in the
multi-employer Pension Plan. For those electing to transfer their benefits,
additional benefits would accrue under the new Pension Plan for future service.
Assets accumulated for the past and future benefits of those transferring
benefits were calculated and a schedule determined for transfer into the new
Pension Plan.
Employees hired by the Company on or after August 1, 1993, were not eligible to
participate in the new Pension Plan, however, effective April 1, 1995, the
company began accepting new participants.
The Pension Plan provides retirement benefits based on years of service and
average compensation during the years of plan participation. The Company's
funding policy is to contribute an amount which meets the minimum funding
requirements of ERISA and which can be deducted for Federal Income Tax
purposes.
The following table sets forth the Company's plan accumulated funded status for
the years ended March 31, 1997 and 1996, and the amounts recognized in the
consolidated balance sheet as of March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Dollars in Thousands
..............................................................
YEARS ENDED MARCH 31,
-------------------------
1997 1996
==============================================================
<S> <C> <C>
Projected benefit obligation:
Accumulated benefit
obligation total (all vested) $1,923 $1,512
- --------------------------------------------------------------
Effect of projected future
compensation levels 220 150
- --------------------------------------------------------------
Projected benefit obligation total 2,143 1,662
- --------------------------------------------------------------
Plan assets at fair value 3,080 2,836
==============================================================
Projected plan assets in excess of
benefit obligation 937 1,174
==============================================================
Unrecognized transition asset 1,391 1,493
- --------------------------------------------------------------
Unrecognized prior service costs (54) --
- --------------------------------------------------------------
Unrecognized loss (59) (41)
- --------------------------------------------------------------
Accrued pension cost included on
consolidated balance sheet $ 341 $ 278
==============================================================
</TABLE>
Net pension cost for the years ended March 31, 1997, 1996 and 1995, includes
the following components:
<TABLE>
<CAPTION>
Dollars in Thousands
..........................................................................
YEARS ENDED MARCH 31,
------------------------------
1997 1996 1995
==========================================================================
<S> <C> <C> <C>
Service cost $252 $217 $154
- --------------------------------------------------------------------------
Interest cost 133 99 51
- --------------------------------------------------------------------------
Actual return on plan assets (287) (383) (125)
- --------------------------------------------------------------------------
Amortization of transition asset (101) (101) (68)
- --------------------------------------------------------------------------
Amortization of prior service costs 4 -- --
- --------------------------------------------------------------------------
Asset gain 62 184 --
==========================================================================
Net pension cost $ 63 $ 16 $ 12
==========================================================================
</TABLE>
In determining the estimated costs of the Pension Plan, the weighted average
discount rate used was 7.5% and the weighted average rate of increase in
compensation levels was 5.5% compounded annually for the years ended March 31,
1997, 1996 and 1995. The weighted average expected long-term rate of return on
Pension Plan assets used in determining net periodic pension cost was 8.00%.
The Pension Plan's assets consist primarily of bond and stock funds
administered by an independent asset manager.
COMMON STOCK ACQUIRED BY THE EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP"). In
connection with the Conversion, the Company established the ESOP for the
benefit of eligible employees. The Company purchased 1,018,332 shares of common
stock on behalf of the ESOP in the Conversion, of which, as of March 31, 1997,
332,053 shares were committed to be released and allocated to participants. The
Company recognizes compensation expense equal to the fair value of the ESOP
shares during the periods in which they become committed to be released. To the
extent that the fair value of ESOP shares differs from the cost of such shares,
this differential will be charged or credited to equity. Management expects the
recorded amount of expense to fluctuate as continuing adjustments are made to
reflect changes in the fair value of the ESOP shares. The Company recorded
compensation and employee benefit expense related to the ESOP of $1.9 million,
$1.4 million and $483,000 for the years ended March 31, 1997, 1996 and 1995,
respectively. The fair market value of the unallocated ESOP shares on March 31,
1997, amounted to $10.6 million.
COMMON STOCK ACQUIRED BY THE RECOGNITION AND RETENTION PLAN AND TRUST ("RRP").
An aggregate of 371,120 shares, net of forfeitures, have been awarded to the
Company's Board of Directors and executive officers as of March 31, 1997,
subject to vesting and other provisions of the RRP.
At March 31, 1997, the deferred cost of unearned RRP shares totaled $2.7
million and is recorded as a charge against stockholders' equity. Compensation
expense will be recognized ratably over the five year vesting period only for
those shares awarded. The Company recorded compensation and employee benefit
expense related to the RRP of $617,420, $829,000 and $373,000 for the years
ended March 31, 1997, 1996 and 1995, respectively.
34
<PAGE> 40
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997, 1996 AND 1995
12. EMPLOYEE BENEFITS (continued)
STOCK OPTION PLAN
Common stock totalling 1,454,760 shares has been reserved for issuance for the
1994 Option Plan. An aggregate of 634,600 stock options, net of forfeitures,
have been granted and are exercisable to the Bank's executive officers,
non-employee directors, and other key employees through March 31, 1997. The
exercise price per share ranges from $7.4688 to $7.8125; $7.4688 to $11.9375;
and $11.9688 to $17.375 for the plan years 1997, 1996 and 1995, respectively.
The following table summarizes the stock options outstanding and exercisable
for the Option Plan as of March 31, 1997:
<TABLE>
<CAPTION>
...................................................................................................................................
YEARS ENDED MARCH 31,
===================================================================================================================================
1997 1996 1995
=================================================================== =============================== ===============================
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,184,200 $ 7.7704 1,120,000 $ 7.4688 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Granted 154,000 $13.7445 91,000 $11.3935 1,120,000 $7.4688
- -----------------------------------------------------------------------------------------------------------------------------------
Exercised (800) $ 7.4688 (19,600) $ 7.4688 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Canceled -- -- (7,200) $ 7.4688 -- --
===================================================================================================================================
Outstanding at end of year 1,337,400 $ 8.4585 1,184,200 $ 7.7704 1,120,000 $7.4688
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted remaining average
contractual life (years) -- 10 -- 9 -- 8
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Average Contractual
Life Exercisable at end of year 634,600 $ 7.6748 439,600 $ 7.6605 -- --
===================================================================================================================================
Weighted-average fair
value of awards granted $11,312,398 -- $9,201,708 -- $8,365,056 --
===================================================================================================================================
</TABLE>
The Black-Scholes option-pricing model was used to determine the grant-date
fair-value of options in fiscal 1997. Significant assumptions used in the model
included a weighted average risk free rate of return of 6.74%; expected option
life of 6 years; expected stock price volatility of 84.0%; and expected
dividends of 2.42%.
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-based
Compensation" ("SFAS 123"). This statement encourages, but does not require,
the adoption of fair-value accounting for stock-based compensation to
employees. The Company, as permitted, has elected not to adopt the fair value
accounting provisions of SFAS 123, and has instead continued to apply APB
Opinion 25 and related Interpretations in accounting for plans and provide the
required proforma disclosures of SFAS 123. Had the grant-date fair-value
provisions been adopted, the Corporation would have recognized $1,458,747 in
compensation expense related to its Option Plan in 1997. As a result, net
income of the Company would have been $13.0 million and fully diluted earnings
per share would have been $1.15 for the year ended March 31, 1997.
The effects on net income and earnings per share of applying the disclosure
requirement of SFAS 123 in 1997 may not be representative of the future
proforma effects on net income and earnings per share due to the vesting
provisions of the options and future awards that are available to be granted.
35
<PAGE> 41
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
13. COMMITMENTS AND CONTINGENCIES
As of March 31, 1997, the Company is committed to the funding of certain loans.
Approximately $28.5 million is committed to fixed rate loans and $40.1million
committed to variable rate loans. These commitments are generally outstanding
for 45 days.
As of March 31, 1997, the Company is committed to purchase mortgage-related
securities totaling $14.8 million and investment securities totaling $10.0
million.
The Company has commitments outstanding of $51.0 million at March 31, 1997, to
sell fixed rate mortgage loans and $2.9 million of adjustable-rate mortgage
loans.
The Company had the following off-balance-sheet financial instruments:
<TABLE>
<CAPTION>
Dollars in Thousands
...........................................................................
YEARS ENDED MARCH 31,
----------------------------
1997 1996
===========================================================================
<S> <C> <C>
Amounts representing credit risk:
- ---------------------------------------------------------------------------
Secured consumer lines of credit $55,549 $55,727
- ---------------------------------------------------------------------------
Unsecured consumer lines of credit 9,405 9,917
- ---------------------------------------------------------------------------
Commercial lines of credit 18,573 11,939
- ---------------------------------------------------------------------------
Commercial letters of credit 1,115 163
- ---------------------------------------------------------------------------
Notional or contract amounts
of off-balance-sheet financial instruments
not constituting credit risk:
Forward commitments to sell
in the secondary market $53,922 $58,729
===========================================================================
</TABLE>
In the past, the Company pooled and sold with recourse certain mortgage-backed
securities through federal agencies which were collateralized substantially by
residential mortgage loans. At March 31, 1997 and 1996, the remaining
outstanding balance subject to recourse was $2.5 million and $3.3 million
respectively.
The Company is party to certain claims and litigation arising in the ordinary
course of business. In the opinion of management, the resolution of such claims
and litigation will not materially affect the Company's consolidated financial
position or results of operations.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes. Derivatives, such as forward
commitments to sell in the secondary market, are primarily used to manage
well-defined interest rate risks. In the ordinary course of business, the
Company may expose a portion of its available for sale mortgage loan portfolio,
including its pipeline, to interest rate risk, as volume and market conditions
warrant. This exposure represents those loans which have closed or are expected
to close which are not hedged at a given point in time. At March 31, 1997, the
Company's exposure is $6.7 million and the maximum exposure position authorized
by the Company is $20.0 million.
The Company produces a daily exposure report summarizing the exposure which is
reviewed and to the extent considered necessary by management, adjustments are
made.
14. PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following at March 31, 1997 and
1996:
<TABLE>
<CAPTION>
Dollars in Thousands
..............................................................
YEARS ENDED MARCH 31,
-------------------------
1997 1996
==============================================================
<S> <C> <C>
Premises owned $11,778 $11,778
- --------------------------------------------------------------
Furniture and fixtures 17,051 13,271
- --------------------------------------------------------------
Leasehold improvements 5,063 3,068
- --------------------------------------------------------------
Accumulated depreciation (16,903) (13,774)
==============================================================
$16,989 $14,343
==============================================================
</TABLE>
The Company has entered into operating leases for several of its branch
facilities. The minimum annual rental payments under these leases at March 31,
1997, are as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................
YEAR MINIMUM LEASE PAYMENTS
===============================================================
<S> <C>
1998 $1,627
- ---------------------------------------------------------------
1999 1,330
- ---------------------------------------------------------------
2000 1,114
- ---------------------------------------------------------------
2001 1,090
- ---------------------------------------------------------------
2002 and after 7,515
===============================================================
</TABLE>
The Company opened or acquired six new business centers and nine mortgage loan
production offices resulting in increased rent expense during the 1997 fiscal
year. Rent expense under these leases was $1.4 million, $487,000 and $248,000
for the years ended March 31, 1997, 1996 and 1995, respectively.
The Company has executed various operating leases covering portions of its
buildings with various unrelated lessees. Annual minimum lease payments to be
received by the Company are as follows:
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................
YEAR MINIMUM LEASE PAYMENTS
===============================================================
<S> <C>
1998 $666
- ---------------------------------------------------------------
1999 437
- ---------------------------------------------------------------
2000 287
- ---------------------------------------------------------------
2001 209
- ---------------------------------------------------------------
2002 and after 994
===============================================================
</TABLE>
36
<PAGE> 42
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
15. PARENT COMPANY FINANCIAL INFORMATION
Condensed financial statements of ML Bancorp, Inc. (parent company) are shown
below. The parent company has no significant operating activities.
CONDENSED STATEMENT OF FINANCIAL CONDITION:
<TABLE>
<CAPTION>
Dollars in Thousands
...............................................................................................................................
YEARS ENDED MARCH 31,
- -------------------------------------------------------------------------------------------------------------------------------
Assets 1997 1996
===============================================================================================================================
<S> <C> <C>
Cash $ 3 $ 282
- -------------------------------------------------------------------------------------------------------------------------------
Equity securities
available for sale -- 2,355
- -------------------------------------------------------------------------------------------------------------------------------
Investment in subsidiaries 183,426 137,347
- -------------------------------------------------------------------------------------------------------------------------------
Other assets 3,959 528
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $187,388 $140,512
===============================================================================================================================
Liabilities and Equity
- -------------------------------------------------------------------------------------------------------------------------------
Other Borrowed Money 51,547 --
- -------------------------------------------------------------------------------------------------------------------------------
Other liabilities 137 175
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 51,684 175
- -------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 135,704 140,337
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $187,388 $140,512
===============================================================================================================================
</TABLE>
CONDENSED STATEMENT OF OPERATIONS:
<TABLE>
<CAPTION>
Dollars in Thousands
..................................................................................................................................
YEARS ENDED MARCH 31, PERIOD FROM
----------------------------------------- AUGUST 11, 1994
TO
1997 1996 MARCH 31, 1995
==================================================================================================================================
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $28,000 $21,201 $6,000
- ----------------------------------------------------------------------------------------------------------------------------------
Gain on sales of securities available for sale 106 197 --
- ----------------------------------------------------------------------------------------------------------------------------------
Other 142 54 95
==================================================================================================================================
Total income 28,248 21,452 6,095
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Professional fees 361 389 86
- ----------------------------------------------------------------------------------------------------------------------------------
Other 495 250 33
==================================================================================================================================
Total expenses 856 639 119
==================================================================================================================================
Income before equity
in undistributed income of
subsidiaries and income tax benefit 27,392 20,813 5,976
- ----------------------------------------------------------------------------------------------------------------------------------
Income tax benefit (175) (124) --
==================================================================================================================================
Income before equity
in undistributed income of subsidiaries 27,567 20,937 5,976
- ----------------------------------------------------------------------------------------------------------------------------------
(Return of) equity in
undistributed income of subsidiaries (13,757) (9,317) 517
==================================================================================================================================
Net income $13,810 $11,620 $6,493
==================================================================================================================================
</TABLE>
37
<PAGE> 43
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
15. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS:
<TABLE>
<CAPTION>
Dollars in Thousands
..................................................................................................................................
YEARS ENDED MARCH 31, PERIOD FROM
--------------------------------------------- AUGUST 11, 1994
TO
1997 1996 MARCH 31, 1995
==================================================================================================================================
<S> <C> <C> <C>
Operating activities:
Net income $13,810 $11,620 $ 6,493
- ----------------------------------------------------------------------------------------------------------------------------------
Adjustments to
reconcile net income to net cash
provided by operating activities:
Return of (equity in)
income of subsidiaries 13,757 9,317 (517)
- ----------------------------------------------------------------------------------------------------------------------------------
Amortization of common
stock acquired by stock benefit plans 2,812 2,326 856
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain on sale of equity
securities available for sale (106) (197) --
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in investment
in subsidiaries (84,418) (22,596) --
- ----------------------------------------------------------------------------------------------------------------------------------
(Decrease) increase
in other liabilities (38) (1,634) 1,809
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in other assets (3,431) (527) (1)
==================================================================================================================================
Net cash (used) provided by
operating activities (57,614) (1,691) 8,640
- ----------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of common
stock of subsidiaries -- -- (91,959)
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of assets
available for sale (1,094) (2,890) (745)
- ----------------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of
assets available for sale 1,161 1,477 --
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends received from subsidiaries 28,000 21,201 6,000
==================================================================================================================================
Net cash provided (used)
by investing activities 28,067 19,788 (86,704)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Net proceeds from issuance
of debentures 50,000 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net proceeds from issuance
of common stock -- -- 95,572
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock acquired
by stock benefit plans -- -- (11,446)
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (16,616) (15,035) (5,648)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends paid (4,116) (3,194) --
==================================================================================================================================
Net cash provided (used)
by financing activities 29,268 (18,229) 78,478
==================================================================================================================================
Net (decrease) increase
in cash (279) (132) 414
==================================================================================================================================
Cash, beginning of period 282 414 --
==================================================================================================================================
Cash, end of period $ 3 $ 282 $ 414
==================================================================================================================================
</TABLE>
38
<PAGE> 44
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
16. CAPITAL SECURITIES
During the year ended March 31, 1997, the Company issued $50.0 million of trust
preferred securities at an interest rate of 9.875%, with a scheduled maturity
of March 1, 2027. The securities were issued by ML Bancorp's recently formed
subsidiary, ML Capital Trust I, and proceeds from the issue were invested in
Junior Subordinated Debentures issued by ML Bancorp. Interest of $2.47 million
is payable semi-annually, commencing on September 1, 1997. The Company has the
option, subject to required regulatory approval, to prepay the securities
beginning March 1, 2007.
The securities are shown on the liability side of the balance sheet as
"Corporation-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Corporation." The
interest cost associated with this issue is treated as a non-interest expense
on the consolidated statement of operations rather than interest expense.
17. REGULATORY MATTERS
The Company is required to maintain certain daily reserve balances in
accordance with Federal Reserve Board requirements. Aggregate reserves (in the
form of vault cash) were maintained to satisfy federal regulatory requirements
at March 31, 1997.
Retained earnings are substantially restricted in connection with regulations
related to the insurance of savings accounts, which require the Company to
maintain certain statutory reserves.
At the date of the Conversion to a capital stock form of ownership, the Company
established a liquidation account in an amount equal to its retained income as
of March 31, 1994. The liquidation account will be maintained for the benefit
of eligible account holders who continue to maintain their accounts at the
Company after the Conversion. The liquidation account will be reduced annually
to the extent that eligible account holders have reduced their qualifying
deposits as of each anniversary date. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In the event of
a complete liquidation of the Company, each eligible account holder will be
entitled to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held.
The Company may not declare or pay cash dividends on or repurchase any of its
share of common stock if the effect thereof would cause equity to be reduced
below applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.
Dividends payable to the Company by the Bank are subject to certain regulatory
limitations. The payment of dividends in any year without regulatory permission
is limited to the net profits (as defined for regulatory purposes) for that
year plus the retained net profits for the preceding two calendar years.
Accordingly, as of March 31, 1997, dividends in excess of those already
declared from the Bank to the Company are limited to $4.9 million.
Under the Office of Thrift Supervision capital regulations, savings
institutions must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "core" capital equal to 3.0% of adjusted total assets, Tier I capital
equal to 4.0% of adjusted total assets, and "risk-based" capital equal to 8.0%
of risk-weighted assets. At March 31, 1997, the Bank was in compliance with all
such regulatory requirements.
The following sets forth the Bank's compliance with each of the regulatory
capital requirements at March 31, 1997 and 1996.
<TABLE>
<CAPTION>
..................................................................................................................................
YEARS ENDED MARCH 31,
----------------------------------------------------------------------------------------------------
1997 (1) 1996
----------------------------------------------- -------------------------------------------------
TANGIBLE CORE TIER I RISK-BASED TANGIBLE CORE TIER I RISK-BASED
CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Regulatory Capital $116,611 $116,611 $116,611 $128,119 $131,881 $131,881 $131,881 $143,547
- ----------------------------------------------------------------------------------------------------------------------------------
Minimum Required
Regulatory Capital 29,498 59,019 78,495 73,458 26,461 52,960 70,437 75,011
==================================================================================================================================
Excess Regulatory Capital $ 87,113 $ 57,592 $38,116 $ 54,661 $105,420 $ 78,921 $ 61,444 $ 68,536
- ----------------------------------------------------------------------------------------------------------------------------------
Regulatory Capital as a
Percentage of Assets (1) 5.93% 5.93% 5.93% 13.95% 7.48% 7.48% 7.48% 15.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Minimum Capital Required
as a Percentage of Assets 1.50 3.00 4.00 8.00 1.50 3.00 4.00 8.00
==================================================================================================================================
Excess Regulatory Capital
as a Percentage of Assets 4.43% 2.93% 1.93% 5.95% 5.98% 4.48% 3.48% 7.31%
==================================================================================================================================
</TABLE>
(1) Tangible, core and Tier I capital are computed as a percentage of adjusted
total assets of $1.97 billion. Risk-based capital is computed as a percentage
of total risk-weighted assets of $918 million.
39
<PAGE> 45
ML BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
18. SFAS NO. 128, "EARNINGS PER SHARE"
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". This
statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, "Earnings Per Share," and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and the denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation. This statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. This
statement requires restatement of all prior period EPS data presented. The
Company has not yet determined the effect, if any, the adoption of this
statement will have on its EPS disclosure.
19. PENDING ACQUISITION
On February 4, 1997, the Company entered into a definitive agreement to acquire
Penncore Financial Services Corporation ("Penncore") the holding company for
Commonwealth State Bank ("Commonwealth"). Commonwealth is a $138 million,
state-chartered bank with two branches in Newtown and Yardley, Bucks County,
Pennsylvania. Under the terms of the agreement, Penncore shareholders can
receive either $36.56 in cash or 2.5 shares of ML Bancorp, Inc. common stock
for each Penncore share owned. The transaction will be accounted for as a
purchase and is subject to regulatory and Penncore shareholder approvals. The
total value of the deal is $14.1 million subject to change based upon ML
Bancorp's stock price prior to finalization of the acquisition. When
consummated, the transaction is not expected to materially affect the earnings
per share and tangible book value of the Company. Penncore has granted the
Company an option to purchase, under certain circumstances, Penncore common
stock in an amount up to 19.9% of Penncore's outstanding shares, at an exercise
price of $24.00 per share.
40
<PAGE> 1
EXHIBIT 23
[LETTERHEAD OF KPMG PEAT MAWRICK LLP]
The Board of Directors
of ML Bancorp, Inc.
We consent to incorporation by reference in the registration statement (No.
33-96708) on Form S-8 of ML Bancorp, Inc. of our report dated April 22, 1997,
relating to the consolidated statements of financial conditionof ML Bancorp,
Inc. and subsidiaries as of March 31, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the years in the three-year period ended March 31, 1997,
which report appears in the March 31, 1997 annual report on Form 10-K of ML
Bancorp, Inc.
/s/ KPMG PEAT MARWICK LLP
Philiadelphia, Pennsylvania
June 23, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 10,662
<INT-BEARING-DEPOSITS> 7,082
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 597,825
<INVESTMENTS-CARRYING> 417,364
<INVESTMENTS-MARKET> 411,776
<LOANS> 835,243
<ALLOWANCE> 14,733
<TOTAL-ASSETS> 1,959,847
<DEPOSITS> 473,357
<SHORT-TERM> 456,285
<LIABILITIES-OTHER> 7,083
<LONG-TERM> 437,418
0
0
<COMMON> 73
<OTHER-SE> 135,631
<TOTAL-LIABILITIES-AND-EQUITY> 1,959,847
<INTEREST-LOAN> 64,022
<INTEREST-INVEST> 72,735
<INTEREST-OTHER> 561
<INTEREST-TOTAL> 137,318
<INTEREST-DEPOSIT> 33,623
<INTEREST-EXPENSE> 83,139
<INTEREST-INCOME-NET> 54,179
<LOAN-LOSSES> 5,310
<SECURITIES-GAINS> (58)
<EXPENSE-OTHER> 48,860
<INCOME-PRETAX> 15,715
<INCOME-PRE-EXTRAORDINARY> 15,715
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,810
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.22
<YIELD-ACTUAL> 3.06
<LOANS-NON> 9,392
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13,124
<CHARGE-OFFS> 791
<RECOVERIES> 90
<ALLOWANCE-CLOSE> 14,733
<ALLOWANCE-DOMESTIC> 10,741
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,992
</TABLE>
