<PAGE>
As filed with the Securities and Exchange Commission on January 9, 1996
REGISTRATION NO. 33-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
________________
Susquehanna Bancshares, Inc.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
PENNSYLVANIA 23-2201716
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
26 NORTH CEDAR STREET
LITITZ, PENNSYLVANIA 17543
(717) 626-4721
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
RICHARD M. CLONEY
VICE PRESIDENT AND SECRETARY
26 NORTH CEDAR STREET
LITITZ, PENNSYLVANIA 17543
(717) 626-4721
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
________________
COPIES TO:
JAMES H. CARROLL, ESQ. LEE MEYERSON, ESQ.
MORGAN, LEWIS & BOCKIUS LLP SIMPSON THACHER & BARTLETT
ONE COMMERCE SQUARE 425 LEXINGTON AVENUE
417 WALNUT STREET NEW YORK, NEW YORK 10017
HARRISBURG, PA 17101 (212) 455-2000
(717) 237-4036
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) OFFERING PRICE (2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Senior Notes................. $35,000,000 100% $35,000,000 $12,069
============================================================================================================================
</TABLE>
<PAGE>
(1) Or, if any Senior Notes are issued at original issue discount, such greater
amount as shall result in aggregate proceeds to the Registrant of
$35,000,000.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION - DATED JANUARY 9, 1996
$35,000,000
SUSQUEHANNA BANCSHARES, INC.
____% SENIOR NOTES DUE ____
________________
Susquehanna Bancshares, Inc. ("Susquehanna" or the "Company") is offering
$35,000,000 aggregate principal amount of its ____% Senior Notes Due ____ (the
"Senior Notes"). Interest on the Senior Notes is payable semiannually on
__________ and __________ of each year commencing __________, 1996. The Senior
Notes will be available for purchase in denominations of $1,000 or any integral
multiple thereof. The Senior Notes are not redeemable prior to maturity and no
sinking fund is provided for the Senior Notes. See "DESCRIPTION OF SENIOR
NOTES."
The Senior Notes will be represented by one or more Global Notes registered
in the name of a nominee of The Depository Trust Company, as depository (the
"Depository"). Beneficial interests in the Global Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Except as described under "DESCRIPTION OF
SENIOR NOTES--Global Notes," Senior Notes in definitive form will not be issued
and owners of beneficial interests in the Global Notes will not be considered
holders of the Senior Notes. Settlement will be made in immediately available
funds. The Senior Notes will trade in the Depository's Same-Day Funds Settlement
System until maturity, and secondary market trading activity in the Senior Notes
will therefore settle in immediately available funds. All payments of principal
and interest will be made by the Company in immediately available funds. See
"DESCRIPTION OF SENIOR NOTES--Same-Day Settlement and Payment."
________________
THE SENIOR NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A
BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE SENIOR NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note............................ % % %
- -------------------------------------------------------------------------------------------------
Total...................................... $ $ $
=================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $138,000.
________________
The Senior Notes are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The several Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
the Senior Notes will be delivered in book-entry form only through the
facilities of the Depository on or about _____________, 1996.
________________
OPPENHEIMER & CO., INC. LEGG MASON WOOD WALKER
Incorporated
The date of this Prospectus is _________________, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed with the Commission are available for inspection and copying
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center, New
York, New York 10048. Copies of such documents may also be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
authorized for quotation on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") National Market. Such materials and other
information concerning the Company, therefore, can also be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C.
The Company has filed with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), a Registration Statement on Form S-3
(including all amendments and exhibits thereto, the "Registration Statement")
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement, including any amendments and exhibits
thereto, is available for inspection and copying as set forth above. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
2
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
Certain documents previously filed by the Company with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus as follows:
(1) the Annual Report on Form 10-K for the year ended December 31, 1994;
(2) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995;
(3) the Current Report on Form 8-K dated March 31, 1995, as amended by
Form 8-K/A-1 dated May 26, 1995, which Report contains audited
consolidated financial information for Atlanfed Bancorp, Inc. as of
March 31, 1995 and 1994 and for the years ended March 31, 1995, 1994
and 1993;
(4) the Current Report on Form 8-K dated April 21, 1995, as amended by
Form 8-K/A-1 dated May 24, 1995, which Report contains audited
consolidated financial information for Reisterstown Holdings, Inc. as
of March 31, 1995 and September 30, 1994, and for the six months ended
March 31, 1995 and for the years ended September 30, 1994 and 1993;
(5) the Current Report on Form 8-K dated November 20, 1995, which Report
contains audited consolidated financial information of the Company as
of December 31, 1994 and 1993 and for the years ended December 31,
1994, 1993 and 1992, which information has been restated to reflect
the acquisition of Atlanfed Bancorp, Inc., accounted for as a pooling
of interests; and
(6) the Current Report on Form 8-K dated November 21, 1995, which Report
contains audited consolidated financial information of Fairfax
Financial Corporation as of September 30, 1995 and 1994 and for the
years ended September 30, 1995, 1994 and 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering contemplated hereby shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing thereof. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. All information appearing in this
Prospectus should be read in conjunction with, and is qualified in its entirety
by, the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding statement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents referred to above (not including exhibits
thereto, unless such exhibits are specifically incorporated by reference
therein). Such requests should be directed to the Secretary, Susquehanna
Bancshares, Inc., 26 North Cedar Street, Lititz, Pennsylvania 17543, telephone
number (717) 626-4721.
3
<PAGE>
All information contained in this Prospectus is qualified in its entirety
by reference to the more detailed financial information and financial
statements, including notes thereto, appearing elsewhere in this Prospectus or
incorporated by reference herein.
SUSQUEHANNA BANCSHARES, INC.
GENERAL
Susquehanna Bancshares, Inc. ("Susquehanna" or the "Company") is a bank
holding company headquartered in Lititz, Pennsylvania. The Company operates as a
super-community bank holding company with six banks, two thrifts and two non-
bank subsidiaries. These subsidiaries provide banking and banking-related
services from 99 branches in central and south central Pennsylvania and west and
central Maryland. Based on total assets at June 30, 1995, Susquehanna is the
ninth largest bank holding company headquartered in Pennsylvania. The Company's
two non-bank subsidiaries provide leasing and insurance services. As of
September 30, 1995, Susquehanna had assets of $2.5 billion, net loans of $1.7
billion, deposits of $2.1 billion and shareholders' equity of $234 million.
The following table lists, as of September 30, 1995, each bank and thrift
subsidiary, the location of its principal office, its number of branches, and
(in millions of dollars) its total assets and deposits:
<TABLE>
<CAPTION>
Location of Number of Total Total
Principal Office Branches Assets Deposits
---------------- -------- ------ --------
<S> <C> <C> <C> <C>
Farmers First Bank (1)..................... Lititz, PA 32 $777 $650
Farmers & Merchants Bank and Trust (1)..... Hagerstown, MD 27 486 425
First National Trust Bank (2).............. Sunbury, PA 10 255 222
Williamsport National Bank (2)............. Williamsport, PA 10 225 194
Citizens National Bank of Southern PA (2).. Greencastle, PA 6 167 147
Spring Grove National Bank (2)............. Spring Grove, PA 3 63 55
Reisterstown Federal Savings Bank (3)...... Reisterstown, MD 2 262 220
Atlantic Federal Savings Bank (3).......... Baltimore, MD 9 250 175
</TABLE>
- ----------------------------
(1) State chartered bank.
(2) Nationally chartered bank.
(3) Federally chartered stock savings bank.
As a "super-community" bank holding company, the Company's strategy has
been to manage its banking subsidiaries on a decentralized basis, allowing each
subsidiary operating in different markets to retain its name and board of
directors as well as substantial autonomy in its day to day operations. The
Company feels such a strategy permits each subsidiary greater flexibility to
better serve its markets and be responsive to local customer needs. Susquehanna
continues, however, to implement consolidations in selected businesses,
operations and support functions in order to achieve greater economies of scale
and cost savings. The Company has commenced a full consolidation of back office
data processing operations of its six bank subsidiaries which is expected to be
completed by mid-1996. The Company further anticipates integrating its trust and
mortgage banking operations. Susquehanna also provides its banking subsidiaries
guidance in the areas of credit policy and administration, strategic planning,
investment portfolio management and other financial and administrative services.
Susquehanna was incorporated in Pennsylvania in 1982. Its executive offices
are located at 26 North Cedar Street, Lititz, Pennsylvania 17543, and its
telephone number is (717) 626-4721.
4
<PAGE>
MARKET AREAS
Susquehanna's market is increasingly geographically and economically
diversified with access to both rural markets and the more affluent markets of
Lancaster, York, Sunbury, Williamsport and Baltimore.
Susquehanna's Pennsylvania franchise is centered in Lancaster County and
also includes Lycoming, Franklin, Snyder, Northumberland, Columbia and York
Counties. The Company's market area, near the Pennsylvania state capital of
Harrisburg, has a diverse economic base which includes farming and farm-related
industry, light and heavy manufacturing, government activities, tourism,
educational facilities and natural resources.
In Pennsylvania, Susquehanna operates 61 branches (including three branches
located in supermarkets) and 44 ATMs connected to the MAC network. As of June
30, 1994, the latest date for which information is available, all but one of the
Company's Pennsylvania-based bank subsidiaries had deposit market shares of
between 10% and 21% in their respective principal market areas.
The Company's Maryland franchise includes Baltimore County, Baltimore City,
Carroll County, Harford County, Cecil County and Anne Arundel County in central
Maryland, and Allegany and Washington Counties in western Maryland.
Susquehanna's market in Allegany and Washington Counties is economically similar
to the Company's Pennsylvania market. As of June 30, 1994, the latest date for
which information is available, the Company's Maryland-based bank subsidiary had
a deposit market share in excess of 20% in this market area. As part of its
strategy to reinforce and expand its Maryland franchise, in the first half of
1995 Susquehanna completed the acquisition of two Maryland thrift holding
companies, Reisterstown Holdings, Inc. ("Reisterstown") and Atlanfed Bancorp,
Inc. ("Atlanfed"), totalling $512 million in assets. The acquisition of a third
thrift holding company, Fairfax Financial Corporation ("Fairfax"), totalling
$476 million in assets at September 30, 1995, is expected to close during the
first quarter of 1996 and will add Wicomico and Worcester Counties to
Susquehanna's Maryland franchise. These Maryland thrift acquisitions have
expanded Susquehanna's market into the more urban Baltimore banking market,
providing the Company with attractive commercial and consumer lending, trust
service and mortgage banking growth opportunities.
Including the Fairfax acquisition, in Maryland the Company operates 47
branches and 27 ATMs connected to the MAC and MOST networks. Given the market
overlap of the three Maryland thrifts, upon completion of the Fairfax
acquisition, it is management's intention to consolidate the thrifts into a
single Maryland thrift subsidiary.
BUSINESS
Susquehanna provides a wide range of retail and commercial banking
services. Susquehanna's strategy for its retail banking businesses is to expand
its deposit and other product market share through a high level of customer
service, new product offerings, application of new technologies and delivery
systems, and selective acquisitions. The Company operates an extensive branch
network and has a strong market presence in its primary markets in Pennsylvania
and Maryland. As a result of the development of broad banking relations with its
customers, the Company's lending and investing activities are funded almost
entirely by core deposits.
The Company's retail banking services include checking and savings
accounts, money market accounts, certificates of deposits, individual retirement
accounts, Christmas clubs, mutual funds, annuities, home equity lines of credit,
residential mortgage loans, home improvement loans, student loans, automobile
loans and personal loans. In general, the maximum unsecured consumer loan the
Company will extend is $15,000. Including home equity loans, consumer loans
accounted for 19% and residential mortgage loans accounted for 39% of the
Company's portfolio at September 30, 1995.
Prior to year-end 1995, Susquehanna plans to introduce six automatic
lending machines ("ALM"), three in its Maryland franchise and three in its
Pennsylvania franchise. ALMs represent a relatively new development in bank
services delivery systems and will afford consumers the convenience of 24 hour
credit up to a maximum loan amount of $5,000.
5
<PAGE>
The Company is also initiating a credit card offering. Using experience and
resources developed in a pilot program operated through one of its Pennsylvania
bank subsidiaries, the credit card program has now been expanded to include
similar offerings through other Susquehanna subsidiaries. The program targets
existing customers and selected prospects in Susquehanna's market areas.
Susquehanna expects to begin offering a debit card some time in 1996.
Through employees of Invest Financial Corporation based in Company offices,
Susquehanna offers its customers mutual funds and other financial products.
In 1994, Susquehanna established a Marketing Customer Information File
("MCIF") system to provide instant access to customer and market data.
Management can quickly manipulate and analyze data to update ongoing strategic
planning processes. Examples of MCIF applications include measurement of product
usage by branch, profitability by product, and product customer usage and market
penetration. The MCIF has significantly improved the Company's speed, efficiency
and cost-effectiveness in cross-selling its retail products.
Through its subsidiary, Susque-Bancshares Life Insurance Co., the Company
additionally offers certain credit related insurance products.
The acquisition of the Maryland thrifts substantially enhances
Susquehanna's mortgage origination and mortgage banking capabilities. The
consolidation of the resources that are available throughout its system, planned
for 1996, will facilitate an expansion of Susquehanna's mortgage banking
operations in its Maryland and Pennsylvania markets.
The Company's subsidiary banks and thrifts focus their commercial lending
efforts on small and mid-size companies. Virtually all commercial loans are
secured by tangible assets.
Susquehanna's commercial lending operations include commercial, financial
and agricultural lending (11% of the total loan portfolio at September 30,
1995), real estate construction lending (10%), and commercial mortgage lending
(20%). Loans originated by each subsidiary are subject to central review and
uniform Company credit standards. Nearly all of the Company's loans are
concentrated in the markets served by its subsidiary banks and thrifts.
COMPLETED AND PENDING ACQUISITIONS
Since 1982, Susquehanna has made 16 acquisitions totalling $1 billion in
assets, including the 1995 acquisitions in Maryland of Reisterstown and Atlanfed
totalling $512 million in assets. See "UNAUDITED SELECTED PRO FORMA FINANCIAL
DATA" and "UNAUDITED PRO FORMA FINANCIAL STATEMENTS." The Company continues to
selectively pursue the acquisition of strategically located branch offices and
whole institutions offering product expansion and/or geographic expansion into
nearby markets. The Company believes that attractive acquisition opportunities
could exist in central Pennsylvania, Maryland, Delaware, Virginia and West
Virginia.
The acquisition of Fairfax is anticipated to close during the first quarter
of 1996. Fairfax is the holding company for Fairfax Savings, FSB ("Fairfax
Savings"), a federally chartered stock savings bank which, as of September 30,
1995, had assets of $476 million and operated nine banking offices located in
metropolitan Baltimore and Carroll, Wicomico and Worcester Counties in Maryland.
Susquehanna currently anticipates that the purchase price for the Fairfax
acquisition will be approximately $63 million in cash (subject to a closing book
value adjustment) (the "Fairfax Merger").
Consummation of the Fairfax Merger is subject to the approval of the Board of
Governors of the Federal Reserve System ("Federal Reserve Board") and the
Director of the Office of Thrift Supervision ("OTS"). All required approvals
have been received. The Fairfax Merger is also subject to satisfaction of
various other
6
<PAGE>
conditions specified in the acquisition agreement. All shareholder approvals
required for the consummation of the Fairfax Merger have been obtained.
Management of Susquehanna believes that the Fairfax Merger will be
consummated during the first quarter of 1996. There is no assurance, however,
that the Fairfax Merger will be consummated, or that it will not extend beyond
such time period or be consummated on terms different than those described
herein. The merger agreement relating to the Fairfax Merger may be terminated
after March 31, 1996, unless the respective parties agree to extend the time
period by which the closing of such transaction must occur.
FINANCING ACTIVITIES
In December 1995, Susquehanna completed a public offering of 1,495,000
additional shares of Common Stock (the "Common Stock Offering"). The net
proceeds of the Common Stock Offering (approximately $37.6 million) will be used
to fund a portion of the estimated $63 million cash consideration required to
consummate the Fairfax Merger. Susquehanna intends to use the proceeds of the
Senior Notes offered hereby to fund the remaining portion of the cash
consideration required to consummate the Fairfax Merger and for general
corporate purposes. See "USE OF PROCEEDS." The offering of the Senior Notes
contemplated hereby and the Common Stock Offering are both reflected in the pro
forma financial information contained in this Prospectus. See "UNAUDITED PRO
FORMA FINANCIAL STATEMENTS."
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Senior
Notes to fund a portion of the cash consideration for the Fairfax Merger and for
general corporate purposes. The issuance of the Senior Notes is not conditioned
on the closing of the Fairfax Merger. In the event that the Fairfax Merger is
not consummated, all of the net proceeds will be used for general corporate
purposes, which may include funding possible future acquisitions and increasing
investments in the Company's banking subsidiaries.
7
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of
Susquehanna, as of September 30, 1995, (i) on a historical basis as reported,
(ii) as adjusted on a pro forma basis to reflect the Common Stock Offering and
the offering of the Senior Notes contemplated hereby and (iii) as further
adjusted on a pro forma basis to reflect the use of the net proceeds from such
offerings to fund the cash consideration for the Fairfax Merger. The pro forma
capitalization is based on, and is subject to, the assumptions set forth in the
notes to the Unaudited Pro Forma Financial Statements appearing elsewhere in
this Prospectus. The information presented should be read in conjunction with
such pro forma financial statements and the notes thereto.
<TABLE>
<CAPTION>
September 30, 1995
----------------------------------------------
As Adjusted Pro Forma for
As Reported for the Offerings Fairfax Merger
----------- ----------------- --------------
(In thousands, except ratios and share data)
<S> <C> <C> <C>
Long Term Debt:
Debt of parent................................... $ 50,000 $ 50,000 $ 50,000
Debt of subsidiaries............................. 41,979 41,979 54,179
Senior Note offering............................. --- 35,000 35,000
-------- -------- --------
Total Long Term Debt........................... 91,979 126,979 139,179
Shareholders' Equity:
Common stock: $2.00 par value; 32,000,000
shares authorized; 11,682,880, 13,177,880 and
13,177,880 shares issued; 11,640,549,
13,135,549 and 13,135,549 shares
outstanding.................................... 23,366 26,356 26,356
Surplus.......................................... 43,014 77,612 77,612
Retained earnings................................ 168,436 168,436 168,436
Unrealized gains and losses for available-for-
sale securities, net of tax effects............ (287) (287) (280)
Less: Treasury stock (42,331 shares at cost)..... 323 323 323
-------- -------- --------
Total shareholders' equity..................... 234,206 271,794 271,801
-------- -------- --------
Total capitalization........................... $326,185 $398,773 $410,980
======== ======== ========
Capital Ratios:
Tier 1 risk-based capital ratio.................. 11.85% 13.82% 10.91%
Total risk-based capital ratio................... 15.87 17.82 14.52
Leverage ratio................................... 8.57 10.08 7.85
</TABLE>
8
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain selected consolidated historical
financial information for Susquehanna which has been derived from and should be
read in conjunction with, and is qualified in its entirety by, the consolidated
financial statements of Susquehanna, including the notes thereto, incorporated
by reference in this Prospectus. Interim unaudited data for the nine month
periods ended September 30, 1995 and 1994 reflect, in the opinion of management,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such data. Results for the periods ended September 30,
1995 and 1994 are not necessarily indicative of results which may be expected
for any other period or for the fiscal year as a whole.
BALANCE SHEET AND INCOME STATEMENT DATA
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------------- ----------------------------------------------------------------------
1995(1) 1994(2) 1994(2) 1993(2) 1992(2) 1991(2) 1990(2)
------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
(In thousands except per share data)
BALANCE SHEET DATA:
Average assets................ $2,399,570 $2,089,519 $2,123,294 $1,965,863 $1,920,166 $1,859,874 $1,787,212
Average loans and leases,
net of unearned income....... 1,614,875 1,360,363 1,382,111 1,287,078 1,275,431 1,277,676 1,242,327
Average investment
securities................... 588,276 554,382 565,395 491,210 469,019 407,444 359,513
Average deposits.............. 1,992,814 1,762,360 1,785,782 1,669,427 1,631,472 1,574,316 1,513,274
Average shareholders'
equity....................... 224,771 217,027 217,206 202,383 186,629 173,712 162,625
INCOME STATEMENT DATA:
Net interest income........... $ 78,570 $ 69,004 $ 94,145 $ 87,027 $ 83,761 $ 77,898 $ 73,049
Provision for loan and lease
losses....................... 3,711 2,989 3,987 5,130 4,721 4,869 5,021
Net interest income after
provision for loan and
lease losses................. 74,859 66,015 90,158 81,897 79,040 73,029 68,028
Other income.................. 11,742 11,894 15,098 15,816 15,284 13,262 10,244
Other expense................. 59,549 53,402 72,710 66,004 63,611 58,489 54,435
Income before income taxes,
extraordinary item and
cumulative effect of a
change in accounting
principle.................... 27,052 24,507 32,546 31,709 30,713 27,802 23,837
Provision for income
taxes........................ 8,184 7,374 9,718 9,527 8,541 6,515 4,995
Income before extraordinary
item and cumulative effect
of a change in accounting
principle.................... 18,868 17,133 22,828 22,182 22,172 21,287 18,842
Extraordinary item............ --- (732) (732) --- --- --- ---
Cumulative effect of a
change in accounting
principle.................... --- --- --- 1,023 --- --- ---
Net income.................... 18,868 16,401 22,096 23,205 22,172 21,287 18,842
</TABLE>
_________________
(1) Data for the nine months ended September 30, 1995 reflect the acquisition
of Reisterstown on April 21, 1995, accounted for as a purchase and the
acquisition of Atlanfed on April 1, 1995, accounted for as a pooling of
interests.
(2) Data for the nine months ended September 30, 1994 and for the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 have been restated to reflect
the acquisition of Atlanfed, accounted for as a pooling of interests.
9
<PAGE>
FINANCIAL RATIOS
<TABLE>
<CAPTION>
At or for the Nine
Months Ended
September 30, At or for the Year Ended December 31,
------------------------ ------------------------------------------------------
1995(1) 1994(2) 1994(2) 1993(2) 1992(2) 1991(2) 1990(2)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS PERFORMANCE
RATIOS: (3)
Return on average total
assets before extraordinary
item and cumulative
effect of a change in
accounting principle......... 1.05% 1.10% 1.08% 1.13% 1.15% 1.14% 1.05%
Return on average common
shareholders' equity before
extraordinary item and
cumulative effect of a
change in accounting
principle.................... 11.22 10.55 10.51 10.96 11.88 12.25 11.59
Net interest margin............ 4.90 4.90 4.90 4.90 4.90 4.80 4.70
ASSET QUALITY RATIOS: (3)
Allowance for loan and
lease losses to total loans
and leases................... 1.65% 1.61% 1.63% 1.66% 1.41% 1.28% 1.16%
Allowance for loan and
lease losses to
nonperforming loans and
leases....................... 84.75 90.86 98.71 119.96 113.76 101.49 92.65
Net loans and leases
charged off to average
loans and leases............. .24 .16 .13 .15 .25 .25 .37
Nonperforming assets to
total loans and leases and
other real estate owned...... 2.30 2.31 2.00 2.05 2.06 1.91 1.88
Nonperforming loans and
leases to net loans and
leases....................... 1.95 1.77 1.65 1.38 1.24 1.26 1.26
CAPITAL RATIOS:
Average shareholders'
equity to average total
assets....................... 9.37% 10.39% 10.23% 10.29% 9.72% 9.34% 9.10%
Tier 1 risk-based capital
ratio........................ 11.85 13.55 14.20 15.23 13.88 13.02 12.12
Total risk-based capital
ratio........................ 15.87 14.80 15.45 16.48 15.13 14.21 13.21
Leverage ratio................. 8.57 9.34 9.89 10.32 9.49 9.51 8.95
RATIOS OF EARNINGS TO FIXED
CHARGES:(4)
Excluding interest on
deposits..................... 4.21x 7.17x 6.66x 7.75x 6.63x 5.22x 4.16x
Including interest on
deposits..................... 1.44x 1.60x 1.57x 1.56x 1.44x 1.30x 1.24x
</TABLE>
_______________
(1) Data for the nine months ended September 30, 1995 reflect the acquisition
of Reisterstown on April 21, 1995, accounted for as a purchase and the
acquisition of Atlanfed on April 1, 1995, accounted for as a pooling of
interests.
(2) Data for the nine months ended September 30, 1994 and for the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 have been restated to reflect
the acquisition of Atlanfed, accounted for as a pooling of interests.
(3) Annualized where applicable.
(4) For purposes of computing these ratios, earnings represent income before
income taxes, extraordinary item and cumulative effect of a change in
accounting principle plus fixed charges. Fixed charges, excluding interest
on deposits, include interest (other than on deposits), whether expensed or
capitalized, and that portion of rental expense (generally one third) deemed
representative of the interest factor. Fixed charges, including interest on
deposits, include all interest, whether expensed or capitalized, and that
portion of rental expense (generally one third) deemed representative of the
interest factor.
10
<PAGE>
UNAUDITED SELECTED PRO FORMA FINANCIAL DATA
The following tables set forth unaudited selected pro forma data for
Susquehanna which gives effect to the Atlanfed acquisition, accounted for as a
pooling of interests, each of the Fairfax Merger (together with the Senior Note
offering contemplated hereby and the Common Stock Offering) and the Reisterstown
acquisition, accounted for as purchases, all as if they had been consummated as
of January 1, 1994. The selected pro forma data is not necessarily indicative of
the results that would have been achieved had such transactions been consummated
on such dates and should not be construed as representative of future
operations. This presentation is subject to the assumptions set forth in the
notes to the Unaudited Pro Forma Financial Statements appearing elsewhere in
this Prospectus. The information presented should be read in conjunction with
such pro forma financial statements, and the notes thereto, and the historical
consolidated financial statements, including the notes thereto, of Susquehanna,
Atlanfed, Fairfax and Reisterstown incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
At or for the
Nine Months At or for the
Ended Year Ended
September 30, December 31,
1995 1994
--------------- --------------
(In thousands, except per share
data and ratios)
<S> <C> <C>
BALANCE SHEET DATA:
Average assets.................................................. $2,977,761 $2,813,719
Average loans and leases, net of unearned income................ 2,099,105 1,921,820
Average investment securities................................... 626,126 635,513
Average deposits................................................ 2,442,068 2,336,176
Average shareholders' equity.................................... 262,366 254,801
INCOME STATEMENT DATA:
Net interest income............................................. $ 92,120 $ 114,887
Provision for loan and lease losses............................. 3,756 4,003
Other income.................................................... 14,514 25,995
Other expense................................................... 71,657 91,584
Income before income taxes...................................... 31,221 45,295
Net income from operations...................................... 20,954 29,370
EARNINGS PERFORMANCE RATIOS: (1)
Return on average total assets.................................. 0.94% 1.04%
Return on average common shareholders' equity................... 10.68 11.53
Net interest margin............................................. 4.58 4.54
ASSET QUALITY RATIOS: (1)
Allowance for loan and lease losses to total loans and leases... 1.51% 1.52%
Allowance for loan and lease losses to nonperforming loans and
leases........................................................ 86.77 112.86
Net loans and leases charged off to average loans and leases.... 0.19 0.11
Nonperforming assets to total loans and leases and other real
estate owned.................................................. 2.15 1.82
Nonperforming loans and leases to net loans and leases.......... 1.74 1.35
RATIOS OF EARNINGS TO FIXED CHARGES: (2)
Excluding interest on deposits.................................. 3.67x 4.85x
Including interest on deposits.................................. 1.39x 1.52x
</TABLE>
_______________________
(1) Annualized where applicable.
(2) For purposes of computing these ratios, earnings represent income before
income taxes plus fixed charges. Fixed charges, excluding interest on
deposits, include interest (other than on deposits), whether expensed or
capitalized, and that portion of rental expense (generally one third) deemed
representative of the interest factor. Fixed charges, including interest on
deposits, include all interest, whether expensed or capitalized, and that
portion of rental expense (generally one third) deemed representative of the
interest factor.
11
<PAGE>
FINANCIAL OVERVIEW
The following should be read in conjunction with Susquehanna's Consolidated
Financial Statements for the year ended December 31, 1994, and for the nine
months ended September 30, 1995, including the related Management's Discussion
and Analysis of Financial Condition and Results of Operations included in
Susquehanna's Current Report on Form 8-K dated November 20, 1995, and Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995, respectively,
which are incorporated herein by reference. See "INCORPORATION OF DOCUMENTS BY
REFERENCE."
EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 VS 1994
Net income for the nine months ending September 30, 1995 was $18.9 million
compared to $16.4 million for the nine months ending September 30, 1994 or a 15%
increase. Net income before extraordinary item for the nine months ending
September 30, 1994 was $17.1 million compared with $18.9 million in 1995 or an
increase of $1.7 million or 10%. Earnings per share for the first nine months
before and after extraordinary item increased from $1.47 and $1.41 per share,
respectively, in 1994 to $1.62 per share for both before and after extraordinary
item in 1995. The increase in net income before extraordinary item for the nine
months is due primarily to an increase in net interest income of $9.6 million
offset by increases in operating expenses, loan loss provision and income taxes
of $6.1 million, $0.7 million and $0.8 million, respectively.
For the nine months ended September 30, 1995, return on average assets was
1.05% which did not change from the comparable period in 1994, while return on
average equity was 11.22% for the first nine months of 1995 compared to 10.10%
for 1994. Book value per share increased to $20.12 per share at September 30,
1995 from $18.66 per share at December 31, 1994 and from $18.65 per share at
September 30, 1994.
NET INTEREST INCOME
Susquehanna's major source of operating revenue is net interest income
which increased $9.6 million, 14%, over the comparable nine month period of
1994. The net interest margin, on a tax equivalent basis, for the nine month
periods ended September 30, 1995 and 1994 was 4.9%. Average yields on earning
assets were 8.4% for the nine month period ending September 30, 1995 compared to
7.7% in the comparable period of 1994. Average funding costs increased to 4.3%
for the nine months ended September 30, 1995 from 3.3% in the comparable period
in 1994. Therefore, the increase in net interest income was due to the growth in
earning assets primarily resulting from the acquisition of the Allegany branch
offices in July 1994 and Reisterstown in April 1995 and the $50 million
subordinated debt offering in February 1995.
An additional positive influence on the ability of Susquehanna to maintain
a net interest margin at or near 5.0% has been the increase in non-interest-
bearing demand deposits and earnings retention. While Susquehanna's interest
margin has generally remained at or near the 5.0% level, variances do occur as
an exact repricing match of assets and liabilities is not possible. See "--
Interest Rate Sensitivity."
PROVISION AND ALLOWANCE FOR LOSSES ON LOANS AND LEASES
The following table summarizes the Company's provision and allowance for
loan and lease losses for the nine month periods ended September 30, 1995 and
1994:
12
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1995 1994
-------- --------
(Dollars in thousands)
<S> <C> <C>
Balance-Beginning of period............................... $23,845 $21,717
Allowance acquired in business combination.............. 3,323 __
Change in fiscal year................................... (8) __
Additions charged to operating expenses................. 3,711 2,989
------ ------
30,871 24,706
------ ------
Charge-offs............................................. (3,694) (2,387)
Recoveries.............................................. 771 795
------ ------
Net charge-offs....................................... (2,923) (1,592)
------ ------
Balance - Period end...................................... $27,948 $23,114
====== ======
Net charge-offs as a percent of average loans and leases
(annualized)............................................ 0.24% 0.16%
Allowance as a percent of period-end loans and leases..... 1.65% 1.61%
Average loans and leases.................................. $1,614,875 $1,360,363
Period-end loans and leases............................... 1,692,790 1,435,731
</TABLE>
As indicated by the table, the provision for losses on loans and leases for
the nine months ended September 30, 1995 was $3.7 million compared to $3.0
million for the nine months ended September 30, 1994. This increase resulted
primarily from the rapid deterioration of one borrower. Susquehanna performs
quarterly reviews of the adequacy of the allowance for loan and lease losses to
determine the appropriate provision to be charged in that period.
NON-INTEREST INCOME
Non-interest income, recorded as other income, consists of service charges
on deposit accounts, commissions, fees received for travelers' check sales and
money orders, fees for trust services, premium income generated from reinsurance
activities, gains and losses on securities transactions, net gains on sales of
mortgages, net gains on sales of other real estate owned and other miscellaneous
income, such as safe deposit box rents. Other income as a percentage of net
interest income and other income was 13% and 15% for the nine months ended
September 30, 1995 and 1994, respectively.
Non-interest income for the first nine months decreased from $11.9 million
in 1994 to $11.7 million in 1995 primarily due to net investment security gains
of $1.0 million in 1994 offset by the $0.6 million gain on sale of student loans
in September 1995.
13
<PAGE>
NON-INTEREST EXPENSE
Non-interest expenses are categorized into five main groupings: employee-
related expenses, which include salaries, fringe benefits, and employment taxes;
occupancy expenses, which include depreciation, rents, maintenance, utilities,
and insurance; equipment expenses, which include depreciation, rents and
maintenance; FDIC insurance premiums on deposits; and other expenses incurred in
operating Susquehanna's business.
Non-interest expenses for the first nine months increased $6.1 million from
$53.4 million in 1994 to $59.5 million in 1995. This increase was primarily due
to salaries and employee benefits, an increase of $4.3 million and other
operating expenses, an increase of $2.0 million offset by a decline in FDIC
insurance premiums of $0.5 million. These increases and the decline were
significantly affected by the purchases of Reisterstown in April 1995 and the
Allegany branch offices in July 1994 and by the Bank Insurance Fund refund of
$1.0 million in September 1995. See "REGULATORY MATTERS--Federal Deposit
Insurance Corporation Improvement Act of 1991" and "--Proposed Legislation
Regarding SAIF Assessments."
LOAN PORTFOLIO
Loans and leases, net of unearned income, at September 30, 1995 and
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
-------------------- ------------------
(Dollars in thousands)
Balance Percent Balance Percent
---------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural.. $ 192,502 11% $ 186,013 13%
Real estate - construction............... 175,682 10 84,886 6
Residential mortgage..................... 655,252 39 557,969 38
Commercial mortgage...................... 330,883 20 294,673 20
Home equity.............................. 104,039 6 102,715 7
Consumer................................. 216,250 13 223,963 15
Leases................................... 18,182 1 15,967 1
---------- --- ---------- ---
Total loans and leases.............. $1,692,790 100% $1,466,186 100%
========== === ========== ===
</TABLE>
Loans at September 30, 1995 were $1.7 billion compared to $1.4 billion at
September 30, 1994 and accounted for 67% of period-end assets in 1995 compared
to 65% in 1994. Most of this growth is attributable to the Reisterstown
acquisition in April 1995. Average loans represented 72% and 69% of average
earning assets for the nine month periods in 1995 and 1994, respectively.
ASSET QUALITY
The following table summarizes Susquehanna's risk assets at September 30,
1995, December 31, 1994 and September 30, 1994:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
-------------- ------------- --------------
(Dollars in thousands)
Nonperforming assets:
<S> <C> <C> <C>
Nonaccrual loans and leases.................... $26,216 $17,215 $18,462
Restructured accrual loans..................... 6,760 6,941 6,976
Other real estate owned........................ 6,022 5,341 7,838
------- ------- -------
Total nonperforming assets $38,998 $29,497 $33,276
======= ======= =======
As a percent of period-end loans and leases and
other real estate owned........................ 2.30% 2.00% 2.31%
Loans and leases contractually past due 90 days
and still accruing............................. $ 4,402 $14,450 $ 7,387
</TABLE>
14
<PAGE>
Non-performing assets at September 30, 1995 were $39.0 million compared to
$33.3 million at September 30, 1994. This increase was primarily due to one
hotel loan with a principal balance of approximately $7 million that went on
nonaccrual status in March 1995. This loan is now current for principal and
interest and has been removed from nonaccrual status. Non-performing assets as a
percentage of total loans and other real estate owned was 2.30% at September 30,
1995 compared to 2.31% at September 30, 1994. The allowance for loan losses as a
percentage of non-performing loans was 85% at September 30, 1995 compared to 91%
at September 30, 1994. Net charge-offs annualized as a percentage of average
loans and leases equaled 0.24% at September 30, 1995 and 0.16% at September 30,
1994. Virtually all non-performing assets are secured by property having
substantial value, principally in the form of real estate. Property included in
the category of other real estate owned is carried at the lower of cost or fair
value.
INVESTMENT SECURITIES
The following table summarizes the Company's investment portfolio at
September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
-------------------------- --------------------------
Amortized cost Fair value Amortized cost Fair value
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
(In thousands)
Available-for-sale:
U.S. Treasury.................... $161,946 $162,134 $189,461 $184,494
U.S. Government agencies......... 52,538 52,153 22,042 20,932
Mortgage-backed.................. 113,701 112,451 70,797 68,505
Corporates....................... 73,225 73,451 89,629 84,989
Equities......................... 16,748 17,536 14,443 15,125
-------- -------- -------- --------
Total available-for-sale....... 418,158 417,725 386,372 374,045
-------- -------- -------- --------
Held-to-maturity:
U.S. Treasury.................... $ 9,962 $ 10,180 $ 10,948 $ 10,658
U.S. Governmental agencies....... 19,973 20,105 28,506 27,166
State & municipal................ 106,270 107,543 120,582 118,677
Mortgage-backed.................. 19,526 19,694 44,913 42,310
Corporates....................... 19,025 19,249 19,002 18,224
-------- -------- -------- --------
Total held-to-maturity......... 174,756 176,771 223,951 217,035
-------- -------- -------- --------
Total investment securities.. $592,914 $594,496 $610,323 $591,080
======== ======== ======== ========
</TABLE>
The investment security portfolio at September 30, 1995 totaled $593
million of which $418 million was classified as available-for-sale. The held-to-
maturity portfolio was $175 million at September 30, 1995 with a fair value of
$177 million. U.S. Treasury and U.S. government agency obligations accounted for
41% of the total investment security portfolio; state and municipal bonds, 18%;
corporate bonds, 16%; and mortgage-backed securities, 22%. The tax equivalent
yield for the nine months ended September 30, 1995 was 6.3% compared to 6.0% for
the same period of 1994.
DEPOSITS
The following table summarizes the Company's deposits at September 30,
1995, December 31, 1994 and September 30, 1994:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
-------------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)
Amount Percent Amount Percent Amount Percent
---------- ------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Demand................... $ 255,191 12% $ 261,045 14% $ 248,984 13%
Interest-bearing demand.. 471,909 23 464,052 25 475,060 26
Savings.................. 388,331 19 398,423 21 414,257 22
Time..................... 882,796 42 697,406 37 681,377 37
Time of $100 or more..... 89,814 4 45,404 3 39,961 2
---------- --- ---------- --- ---------- ---
Total deposits......... $2,088,041 100% $1,866,330 100% $1,859,639 100%
========== === ========== === ========== ===
</TABLE>
Susquehanna's core deposit base is its primary funding source. Deposits are
the primary funding source for earning assets. The deposit base increased over
the past year primarily through the Reisterstown acquisition. Total deposits as
of September 30, 1995 were $2.1 billion compared to $1.9 billion as of September
30, 1994. The deposit base consists primarily of in-market deposits and there
are no brokered deposits. Certificates of deposit of $100,000 or more represent
4.3% of the total deposits.
CAPITAL ADEQUACY
Susquehanna's total shareholders' equity at September 30, 1995 was $234
million compared to $217 million at September 30, 1994. To date, the growth of
the equity account has been achieved through the retention of earnings. At
September 30, 1995, the Tier 1 risk-based capital, the total risk-based capital
and the leverage ratios were 11.85%; 15.87%; and 8.57%; respectively.
INTEREST RATE SENSITIVITY
Susquehanna employs a variety of methods to monitor interest rate
sensitivity and limit net interest income exposure. By dividing the assets and
liabilities into three groups (fixed rate, floating rate, and those which
reprice only at management's discretion) strategies are developed which are
designed to minimize exposure to interest rate fluctuations. Management also
utilizes gap analysis to evaluate rate sensitivity at a given point in time.
An institution with more assets repricing than liabilities over a given
time frame is considered asset sensitive, and one with more liabilities
repricing than assets is considered liability sensitive. An asset sensitive
institution will generally benefit from rising rates, and a liability sensitive
institution will generally benefit from declining rates. While Susquehanna has
had and will into the foreseeable future experience a negative gap position
(liability sensitive), the impact of a rapid rise in interest rates, as occurred
in 1994, did not have a significant effect on the net interest margin of
Susquehanna, which has consistently remained at or near the 5.0% level.
16
<PAGE>
REGULATORY MATTERS
The Company is a bank holding company subject to supervision and regulation
by the Federal Reserve Board under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). In general, the BHC Act and regulations promulgated by
the Federal Reserve Board limit the business of bank holding companies to owning
or controlling banks and engaging in such other activities as the Federal
Reserve Board may determine to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. With certain exceptions,
the BHC Act prohibits bank holding companies from acquiring direct or indirect
ownership or control of more than 5% of any class of voting shares in any
company, including any bank, without the prior approval of the Federal Reserve
Board. Since consummation of the Atlanfed and Reisterstown acquisitions, the
Company has also been subject to supervision and regulation by the Office of
Thrift Supervision ("OTS") as a savings and loan holding company.
Susquehanna's banking subsidiaries include four national banks, a Maryland
state-chartered bank, a Pennsylvania state-chartered bank and two federally-
chartered savings banks. These subsidiaries, therefore, are subject to
regulation and supervision by various regulatory agencies, including the state
banking authorities of Pennsylvania and Maryland, the Federal Reserve Board, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation (the
"FDIC") and the OTS. Various consumer laws and regulations also affect the
operations of the Company's subsidiaries.
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
Susquehanna's ability to pay dividends is largely dependent upon the
receipt of dividends from its banking subsidiaries. Both federal and state laws
impose restrictions on the ability of these banking subsidiaries to pay
dividends. In addition to the specific restrictions discussed below, bank
regulatory agencies, in general, also have the ability to prohibit proposed
dividends by a bank or savings institution which would otherwise be permitted
under applicable regulations if the regulatory body determines that such
distribution would constitute an unsafe or unsound practice.
The Federal Reserve Board and the FDIC have issued policy statements which
provide that, as a general matter, insured banks and bank holding companies may
pay dividends only out of current operating earnings.
For national banks, the approval of the Comptroller of the Currency is
required for the payment of dividends in any calendar year by a national bank
subsidiary if the total of all dividends declared by such bank in a calendar
year exceeds the current year's net income combined with the retained net income
of the two preceding years. "Retained net income" means the net income of a
specified period less any common or preferred stock dividends declared for that
period. Moreover, no dividends may be paid by a national bank in excess of its
undivided profits account.
Dividends payable by a Pennsylvania state-chartered bank are restricted due
to the requirement that such bank set aside to a surplus fund each year at least
10% of its net earnings until such surplus equals the amount of its capital.
Furthermore, the payment of a dividend may not be made if it results in the
reduction of the surplus available to the bank.
For a Maryland state-chartered bank, dividends may be paid out of undivided
profits or, with the approval of the Maryland Bank Commissioner, from surplus in
excess of 100% of required capital stock. If, however, the surplus of a Maryland
bank is less than 100% of its required capital stock, cash dividends may not be
paid in excess of 90% of net earnings.
Federal regulations impose restrictions on dividend payments by savings
institutions, like Atlantic Federal Savings Bank and Reisterstown Federal
Savings Bank, which converted from mutual to stock ownership and were federally
insured at the time of the conversion. Upon conversion, these regulations
require that a "liquidation
17
<PAGE>
account" be established by restricting a portion of net capital for the benefit
of eligible savings account holders who maintain their savings accounts with the
institution after conversion. In the event of complete liquidation (and only in
such event), each savings account holder who continues to maintain a savings
account will be entitled to receive a distribution from the liquidation account
after payment to all creditors, but before any liquidation distribution with
respect to capital stock. This account is proportionately reduced for any
decreases in the eligible holder's savings accounts. Under federal regulations,
Atlantic Federal Savings Bank and Reisterstown Federal Savings Bank may not
declare or pay a cash dividend on common stock if the dividend would cause the
institution's capital to be reduced below the amount required for the
liquidation account or, as to all savings institutions, below the capital
requirements imposed by the OTS under the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), and regulations promulgated
thereunder.
Savings institution holding companies are required to give the OTS 30 days'
prior notice of any proposed declaration of dividends to the holding company.
Under OTS regulations, a savings institution that, immediately prior to,
and on a pro forma basis after giving effect to, a proposed dividend or other
capital distribution, has total capital (as defined by OTS regulation) that is
equal to or greater than the amount of its fully phased-in capital requirements
(a "Tier 1 Institution") generally is permitted without OTS approval to make
capital distributions during a calendar year in an aggregate amount equal to the
greater of (i) up to 100% of its net income to date during the calendar year
plus an amount that would reduce by one-half the amount by which its total
capital exceeded its fully phased-in risk-based capital requirement at the
beginning of the calendar year or (ii) up to 75% of its net income for the
previous four quarters. A savings institution with total capital in excess of
current minimum capital requirements but not in excess of the fully phased-in
requirements (a "Tier 2 Institution") is permitted, depending on the
institution's level of capital, to make capital distributions without OTS
approval of up to 25%, 50% or 75% of its net income for the previous four
quarters, less dividends already paid for such period, depending on the savings
institution's level of risk-based capital. A savings institution that fails to
meet current minimum capital requirements (a "Tier 3 Institution") is prohibited
from making any capital distributions without the prior approval of the OTS.
Tier 1 Institutions that have been notified by the OTS that they are in need of
more than normal supervision will be treated as either a Tier 2 or Tier 3
Institution. As of September 30, 1995, each of Atlantic Federal Savings Bank,
Reisterstown Federal Savings Bank and Fairfax Savings satisfied the requirements
of a Tier 1 Institution.
Savings institutions are further prohibited from making any capital
distributions if after making the distribution, an institution would have: (i) a
total risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based
capital ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%.
In accordance with the above regulatory restrictions, each of Susquehanna's
banking subsidiaries currently has the ability to pay dividends and at September
30, 1995, an aggregate of $23 million was available for the payment of dividends
to Susquehanna without prior regulatory approval.
There are also statutory limits on the transfer of funds to the Company and
its nonbanking subsidiaries by its banking subsidiaries whether in the form of
loans or other extensions of credit, investments or asset purchases. Such
transfers by any banking subsidiary to the Company or to any such nonbanking
subsidiary generally are limited in amount to 10% of such bank's capital and
surplus, or 20% in the aggregate. Furthermore, such loans and extensions of
credit are required to be collateralized in specified amounts.
HOLDING COMPANY STRUCTURE
Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to its subsidiary banks and to make
capital injections into a troubled subsidiary bank, and the Federal Reserve
Board may charge the bank holding company with engaging in unsafe and unsound
practices for failure to commit resources to a subsidiary bank when required. A
required capital injection may be called for at a time when the Company does not
have the resources to provide it. Any capital loans by the Company to its
subsidiary
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bank would be subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank.
In addition, under FIRREA, depository institutions insured by the FDIC can
be held liable for any losses incurred by, or reasonably anticipated to be
incurred by, the FDIC after August 9, 1989 in connection with (i) the default of
a commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default. "Default" is defined generally as the
appointment of a conservator or receiver and "in danger of default" is defined
generally as the existence of certain conditions indicating that a "default" is
likely to occur in the absence of regulatory assistance. Accordingly, in the
event that any insured subsidiary of the Company causes a loss to the FDIC,
other insured subsidiaries of the Company could be required to compensate the
FDIC by reimbursing it for the estimated amount of such loss.
For a description of certain other requirements relating to capital
distributions between depository institutions and bank holding companies and the
potential obligation of a bank holding company to guarantee the capital
restoration plans of any of its undercapitalized depository institution
subsidiaries, see "--Federal Deposit Insurance Corporation Improvement Act of
1991."
CAPITAL REQUIREMENTS
Bank holding companies are required to comply with risk-based capital
guidelines established by the Federal Reserve Board. The guidelines, which were
fully phased in at the end of 1992, establish a framework that is intended to
make regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations and take off-balance sheet exposures into
explicit account in assessing capital adequacy. The risk-based ratios are
determined by allocating assets and specified off-balance sheet commitments into
four risk-weight categories, with higher levels of capital being required for
categories perceived as representing greater risk. Susquehanna's banking
subsidiaries are subject to substantially similar capital requirements.
Generally, under the applicable guidelines, a banking organization's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, perpetual preferred stock (excluding auction rate issues) and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and
other intangibles, subject to certain exceptions. "Tier 2", or supplementary
capital, includes, among other things, limited-life preferred stock, hybrid
capital instruments, mandatory convertible securities, qualifying subordinated
debt, and the allowance for loan and lease losses, subject to certain
limitations and less required deductions. "Total capital" is the sum of Tier 1
and Tier 2 capital. The Tier 1 component must comprise at least 50% of
qualifying total capital.
Banking organizations that are subject to the guidelines are required to
maintain a ratio of Tier 1 capital to risk-weighted assets of at least 4% and a
ratio of total capital to risk-weighted assets of at least 8%. The appropriate
regulatory authority may set higher capital requirements when an organization's
particular circumstances warrant.
The Federal Reserve Board and the FDIC have also adopted leverage capital
guidelines to which the Company and its banking subsidiaries are subject. The
guidelines provide for a minimum leverage ratio (Tier 1 capital to adjusted
total assets) of 3% for financial institutions that have the highest regulatory
examination ratings and are not experiencing or anticipating significant growth.
Financial institutions not meeting these criteria are required to maintain
leverage ratios of at least one to two percentage points higher.
On December 15, 1994, the federal banking agencies adopted amendments to
their respective risk-based capital requirements that explicitly identify
concentration of credit risk and certain risks arising from nontraditional
activities and the management of such risks, as important factors to consider in
assessing an institution's overall capital adequacy. The amendments do not,
however, mandate any specific adjustments to the risk-based capital calculations
as a result of such factors. On August 2, 1995, the federal banking agencies
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published amendments to their risk-based capital rules that include interest-
rate risk as a qualitative factor to be considered in assessing capital
adequacy. Concurrent with the publication of the amendments, the federal banking
agencies proposed a system for measuring interest rate risk and announced their
intention, after a trial period to evaluate the reliability and accuracy of the
proposed system, to initiate a rulemaking process for the purpose of amending
the risk-based capital rules to include an explicit capital charge for interest-
rate risk that will be based upon the level of a bank's measured interest-rate
risk exposure.
On July 14, 1995, the federal banking regulators issued a proposal to amend
their risk-based capital rules to incorporate a measure for market risk in
foreign exchange and commodity activities and in the trading of debt and equity
instruments. Under the proposal, banks with relatively large trading activities
would calculate their capital charges for market risk using their own internal
value-at-risk models (subject to parameters set by the regulators) or,
alternatively, risk management techniques developed by the regulators. The
effect of the proposed rules would be that, in addition to existing capital
requirements for credit risk, certain institutions would be required to hold
capital based on the measure of their market risk exposure. These institutions
would be able to satisfy this additional requirement, in part, by issuing short-
term subordinated debt that qualifies as Tier 3 capital. The proposed rule would
go into effect at the end of 1997.
Failure to meet applicable capital guidelines could subject a banking
organization to a variety of enforcement actions, including limitations on its
ability to pay dividends, the issuance by the applicable regulatory authority of
a capital directive to increase capital and, in the case of depository
institutions, the termination of deposit insurance by the FDIC, as well as to
the measures described under "--Federal Deposit Insurance Corporation
Improvement Act of 1991" below, as applicable to undercapitalized institutions.
As of September 30, 1995 the Company's ratios of Tier 1 and total capital
to risk-weighted assets were 11.85% and 15.87%, respectively, and its leverage
ratio as of such date was 8.57%. As of September 30, 1995, each of the Company's
banking subsidiaries had capital in excess of all such requirements.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December, 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made significant revisions to several other federal banking statutes. FDICIA
provides for, among other things, (i) a recapitalization of the Bank Insurance
Fund of the FDIC (the "BIF") by increasing the FDIC's borrowing authority and
providing for adjustments in its assessment rates; (ii) annual on-site
examinations of federally-insured depository institutions by banking regulators;
(iii) publicly available annual financial condition and management reports for
financial institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of a "prompt corrective action" system of regulatory
supervision and intervention, based on capitalization levels, with more scrutiny
and restrictions placed on depository institutions with lower levels of capital;
(vi) additional grounds for the appointment of a conservator or receiver; (vii)
a requirement that the FDIC use the least-cost method of resolving cases of
troubled institutions in order to keep the costs to insurance funds at a
minimum; (viii) more comprehensive regulation and examination of foreign banks;
(ix) consumer protection provisions including a Truth-in-Savings Act; (x) a
requirement that the FDIC establish a risk-based deposit insurance assessment
system; (xi) restrictions or prohibitions on accepting brokered deposits, except
for institutions which significantly exceed minimum capital requirements; and
(xii) certain additional limits on deposit insurance coverage.
A central feature of FDICIA is the requirement that the federal banking
agencies take "prompt corrective action" with respect to depository institutions
that do not meet minimum capital requirements. Pursuant to FDICIA, the federal
bank regulatory authorities have adopted regulations setting forth a five-tiered
system for measuring the capital adequacy of the depository institutions that
they supervise. Under these regulations, a depository institution is classified
in one of the following capital categories: "well capitalized,"
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"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." A depository institution is "well
capitalized" if it has (i) a total risk-based capital ratio of 10% or greater,
(ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii) a leverage ratio
of 5% or greater and (iv) is not subject to any order, regulatory agreement or
written directive to meet and maintain a specific capital level for any capital
measure. An "adequately capitalized" institution is defined as one that has (i)
a total risk-based capital ratio of 8% or greater, (ii) a Tier 1 risk-based
capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater (or
3% or greater in the case of a bank with a composite CAMEL rating of 1). A
depository institution is considered (i) "undercapitalized" if it has (A) a
total risk-based capital ratio of less than 8%, (B) a Tier 1 risk-based capital
ratio of less than 4% or (C) a leverage ratio of less than 4% (or 3% in the
case of an institution with a CAMEL rating of 1), (ii) "significantly
undercapitalized" if it has (A) a total risk-based capital ratio of less than
6%, (B) a Tier 1 risk-based capital ratio of less than 3% or (C) a leverage
ratio of less than 3% and (iii) "critically undercapitalized" if it has a ratio
of tangible equity to total assets equal to or less than 2%. An institution may
be deemed by the regulators to be in a capitalization category that is lower
than is indicated by its actual capital position if, among other things, it
receives an unsatisfactory examination rating with respect to asset quality,
management, earnings or liquidity.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a cash dividend) or paying any management
fees to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit capital restoration plans. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company in
respect of any capital restoration plan is limited to the lesser of (i) an
amount equal to 5% of the depository institution's total assets at the time it
became undercapitalized and (ii) the amount which is necessary (or would have
been necessary) to bring the institution into compliance with all capital
standards applicable with respect to such institution as of the time it fails to
comply with the plan. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of other requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and stop accepting deposits from correspondent banks. Critically
undercapitalized institutions are subject to the appointment of a receiver or
conservator, generally within 90 days of the date such institution is determined
to be critically undercapitalized.
FDICIA also provides for increased funding of the FDIC insurance funds.
Under the FDIC's risk-based insurance premium assessment system, each bank whose
deposits are insured by the BIF is assigned one of the nine risk classifications
based upon certain capital and supervisory measures and, depending upon its
classification, is assessed premiums ranging from .04% to .31% of domestic
deposits. On November 14, 1995, the FDIC board of directors voted to lower the
BIF premium range to zero to .27% effective January 1996. The rate schedule for
deposits which are insured by the Savings Association Insurance Fund ("SAIF")
ranges from .23% to .31% of domestic deposits. All or a portion of the deposits
of several of Susquehanna's subsidiaries are SAIF-insured. The rate schedule is
subject to future adjustments by the FDIC. In addition, the FDIC has authority
to impose special assessments from time to time. See "REGULATORY MATTERS--
Proposed Legislation Regarding SAIF Assessments."
FDICIA provides the federal banking agencies with significantly expanded
powers to take enforcement action against institutions which fail to comply with
capital or other standards. Such action may include the termination of deposit
insurance by the FDIC or the appointment of a receiver or conservator for the
institution. FDICIA also limits the circumstances under which the FDIC is
permitted to provide financial assistance to an insured institution before
appointment of a conservator or receiver.
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INTERSTATE BANKING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act") was enacted into law on September 29, 1994. The law
eliminated substantially all state law barriers to the acquisition of banks by
out-of-state bank holding companies as of September 29, 1995. The law will also
permit interstate branching by banks effective as of June 1, 1997, subject to
the ability of states to opt-out completely or to set an earlier effective date.
In response to the Interstate Banking Act, in April 1995 Maryland adopted
legislation permitting the acquisition of banks primarily subject to Maryland
banking laws by any out-of-state bank holding companies. The Maryland
legislation permits branching in Maryland prior to June 1, 1997 by out-of-state
banks as long as their home state reciprocates by allowing Maryland banks to
open branches there; after June 1, 1997 there are no reciprocity-based
restrictions. On July 6, 1995 Pennsylvania adopted legislation permitting
out-of-state bank holding companies unrestricted access to acquire
Pennsylvania banks. The Pennsylvania legislation permits out-of-state banks to
set up branches in Pennsylvania so long as their home state reciprocates by
allowing Pennsylvania banks to open branches there. The Company anticipates that
the effect of these new laws will be to increase competition within the markets
in which the Company now operates, although the Company cannot predict the
extent to which competition will increase in such markets or the timing of such
increase.
PROPOSED LEGISLATION REGARDING SAIF ASSESSMENTS
The Seven-Year Balanced Budget Reconciliation Act of 1995 presently being
negotiated by the Congressional leadership and President Clinton includes
provision for funding of the FDIC's SAIF at levels mandated under current law.
Known as the "Thrift Fund Bailout", the proposed legislation would impose a one-
time assessment between 85 and 90 basis points per $100 of thrift deposits,
including thrift deposits held by commercial banks. Without the assessment it is
believed that premiums paid by thrifts for federal deposit insurance would be
higher than premiums paid by banks for the foreseeable future.
If enacted, the one-time assessment would be levied as of January 1, 1996,
and would affect several Susquehanna subsidiaries as follows (assuming an
assessment of 85 basis points on the deposit base at June 30, 1995):
Reisterstown Federal Savings Bank which paid a SAIF premium of $498,000 in 1995
but is expected to pay $1,934,000 in 1996 as the result of the one-time
assessment and $148,000 in 1997 by reason of the stabilization of the SAIF and
the concurrent reduction in premium; Atlantic Federal Savings Bank, which paid a
SAIF premium of $412,000 in 1995 but is expected to pay $1,527,000 in 1996 and
$117,000 in 1997 by reason of the stabilization of the SAIF and the concurrent
reduction in premium; and Farmers First Bank which paid a SAIF premium of
$138,000 in 1995 (by virtue of its acquisition by merger of a thrift in 1993)
but is expected to pay $509,000 in 1996 and $39,000 in 1997 by reason of
stabilization of the SAIF and the concurrent reduction in premium.
Fairfax Savings also would be subject to the assessment. In 1995, Fairfax
Savings paid $807,000 in SAIF premiums but is expected to pay $3,297,000 in 1996
as a result of the assessment and $252,000 in 1997 by reason of stabilization of
the SAIF and the concurrent reduction in premium. Susquehanna has agreed to be
responsible for the payment of Fairfax Savings' assessment if the proposed
legislation takes effect prior to the closing of the Fairfax Merger.
If such legislation is enacted, payment of the 1996 one-time assessments is
not expected to have a material adverse effect upon the financial condition of
Susquehanna, although such assessments may have a material adverse effect upon
results of operations for 1996.
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DESCRIPTION OF SENIOR NOTES
The following sets forth certain general terms and provisions of the Senior
Notes. The Senior Notes are to be issued under an indenture (the "Indenture")
between the Company and Mellon Bank, N.A., as Trustee (the "Trustee"). A copy of
the form of the Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. See "AVAILABLE INFORMATION." The following
summaries of certain provisions of the Senior Notes and the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture including the definition
therein of certain terms, and the actual provisions of the Senior Notes.
Wherever particular sections or defined terms of the Indenture are referred to,
it is intended that such sections or defined terms shall be incorporated herein
by reference. Section references are to the Indenture. Capitalized terms not
defined herein have the meanings assigned to such terms in the Indenture.
GENERAL
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that debt securities ("Debt
Securities") may be issued from time to time in one or more series. The Senior
Notes will be the first series of Debt Securities issued by the Company under
the Indenture. The Senior Notes will be unsecured obligations of the Company and
will rank pari passu with all outstanding senior indebtedness of the Company.
The Senior Notes will mature on _________ __, ____, bear interest at the
rate of ____% per annum and be limited to $35,000,000 aggregate principal
amount. Interest on the Senior Notes will be payable semi-annually on _________
__ and _________ __ of each year commencing _________ __, 1996 to the Persons in
whose names the Senior Notes are registered at the close of business on the
preceding _________ __ or _________ __ as the case may be.
Principal of and interest on the Senior Notes will be payable, and the
transfer of Senior Notes will be registrable, through The Depository Trust
Company, as depository (the "Depository"). The Senior Notes will be issued only
in fully registered form without coupons in denominations of $1,000 and integral
multiples thereof.
The Senior Notes will not be redeemable by the Company, in whole or in
part, prior to stated maturity and do not provide for any sinking fund.
The Indenture does not contain provisions which would protect the Holders
of, or owners of beneficial interests in, the Senior Notes against a sudden
decline in credit quality resulting from takeovers, recapitalizations or other
similar restructurings.
No service charge will be made for any transfer or exchange of the Senior
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. (Section 3.5).
All moneys paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Senior Note which remain
unclaimed for two years after such principal, premium or interest shall have
become due and payable may be repaid to the Company and thereafter the Holder of
such Senior Note shall look only to the Company for payment thereof. (Section
10.3).
GLOBAL NOTES
The Senior Notes will be issued in the form of one or more fully registered
global notes ("Global Notes") which will be deposited with, or on behalf of, the
Depository and registered in the name of the Depository's nominee. Unless and
until it is exchangeable in whole or in part for Senior Notes in definitive
form, a Global Note may not be transferred except as a whole by the Depository
to a nominee of the Depository or by a
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nominee of the Depository to the Depository or another nominee of the Depository
or by the Depository or any such nominee to a successor of such Depository or a
nominee of such successor. (Section 2.4).
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with the Depository or its nominee ("Participants")
or persons that may hold interests through Participants. The Company expects
that upon the issuance of a Global Note, the Depository will credit, on its
book-entry registration and transfer system, the Participants' accounts with
the respective principal amounts of the Senior Notes represented by such
Global Note. Ownership of beneficial interests in such Global Note will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the Depository (with respect to interests of
Participants) and on the records of Participants (with respect to interests of
persons held through Pa rticipants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in a Global Note.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, the Depository or such nominee, as the case may be, will be
considered the sole owner or Holder of the Senior Notes represented by such
Global Note for all purposes under the Indenture. (Section 3.8). Except as
provided below, owners of beneficial interests in a Global Note will not be
entitled to have the Senior Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of the
Senior Notes in definitive form and will not be considered the owners or Holders
thereof under the Indenture. Accordingly, each person owning a beneficial
interest in such a Global Note must rely on the procedures of the Depository
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a Holder
under the Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of Holders or that
an owner of a beneficial interest in such a Global Note desires to take any
action which a Holder is entitled to take under the Indenture, the Depository
would authorize the Participants holding the relevant beneficial interests to
take such action, and such Participants would authorize beneficial owners owning
through such Participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payment of principal of, and premium and interest, if any, on, Senior Notes
registered in the name of the Depository or its nominee will be made to the
Depository or its nominee, as the case may be, as the registered owner of the
Global Note representing such Senior Notes. None of the Company, the Trustee,
any Paying Agent or any other agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note
for such Senior Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that upon receipt of any payment of principal of, or
premium or interest on, a Global Note, the Depository will immediately credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depository. Payments by Participants to owners of
beneficial interests in such Global Note held through such Participants will be
the responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "street name."
If the Depository notifies the Company that it is unwilling or unable to
continue as depository or ceases to be a clearing agency registered under the
Exchange Act and a successor depository is not appointed by the Company within
ninety days after receiving such notice or becoming aware that the Depository is
no longer so registered, the Company will issue the Senior Notes in definitive
form upon registration of transfer of, or in exchange for, such Global Note. In
addition, the Company may at any time and in its sole discretion determine not
to have the Senior Notes represented by one or more Global Notes and, in such
event, will issue Senior Notes in definitive form in exchange for all of the
Global Notes representing such Senior Notes. (Section 3.5).
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The Depository has advised the Company as follows: it is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. The Depository was created to hold
securities for its participating organizations and to facilitate the clearance
and settlement of securities transactions between its participants in such
securities through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers (including the Underwriters), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depository's system
is also available to others such as banks, brokers, dealers, and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. Persons who are not participants in the
Depository may beneficially own securities held by the Depository only through
persons who are participants or who clear through or maintain a custodial
relationship with a participant.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Senior Notes will be made in immediately available
funds. All payments of principal and interest in respect of the Senior Notes
will be made by the Company in immediately available funds. The Senior Notes
will trade in the Depository's Same-Day Funds Settlement System until maturity,
and therefore the Depository will require secondary trading in the Senior Notes
to be settled in immediately available funds. Secondary trading in long-term
notes and debentures of corporate issuers is generally settled in clearing-house
or next-day funds. No assurance is given as to the effect, if any, of settlement
in immediately available funds on trading activity in the Senior Notes.
RESTRICTION ON SALE OR ISSUANCE OF CAPITAL STOCK OF PRINCIPAL SUBSIDIARY BANKS
The Indenture prohibits the sale, assignment, transfer or other disposition
of shares of, or securities convertible into, or options or warrants or rights
to subscribe for or purchase shares of, Voting Stock of a Principal Subsidiary
Bank, if after giving effect to any such transaction and to the issuance of the
maximum number of shares of Voting Stock of such Principal Subsidiary Bank
issuable upon the exercise of all such convertible securities, options, warrants
or rights, the Company would own, directly or indirectly, 80% or less of the
shares of Voting Stock of such Principal Subsidiary Bank. The Indenture also
prohibits the merger or consolidation of any Principal Subsidiary Bank with or
into any other corporation and the sale or other disposition of all or
substantially all of the assets of any Principal Subsidiary Bank, if (i) the
Company would own, directly or indirectly, 80% or less of the shares of Voting
Stock of such successor in merger or consolidation or the Person that acquires
all or substantially all of its assets or (ii) immediately after giving effect
to such transaction, an Event of Default or an event which, after notice or
lapse of time or both, would become an Event of Default, shall have happened and
be continuing. (Section 10.6). The covenant will not prohibit sales or
dispositions of Voting Stock: (i) made in compliance with an order of a court or
regulatory authority of competent jurisdiction or made as a condition imposed by
such court or authority to the acquisition by the Company, directly or
indirectly, of any other corporation or entity; or (ii) when the proceeds are,
within a reasonable period of time, invested pursuant to an understanding or
agreement in principle reached at the time of sale, assignment or disposition in
a Controlled Subsidiary (including any Person which upon such investment becomes
a Controlled Subsidiary) engaged in a banking business or any other business
legally permissible for bank holding companies. (Section 10.7). "Principal
Subsidiary Bank" means any Banking Subsidiary of the Company whose Consolidated
Banking Assets constitute 10% or more of the Company's Consolidated Banking
Assets. Upon completion of the Fairfax acquisition, it is anticipated that
Farmers First Bank, Farmers & Merchants Bank & Trust and Fairfax Savings, with
Consolidated Banking Assets as of September 30, 1995 of $1.74 billion, will be
considered Principal Subsidiary Banks. Prior to the Fairfax acquisition, First
National Trust Bank, Reisterstown Federal Savings Bank and Atlantic Federal
Savings Bank would also be considered Principal Subsidiary Banks. "Controlled
Subsidiary" means a Subsidiary more than 80% of the outstanding shares of
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Voting Stock of which is at the time owned directly or indirectly by the Company
or by one or more Controlled Subsidiaries or by the Company and one or more
Controlled Subsidiaries.
EVENTS OF DEFAULT
With respect to the Senior Notes, the Indenture defines an Event of Default
as any one of the following events: (a) default for 30 days in the payment of
any interest upon any Senior Note when it becomes due and payable; (b) default
in the payment of the principal of (or premium, if any on) any Senior Note at
its maturity; (c) failure, subject to waiver, to observe and perform the
covenant referred to above under "--Restriction on Sale or Issuance of Capital
Stock of Principal Subsidiary Banks"; (d) default in the performance, or breach,
of any other covenant or warranty of the Company (other than a covenant or
warranty included in the Indenture solely for the benefit of a series of Debt
Securities other than the Senior Notes) which continues for 60 days after the
holders of least 25% in principal amount of Outstanding Senior Notes have given
written notice as provided in the Indenture; (e) failure to pay when due any
indebtedness of the Company or any Principal Subsidiary Bank in excess of
$5,000,000, or acceleration of the maturity of any such indebtedness in excess
of such amount if acceleration results from a default under the instrument
giving rise to such indebtedness and is not rescinded, annulled or cured within
30 days after due notice; or (f) certain events of bankruptcy, insolvency or
reorganization of the Company or a Principal Subsidiary Bank. (Section 5.1) An
Event of Default under one series of Debt Securities will not necessarily be an
Event of Default with respect to any other series of Debt Securities.
If an Event of Default (other than an Event of Default specified in clause
(f) in the preceding paragraph) with respect to the Senior Notes at the time
Outstanding occurs and is continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Senior Notes may
declare the principal amount of all the Senior Notes to be due and payable
immediately. If an Event of Default specified in clause (f) in the preceding
paragraph occurs, such principal amount shall automatically become immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder. At any time after a declaration of acceleration with respect to
Senior Notes has been made, but before a judgment or decree based on
acceleration has been obtained, the Holders of a majority in aggregate principal
amount of the Outstanding Senior Notes may, under certain circumstances, rescind
and annul such acceleration. (Section 5.2).
If a default in the payment of principal, premium, if any, or interest or
in the performance of any covenant or agreement in the Senior Notes or in the
Indenture occurs, the Trustee may, subject to certain limitations and
conditions, seek to enforce payment of such principal, premium, if any, or
interest on the Senior Notes, or the performance of such covenant or agreement.
(Section 5.3).
The Indenture provides that, subject to the duty of the Trustee during the
continuance of an Event of Default to act with the required standard of care,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. (Section
6.3). Subject to certain limitations, the Holders of a majority in aggregate
principal amount of the Outstanding Senior Notes will 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, with
respect to the Senior Notes. (Section 5.12). The right of a Holder of any Debt
Security to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent, but each Holder has an absolute right to receive
payment of principal, premium, if any, and interest when due and to institute
suit for the enforcement of any such payment. (Sections 5.7 and 5.8).
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Sections 1.2 and 10.4).
The Trustee may withhold notice to Holders of any default (except in payment of
principal, premium, if any, or interest) if it in good faith determines that it
is in the interests of the Holders to do so.
26
<PAGE>
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Company may, without the consent of any Holder of the Debt Securities,
merge or consolidate with any other corporation or sell or convey all or
substantially all of its assets to any corporation, provided that the successor
corporation (if other than the Company) shall be a corporation organized and
existing under the laws of the United States of America or a State thereof or
the District of Columbia and such corporation shall expressly assume the
Company's obligations under the Indenture and on the Debt Securities, and the
Company or such successor corporation, as the case may be, shall not be in
default in the performance of any covenant or condition of the Indenture
immediately after such merger, consolidation, sale or conveyance. In addition,
the Company may, without the consent of any Holder of the Debt Securities,
convey its assets substantially as an entirety to any Person in connection with
any transfer that is assisted by a federal bank regulatory authority and in such
case the Company's obligations under the Indenture need not be assumed by the
entity acquiring such assets. (Section 8.1).
MODIFICATIONS AND WAIVER
The Indenture provides that the Company and the Trustee may enter into a
supplemental indenture to amend the Indenture or the Debt Securities without the
consent of any Holder of any Outstanding Debt Security: (1) to evidence the
succession of another Person to the Company and the assumption by such successor
of the Company's obligations under the Indenture; (2) to add to the covenants of
the Company further covenants, restrictions or conditions for the protection of
the Holders of all or any particular series of Debt Securities; (3) to add or
change any of the provisions of the Indenture necessary to facilitate the
issuance of Debt Securities in bearer form; (4) to add, eliminate or change any
provision of the Indenture prior to the issuance of the series that is entitled
to the benefit of such provision; (5) to establish the terms and conditions of
Debt Securities of any series; (6) to provide for the acceptance of appointment
by a successor trustee or to add or change any of the provisions of the
Indenture necessary to provide for or facilitate the administration of the trust
by more than one Trustee; (7) to cure any ambiguity, defect or inconsistency or
to make such other provision in regard to matters or questions arising under the
Indenture which do not adversely affect the interests of the Holders of the Debt
Securities; (8) to secure the Debt Securities; (9) to provide for the conversion
or exchange of Debt Securities of a particular series into or for other
securities of the Company; or (10) to add additional Events of Default. (Section
9.1).
In addition to the foregoing, modifications and amendments of the Indenture
may be made by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series affected by such modification or amendment; provided, however, that
no such modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the stated maturity date
of the principal of, or any premium or installment of interest, if any, on any
Debt Security, (b) reduce the principal amount of, or premium or interest, if
any, on, any Debt Security, (c) change the currency of payment of principal of,
or premium, if any, or interest on, any Debt Security, (d) impair the right to
institute suit for the enforcement of any such payment on or with respect to any
Debt Security, or (e) reduce the percentage in principal amount of Outstanding
Debt Securities of any series the consent of whose Holders is required for
modification or amendment of the Indenture or for any waiver. (Section 9.2).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all Holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. (Section 10.8).
The Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive any past default under the Indenture with respect to Debt
Securities of that series, except a default in the payment of principal, or of
premium, if any, or interest or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series. (Section 5.13).
27
<PAGE>
GOVERNING LAW
The Indenture and the Senior Notes will be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of business,
including long term borrowings. At present the Company and its subsidiaries are
indebted to the Trustee in the aggregate amount of $9 million. Mellon Bank N.A.
is trustee under an Indenture, dated as of February 1, 1995, for the 9.00%
Subordinated Notes due 2005 of the Company.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following tables set forth certain pro forma combined condensed
financial information of Susquehanna giving effect, as of January 1, 1994, to
(i) the Atlanfed acquisition, accounted for as a pooling of interests, (ii) the
Reisterstown acquisition, accounted for as a purchase, (iii) the issuance of the
Senior Notes in the offering contemplated hereby and the issuance of Common
Stock in the Common Stock Offering to fund the cash consideration for the
Fairfax Merger, and (iv) the Fairfax Merger, accounted for as a purchase.
The information in the following tables is not necessarily indicative of
the results that would have been achieved had such transactions been consummated
on such dates and should not be construed as representative of future
operations. Such information is subject to the assumptions set forth in the
notes to these Unaudited Pro Forma Financial Statements. The information
presented should be read in conjunction with such notes and with the historical
financial statements, including the notes thereto, of Susquehanna, Atlanfed,
Fairfax and Reisterstown incorporated by reference in this Prospectus.
28
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Susquehanna Fairfax For Fairfax Susquehanna
As Reported As Reported* Acquisition Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks..................... $ 80,665 $ 2,942 $ 83,607
Short-term investments...................... 70,068 6,776 $ 72,188 [A] 86,032
(63,000) [B]
Investment securities....................... 592,481 22,861 615,342
Loans and leases, net of unearned income.... 1,692,790 424,648 2,117,438
Allowance for loan and lease losses......... 27,948 3,968 31,916
---------- -------- ----------
Net loans and leases........................ 1,664,842 420,680 2,085,522
Intangible assets[C]........................ 20,659 20,589 [D] 41,248
Other assets................................ 93,410 17,028 400 [A] 110,838
---------- -------- -------- ----------
Total Assets........................ $2,522,125 $470,287 $ 30,177 $3,022,589
========== ======== ======== ==========
LIABILITIES
Deposits.................................... $2,088,041 $386,247 $2,474,288
Short-term borrowings....................... 76,266 20,036 96,302
Long-term debt.............................. 91,979 12,200 $ 35,000 [A] 139,179
Other liabilities........................... 31,633 9,386 41,019
---------- -------- -------- ----------
Total Liabilities................... 2,287,919 427,869 35,000 2,750,788
EQUITY
Common stock................................ 23,366 150 2,990 [A] 26,356
(150) [E]
Surplus..................................... 43,014 195 34,598 [A] 77,612
(195) [E]
Retained earnings........................... 168,436 42,066 (42,066) [E] 168,436
Unrealized gain(loss) on securities
available-for-sale, net of tax............ (287) 7 (280)
Less: Treasury stock........................ 323 323
---------- -------- ----------
Total Equity........................ 234,206 42,418 (4,823) 271,801
---------- -------- -------- ----------
Total Liabilities & Equity.. $2,522,125 $470,287 $ 30,177 $3,022,589
========== ======== ======== ==========
</TABLE>
*Fairfax information is as of June 30, 1995
[A] To record the issuance of 1,495,000 shares of Common Stock at a public
offering price of $26.50 per share and $35 million of Senior Notes at an
assumed interest rate of 7% for the acquisition of Fairfax and for other
general corporate purposes.
[B] To record the purchase of Fairfax for cash.
[C] Includes only those intangibles which are excluded from Tier 1 capital.
[D] To record excess purchase price (goodwill) for Fairfax.
[E] To eliminate the equity of Fairfax in consolidation (purchase accounting).
29
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Susquehanna
Adjustments For Pro Forma for
Susquehanna Reisterstown Reisterstown Reisterstown
As Reported As Reported* Acquisition Acquisition
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest income........... $138,997 $7,137 $(326) [A] $145,808
Interest expense.......... 60,427 3,490 286 [B] 64,203
-------- ------ ----- --------
Net interest income....... 78,570 3,647 (612) 81,605
Provision for loan
and lease losses....... 3,711 --- 3,711
-------- ------ --------
Net interest income
after provision........ 74,859 3,647 (612) 77,894
Investment losses......... (46) (46)
Other income............. 11,788 565 12,353
Salaries and benefits..... 31,264 1,089 32,353
Other expense............. 28,285 1,174 62 [C] 29,581
60 [D]
----- --------
Income before taxes....... 27,052 1,949 (734) 28,267
Taxes..................... 8,184 843 (237) [E] 8,790
-------- ------ ----- --------
Net income from operations $ 18,868 $1,106 $(497) $ 19,477
======== ====== ===== ========
Earnings per share........ $1.62 N/A $1.67
Average shares outstanding 11,638 N/A 11,638
<CAPTION>
Pro Forma
Adjustments For
Fairfax Fairfax Susquehanna
As Reported** Acquisition Pro Forma
------------- ----------- ---------
<S> <C> <C> <C>
Interest income........... $26,014 $171,822
Interest expense.......... 14,101 $ 1,398 [B] 79,702
------- ------- --------
Net interest income....... 11,913 (1,398) 92,120
Provision for loan
and lease losses....... 45 3,756
------- ------- --------
Net interest income
after provision........ 11,868 (1,398) 88,364
Investment losses......... (46)
Other income............. 2,207 14,560
Salaries and benefits..... 4,657 37,010
Other expense............. 4,036 34,647
1,030 [C]
------- ------- --------
Income before taxes....... 5,382 (2,428) 31,221
Taxes..................... 1,966 (489) [E] 10,267
------- ------- --------
Net income from operations $ 3,416 $(1,939) $ 20,954
======= ======= ========
Earnings per share........ N/A $1.60
Average shares outstanding N/A 1,495 [F] 13,133
</TABLE>
______________
* Reisterstown information is for the three months ended December 31, 1994 and
the first 21 days of April 1995.
** Fairfax information is for the nine months ended June 30, 1995.
[A] Reduction of interest income to exclude use of proceeds prior to
Reisterstown purchase.
[B] Increase in interest expense regarding purchase price borrowings of $28,640
for Reisterstown and $25,812 for Fairfax.
[C] Goodwill amortization adjustment.
[D] Amortization of fair value purchase accounting adjustments.
[E] Tax effect on adjustments.
[F] Common Stock issued to satisfy part of Fairfax purchase price.
30
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
UNAUDITED
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Susquehanna
Adjustments For Pro Forma For
Susquehanna Reisterstown Reisterstown Reisterstown
As Reported As Reported* Acquisition Acquisition
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest income............. $150,633 $22,499 $ 27 [A] $173,159
Interest expense............ 56,488 11,392 2,578 [B] 70,458
-------- ------- ------- --------
Net interest income......... 94,145 11,107 (2,551) 102,701
Provision for loan
and lease losses.......... 3,987 127 4,114
-------- ------- --------
Net interest income
after provision........... 90,158 10,980 (2,551) 98,587
Investment gains............ 999 141 1,140
Other income................ 14,099 3,374 17,473
Salaries and benefits....... 36,227 3,237 39,464
Other expense............... 36,483 3,288 251 [C] 40,262
240 [A]
------- --------
Income before taxes......... 32,546 7,970 (3,042) 37,474
Taxes....................... 9,718 3,385 (983) [D] 12,120
-------- ------- ------- --------
Net income from operations.. $ 22,828 $ 4,585 $(2,059) $ 25,354
======== ======= ======= ========
Earnings per share.......... $1.96 N/A $2.18
Average shares outstanding.. 11,634 N/A 11,634
<CAPTION>
Pro Forma
Adjustments
Fairfax As for Fairfax Susquehanna
Reported* Acquisition Pro Forma
--------- ----------- ---------
<S> <C> <C> <C>
Interest income............. $27,731 $200,890
Interest expense............ 13,681 $ 1,864 [B] 86,003
------- ------- --------
Net interest income......... 14,050 (1,864) 114,887
Provision for loan
and lease losses.......... (111) 4,003
------- ------- --------
Net interest income
after provision........... 14,161 (1,864) 110,884
Investment gains............ 1,923 3,063
Other income................ 5,459 22,932
Salaries and benefits....... 5,805 45,269
Other expense............... 4,680 46,315
1,373 [C]
------- ------- --------
Income before taxes......... 11,058 (3,237) 45,295
Taxes....................... 4,457 (652) [D] 15,925
------- ------- --------
Net income from operations.. $ 6,601 $(2,585) $ 29,370
======= ======= ========
Earnings per share.......... N/A $2.24
Average shares outstanding.. N/A 1,495 [E] 13,129
</TABLE>
____________________
* Reisterstown and Fairfax information is for the fiscal year ended September
30, 1994.
[A] Amortization of fair value purchase accounting adjustments.
[B] Increase in interest expense regarding purchase price borrowings of $28,640
for Reisterstown and $25,812 for Fairfax.
[C] Goodwill amortization adjustment.
[D] Tax effect on adjustments.
[E] Common Stock issued to satisfy part of Fairfax purchase price.
31
<PAGE>
UNDERWRITING
Oppenheimer & Co., Inc. and Legg Mason Wood Walker, Incorporated
(the "Underwriters") have severally agreed, subject to the terms and
conditions of the Underwriting Agreement (the "Underwriting Agreement")
between the Company and the Underwriters, to purchase from the Company, and
the Company has agreed to sell to each of the Underwriters, the principal
amount of Senior Notes set forth below opposite their respective names. The
Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
be obligated to purchase all of the Senior Notes if any are purchased.
<TABLE>
<CAPTION>
Principal
Underwriter Amount
----------- ------
<S> <C>
Oppenheimer & Co., Inc. ................. $
Legg Mason Wood Walker, Incorporated.....
----------
Total.............................. $35,000,000
==========
</TABLE>
The Underwriters have advised the Company that they propose
initially to offer the Senior Notes to the public at the public offering
price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of ____% of the
principal amount. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of ____% of the principal amount of the Senior
Notes to certain other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
The Senior Notes are a new issue of securities with no
established trading market. The Company has been advised by the
Underwriters that they intend to make a market in the Senior Notes but are
not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the
trading market for the Senior Notes.
The Underwriters and their affiliates may engage in transactions
with and perform services for the Company in the ordinary course of
business, including, among other things, investment banking transactions
and services.
The Company has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act.
EXPERTS
SUSQUEHANNA
The consolidated balance sheets of Susquehanna as of December 31,
1994 and 1993 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1994, incorporated by reference in this
Prospectus, have been incorporated herein in reliance on the report, which
includes an explanatory paragraph relating to the change in method of
accounting for investments and income taxes in 1993, of Coopers & Lybrand
L.L.P., independent accountants to Susquehanna, given upon the authority of
said firm as experts in accounting and auditing.
ATLANFED
The consolidated statements of financial condition of Atlanfed as
of March 31, 1995 and 1994 and the related consolidated statements of
income, stockholders' equity and cash flows for each of the years in the
three-year period ended March 31, 1995, incorporated by reference in this
Prospectus, have been incorporated herein in reliance on the report of KPMG
Peat Marwick LLP, independent accountants to Atlanfed, given upon the
authority of said firm as experts in accounting and auditing.
FAIRFAX
32
<PAGE>
The consolidated statements of financial condition of Fairfax and
subsidiaries as of September 30, 1995 and 1994 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
years in the three-year period ended September 30, 1995, incorporated by
reference in this registration statement, have been incorporated herein in
reliance on the report of KPMG Peat Marwick LLP, independent accountants,
and upon the authority of said firm as experts in accounting and auditing.
Such report refers to the Company's adoption in 1995 of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
REISTERSTOWN
The consolidated balance sheets of Reisterstown as of March 31,
1995 and September 30, 1994, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the six months
ended March 31, 1995 and each of the two years in the period ended
September 30, 1994, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report, which includes an
explanatory paragraph relating to the change in method of accounting for
income taxes in 1993 and accounting for certain debt and equity securities
in 1995, of Coopers & Lybrand L.L.P., independent accountants to
Reisterstown, given upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the Senior Notes offered hereby will be passed
upon by Morgan, Lewis & Bockius LLP, Harrisburg, Pennsylvania. Certain
legal matters will be passed upon for the Underwriters by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), New
York, New York. Simpson Thacher & Bartlett will rely as to all matters of
Pennsylvania law upon the opinion of Morgan, Lewis & Bockius LLP.
33
<PAGE>
======================================== =======================================
NO DEALER, SALESPERSON OR ANY OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY $35,000,000
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER
COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, THE
SENIOR NOTES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS Susquehanna Bancshares, Inc.
NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS % Senior Notes Due __
OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
_____________________
_________________ P R O S P E C T U S
_____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................
Incorporation of Documents
by Reference...........................
Susquehanna Bancshares, Inc.............
Use of Proceeds......................... Oppenheimer & Co., Inc.
Capitalization..........................
Selected Financial Data................. Legg Mason Wood Walker
Unaudited Selected Pro Forma Incorporated
Financial Data.........................
Financial Overview......................
Regulatory Matters......................
Description of Senior Notes.............
Unaudited Pro Forma Financial Statements _______, 1996
Underwriting............................
Experts.................................
Legal Matters...........................
</TABLE>
======================================== =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with this offering other than underwriting discounts and commissions:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee.. $ 12,069
Printing............................................. 30,000
Accountants' fees and expenses....................... 15,000
Attorneys' fees and expenses......................... 25,000
Blue Sky fees and expenses........................... 10,000
Trustee's fees and expenses.......................... 4,000
Rating Agencies' fees................................ 40,000
Miscellaneous........................................ 1,931
--------
Total...................................... $138,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the "BCL"), provide that a business corporation may indemnify
directors and officers against liabilities they may incur as such provided that
the particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In the case of actions against a director or
officer by or in the right of the corporation, the power to indemnify extends
only to expenses (not judgments and amounts paid in settlement) and such power
generally does not exist if the person otherwise entitled to indemnification
shall have been adjudged to be liable to the corporation unless it is judicially
determined that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for specified expenses. Under Section 1743 of the BCL, the
corporation is required to indemnify directors and officers against expenses
they may incur in defending actions against them in such capacities if they are
successful on the merits or otherwise in the defense of such actions. Under
Section 1745 of the BCL, a corporation may pay the expenses of a director or
officer incurred in defending an action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking from such person to repay the
amounts advanced unless it is ultimately determined that such person is entitled
to indemnification from the corporation. Article XIV of Susquehanna's Bylaws
provides indemnification of directors, officers and other agents of Susquehanna
and advancement of expenses to the extent otherwise permitted by Sections 1741,
1742 and 1745 of the BCL.
Section 1746 of the BCL grants a corporation broad authority to indemnify
its directors, officers and other agents for liabilities and expenses incurred
in such capacity, except in circumstances where the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness. Pursuant to the authority of
Section 1746 of the BCL, Susquehanna has also entered into employment agreements
with certain principal officers which also provide for indemnification in
connection with the performance of their offices.
Article XIV conditions any indemnification or advancement of expenses upon
a determination, made in accordance with the procedures specified in Section
1744 of the BCL, by Susquehanna's directors or shareholders that indemnification
or advancement of expenses is proper because the director or officer met the
standard of conduct set forth in Section 1741 or 1742 of the BCL, as applicable.
As authorized by Section 1747 of the BCL and Article XIV, Susquehanna
maintains, on behalf of its directors and officers, insurance protection against
certain liabilities arising out of the discharge of their duties, as well as
insurance covering Susquehanna for indemnification payments made to its
directors and officers for certain liabilities. The premiums for such insurance
are paid by Susquehanna.
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS.
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
<S> <C>
1.1* Form of Underwriting Agreement
2.1 Agreement and Plan of Affiliation dated as of April 8, 1994, by and
among Susquehanna, Susquehanna Bancshares South II, Inc., Fairfax and
Fairfax Savings (1) (Exhibit 2(b)).
4.1* Form of Indenture between Susquehanna and Mellon Bank, N.A., as
trustee.
4.2 Form of Senior Notes (included in Exhibit 4.1).
5.1* Opinion of Morgan, Lewis & Bockius LLP
12.1* Computation of ratio of earnings to fixed charges.
23.1 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1)
23.2* Consent of Coopers & Lybrand L.L.P. regarding Susquehanna
23.3* Consent of KPMG Peat Marwick LLP regarding Atlanfed
23.4* Consent of KPMG Peat Marwick LLP regarding Fairfax
23.5* Consent of Coopers & Lybrand L.L.P. regarding Reisterstown
24.1 Powers of Attorney are included on the signature page of this
Registration Statement
25.1* Form of T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, as amended, of Mellon Bank, N.A.
</TABLE>
__________________
* Filed herewith.
(1) Exhibit incorporated herein by reference to the Registrant's Current
Report on Form 8-K dated May 5, 1994.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-2
<PAGE>
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto,
duly authorized, in the City of Litiz, Commonwealth of Pennsylvania, on January
9, 1996.
SUSQUEHANNA BANCSHARES, INC.
By: /s/ Robert S. Bolinger
-------------------------------
ROBERT S. BOLINGER
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below in so signing also makes, constitutes and appoints
Robert S. Bolinger and Richard M. Cloney, and each of them acting alone, his
true and lawful attorney-in-fact, with full power of substitution, for him in
any and all capacities, to execute and cause to be filed with the Securities and
Exchange Commission one or more additional registration statements to register,
in accordance with Rule 462(b), additional securities of the same class
registered hereby (and any or all amendments and post-effective amendments
thereto), any or all amendments and post-effective amendments (including post-
effective amendments under Rule 462(b)) to this Registration Statement, with
exhibits thereto and other documents in connection therewith, and hereby
ratifies and confirms all that said attorney-in-fact or his substitute or
substitutes may do or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Robert S. Bolinger President and Chief Executive January 9, 1996
- -------------------------- Officer and a Director
ROBERT S. BOLINGER
/s/ J. Stanley Mull, Jr. Vice President and Treasurer January 9, 1996
- -------------------------- (Principal Financial and
J. STANLEY MULL, JR. Accounting Officer)
/s/ Richard M. Cloney Vice President, Secretary and January 9, 1996
- -------------------------- a Director
RICHARD M. CLONEY
/s/ John M. Denlinger Director January 9, 1996
- --------------------------
JOHN M. DENLINGER
/s/ Henry H. Gibbel Director January 9, 1996
- --------------------------
HENRY H. GIBBEL
/s/ George J. Morgan Director January 9, 1996
- --------------------------
GEORGE J. MORGAN
S-1
<PAGE>
/s/ James G. Apple Director January 9, 1996
- ----------------------------
JAMES G. APPLE
/s/ Edward W. Helfrick Director January 9, 1996
- ----------------------------
EDWARD W. HELFRICK
/s/ Roger V. Wiest Director January 9, 1996
- ----------------------------
ROGER V. WIEST
/s/ T. Max Hall Director January 9, 1996
- ----------------------------
T. MAX HALL
Director
- ----------------------------
RAYMOND M. O'CONNELL
/s/ Marley R. Gross Director January 9, 1996
- ----------------------------
MARLEY R. GROSS
/s/ C. William Hetzer, Jr. Director January 9, 1996
- ----------------------------
C. WILLIAM HETZER, JR.
/s/ Robert C. Reymer, Jr. Director January 9, 1996
- ----------------------------
ROBERT C. REYMER, JR.
/s/ Richard E. Funke Director January 9, 1996
- ----------------------------
RICHARD E. FUNKE
S-2
<PAGE>
EXHIBIT 1.1
-----------
<PAGE>
SUSQUEHANNA BANCSHARES, INC.
$35,000,000
___% SENIOR NOTES DUE _______
UNDERWRITING AGREEMENT
_____________ __, 1996
OPPENHEIMER & CO., INC.
LEGG MASON WOOD WALKER, INCORPORATED
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
Dear Sirs:
Susquehanna Bancshares, Inc., a Pennsylvania corporation (the
"Company"), confirms its agreement with Oppenheimer & Co., Inc. and Legg Mason
Wood Walker, Incorporated (each, an "Underwriter" and collectively, the
"Underwriters") with respect to the sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of $35,000,000 aggregate
principal amount of the Company's __% Senior Notes Due ____ (the "Securities").
The Securities will be issued pursuant to an Indenture, dated as of _________
__, 1996 (the "Indenture"), between the Company and Mellon Bank, N.A., as
trustee (the "Trustee").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-_____) and a related
preliminary prospectus for the registration of the Securities under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder (the "Securities Act Regulations"). The Company has
prepared and filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities Act and
all information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) of the Securities Act Regulations) is
hereinafter called the "Registration Statement," except that, if the Company
files a post-effective amendment to such registration statement which becomes
effective prior to the Closing Time (as defined below), "Registration Statement"
shall refer to such registration statement as so amended. Each prospectus
included in the registration statement, or amendments thereof, before it became
<PAGE>
2
effective under the Securities Act and any prospectus filed with the Commission
by the Company with the consent of the Underwriters pursuant to Rule 424(a) of
the Securities Act Regulations (including the documents incorporated by
reference therein) is hereinafter called the "Preliminary Prospectus." The term
"Prospectus" means the final prospectus (including the documents incorporated by
reference therein), as first filed with the Commission pursuant to paragraph (1)
or (4) of Rule 424(b) of the Securities Act Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary Prospectus.
SECTION 1. Representations and Warranties. (a) The Company
------------------------------
represents and warrants to each Underwriter as follows:
(i) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements thereto will, when they become effective
or are filed with the Commission, as the case may be, conform, in all
material respects with the requirements of the Securities Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the
applicable rules and regulations under said acts; the Indenture conforms
with the requirements of the Trust Indenture Act, and the applicable rules
and regulations thereunder; the Registration Statement did not, and any
amendment thereto will not, in each case as of the applicable effective
date, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Prospectus and any amendment or
supplement thereto will not, as of the applicable filing date and at
Closing Time (as hereinafter defined), contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company by or on behalf of any
Underwriter in writing expressly for use in the Registration Statement or
Prospectus.
(ii) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the Securities Act, at the time they
were filed with the Commission, complied as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
<PAGE>
3
(iii) The Company meets the requirements for the use of Form S-3 under
the Securities Act.
(iv) To the knowledge of the Company, the independent certified
public accountants who certified the financial statements included or
incorporated by reference in the Prospectus are independent public
accountants as required by the Securities Act and the Securities Act
Regulations .
(v) The financial statements, including the notes thereto and the
supporting schedules, included or incorporated by reference in the
Prospectus present fairly, in all material respects, the financial position
of the entities purported to be shown thereby, in each case at the dates
indicated, and the results of their operations for the periods specified;
and said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
except as otherwise stated therein. The pro forma financial statements and
selected pro forma financial data included in the Prospectus comply in all
material respects with the applicable requirements of Regulation S-X of the
Commission and reflect all adjustments necessary to summarize fairly, in
all material respects, the pro forma financial position and results of
operations of the entities purported to be shown thereby at the dates
indicated and for the periods specified.
(vi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, of the Company and its subsidiaries considered as
one enterprise, or in the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise, whether
or not arising in the ordinary course of business, (B) to the knowledge of
the Company, there has been no adverse change in the condition (financial
or other), earnings, business affairs or business prospects of Fairfax (as
such term is defined in the Registration Statement and the Prospectus) or
any of its subsidiaries which would, either individually or in the
aggregate, be material and adverse to the Company, its subsidiaries and
such other company considered as one enterprise, unless in any such case
the Company shall have elected to terminate the merger agreement for such
acquisition, (C) there have been no material transactions entered into by
the Company or its subsidiaries other than those in the ordinary course of
business, and (D) the Company has not sustained any material loss or
interference with its assets, businesses or properties (whether owned or
leased) from fire, explosion, earthquake, flood or other calamity, whether
or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree.
<PAGE>
4
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania with corporate power and authority to own and lease its
properties and to conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement, the
Indenture and the Securities; the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction, if any, in which its ownership or leasing of properties or
the conduct of its business requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the
conduct of the business, condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise; and the Company is duly registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended.
(viii) Each of the subsidiaries of the Company has been duly
incorporated or organized and is validly existing as a corporation or
association under the laws of its jurisdiction of incorporation or
organization and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction, if any, in which its
ownership or leasing of properties or the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the conduct of the business, condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; and the
deposit accounts of each bank or thrift subsidiary of the Company are
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund, as appropriate, of the Federal Deposit Insurance Corporation ("FDIC")
to the fullest amount permitted by law and the rules and regulations of the
FDIC, and no proceedings for the termination of such insurance are pending
or threatened.
(ix) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; and all of the issued shares
of capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable (subject,
however, to the provisions of Section 55 of Title 12 of the United States
Code and any comparable provision of Maryland or Pennsylvania law) and are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(x) The Securities have been duly and validly authorized for
issuance and sale to the Underwriters
<PAGE>
5
pursuant to this Agreement and, when executed and authenticated in
accordance with the terms of the Indenture and delivered to the
Underwriters against payment of the consideration set forth herein, will
constitute valid and legally binding obligations of the Company enforceable
in accordance with their terms and entitled to the benefits provided by the
Indenture; and the Indenture has been duly authorized and, when executed by
the proper officers of the Company and delivered by the Company, will have
been duly executed and delivered by the Company and will constitute the
valid and legally binding instrument of the Company, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other laws relating to or affecting enforcement
of creditors' rights generally or by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law); the Indenture has been duly qualified under the Trust Indenture
Act; and the Securities and the Indenture conform to the descriptions
thereof contained in the Registration Statement and the Prospectus.
(xi) This Agreement has been duly authorized, executed and delivered
by the Company.
(xii) Neither the Company nor any of its subsidiaries is in violation
of its charter or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or any of its properties
may be bound and which is material to the Company and its subsidiaries
considered as one enterprise; and the execution and delivery of this
Agreement and the Indenture, the issue and sale of the Securities, the
compliance by the Company with the provisions of the Securities, the
Indenture and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or constitute a
breach of, or default under, the articles of incorporation or by-laws of
the Company or a breach or default under any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of its properties may
be bound and which is material to the Company and its subsidiaries
considered as one enterprise nor (assuming compliance by the Underwriters
with all applicable state securities or blue sky laws) will such action
result in any violation on the part of the Company or its subsidiaries of
any applicable law or regulation or of any applicable administrative,
regulatory or court decree.
(xiii) There are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject which are required
to be disclosed in the Registration Statement and are not so
<PAGE>
6
disclosed or which the Company has reasonable cause to believe would
individually or in the aggregate have a material adverse effect on the
consolidated financial position of the Company and its subsidiaries,
considered as one enterprise; and to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(xiv) No approval, authorization, consent, registration, qualification
or other order of any public board or body is required in connection with
the execution and delivery of this Agreement or the Indenture or the
issuance and sale of the Securities or the consummation by the Company of
the other transactions contemplated by this Agreement or the Indenture,
except such as have been obtained, or will have been obtained at the
Closing Time, under the Securities Act and the Trust Indenture Act and such
as may be required under the blue sky or securities laws of various states
in connection with the offering of the Securities.
(xv) The Company and its subsidiaries possess all material licenses,
certificates, authorities or permits issued by the appropriate State or
Federal regulatory agencies or bodies necessary to conduct their businesses
as described in the Prospectus, and neither the Company nor its
subsidiaries have received any notice of proceedings relating to the
revocation or modification of any such license, certificate, authority or
permit which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the conduct of the business, condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise. Neither the Company nor any of
its subsidiaries is party to or otherwise the subject of any consent
decree, memorandum of understanding, written commitment or other
supervisory agreement with the Board of Governors of the Federal Reserve
Board or any Federal Reserve Bank (the "Federal Reserve"), the FDIC, the
Office of the Comptroller of the Currency, or any other federal or state
authority or agency responsible for the supervision, regulation or
insurance of depository institutions or their holding companies.
(xvi) There are no contracts or other documents which are required to
be filed as exhibits to the Registration Statement by the Securities Act or
by the Securities Act Regulations which have not been filed as exhibits to
the Registration Statement.
(xvii) The Securities have been rated by Moody's Investors Service,
Inc. as ______ and Standard & Poor's Corporation as _______.
<PAGE>
7
(xviii) The Agreement and Plan of Affiliation relating to the Fairfax
Merger (as such term is defined in the Registration Statement and
Prospectus) is in full force and effect and has not been amended, modified
in any material respect or terminated (except as otherwise disclosed in the
Registration Statement and Prospectus), nor has any party thereto taken any
action for that purpose. No action has been taken by the Federal Reserve,
the Office of Thrift Supervision or any other federal or state governmental
agency, authority or body to disapprove, enjoin or prohibit the
transactions contemplated by the Fairfax Merger, and to the best knowledge
of the Company no such action is threatened or contemplated.
(b) Any certificate signed by any officer of the Company and
delivered to you or to your counsel shall be deemed a representation and
warranty by the Company to you as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company agrees to
sell to each Underwriter, severally and not jointly, and each Underwriter
agrees, severally and not jointly, to purchase from the Company, the principal
amount of Securities set forth in Schedule A hereto opposite the name of such
Underwriter at a purchase price equal to ______% of the principal amount
thereof, plus accrued interest, if any, from ___________ __, 1996, plus any
additional principal amount of Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
Payment of the purchase price for, and delivery of, the Securities
shall be made at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017, or at such other place as shall be agreed upon
by you and the Company, at 10:00 A.M., on the [third][fourth] business day
(unless postponed in accordance with the provisions of Section 10) following the
date of this Agreement, or such other time not later than ten business days
after such date as shall be agreed upon by the Underwriters and the Company
(such time and date of payment and delivery being herein called "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds, against delivery to the Underwriters of the Securities to be
purchased by them. The Securities shall be in fully registered book-entry form
in such denominations and registered in such names as the Underwriters may
request in writing at least two business days before Closing Time, and shall be
made available for examination and packaging by the Underwriters not later than
10:00 A.M. on the last business day prior to Closing Time.
<PAGE>
8
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Underwriter as follows:
(a) The Company will prepare the Prospectus in a form approved by the
Underwriters and will file such Prospectus with the Commission pursuant to
subparagraph (1) or (4) of Rule 424(b) not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement. The Company will notify the Underwriters
immediately, and confirm the notice in writing, (i) of the effectiveness of
the Registration Statement and any amendment thereto (including any post-
effective amendment), and of the filing of the Prospectus pursuant to Rule
424(b), (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceeding for any such purpose. The Company will make
every reasonable effort to prevent the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or suspending any such qualification and, if any such order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will give the Underwriters notice of its intention to
prepare or file any amendment to the Registration Statement relating to the
Securities (including any post-effective amendment) or any amendment or
supplement to the Prospectus (including documents deemed to be incorporated
by reference into the Prospectus and including any revised prospectus which
the Company proposes for use by the Underwriters in connection with the
offering of the Securities which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective,
whether or not such revised prospectus is required to be filed pursuant to
Rule 424(b) of the Securities Act Regulations), will furnish the
Underwriters and counsel for the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Underwriters or counsel
for the Underwriters shall reasonably object.
(c) The Company will deliver to each Underwriter one manually
executed copy of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated by reference into the
<PAGE>
9
Prospectus), such number of conformed copies of the Registration Statement
as originally filed and of each amendment thereto (including documents
incorporated by reference into the Prospectus but without exhibits) as such
Underwriter may reasonably request and copies of each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus.
(d) The Company will furnish to each Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the
Securities Act, such number of copies of the Prospectus (as amended or
supplemented, if applicable) as you may reasonably request for the purposes
contemplated by the Securities Act or the Securities Act Regulations.
(e) If any event shall occur as a result of which it is necessary, in
the reasonable opinion of counsel for the Underwriters, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
purchaser, the Company will forthwith amend or supplement the Prospectus by
preparing and furnishing to the Underwriters a reasonable number of copies
of an amendment of or supplement to the Prospectus (in form and substance
satisfactory to counsel for the Underwriters) so that, as so amended or
supplemented, the Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the
time it is delivered to a purchaser, not misleading.
(f) The Company, during the period when the Prospectus is required to
be delivered under the Securities Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15
of the Exchange Act subsequent to the time the Registration Statement
becomes effective.
(g) The Company will endeavor, in cooperation with the Underwriters,
to qualify the Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States
as the Underwriters may designate, and will maintain such qualifications in
effect for as long as may be required for the distribution of the
Securities, except that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to execute a general
consent to service of process in any state or other jurisdiction. The
Company will file such statements and reports as may be required by the
laws of each jurisdiction in which the Securities have been qualified as
above provided.
(h) The Company will make generally available to its security holders
as soon as practicable after the effective
<PAGE>
10
date of the Registration Statement an earning statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning after the date of this Agreement.
(i) The Company, from the date hereof until the Closing Time, will
not offer, sell, contract to sell or otherwise dispose of any debt
securities issued or guaranteed by the Company that in the reasonable
judgment of the Underwriters are substantially similar to the Securities,
without the prior written consent of the Underwriters.
(j) For a period of five years (but not beyond any such date on which
no Securities shall be outstanding) after the Closing Time, the Company
will furnish to each Underwriter copies of all reports and communications
delivered to the Company's shareholders or to holders of the Securities as
a class and will also furnish copies of all reports (excluding exhibits)
filed with the Commission on forms 8-K, 10-Q and 10-K, and all other
reports and information furnished to its shareholders generally, not later
than the time such reports are first furnished to its shareholders
generally.
SECTION 4. Payment of Expenses. The Company is responsible for
-------------------
paying all expenses incident to the performance of its obligations under this
Agreement (except for the fees and disbursements of the counsel for the
Underwriters other than pursuant to (iv) of this Section 4), including (i) the
printing and filing of the Registration Statement as originally filed and any
amendments and exhibits thereto, (ii) the preparation, issuance and delivery of
the Securities to the Underwriters, (iii) the fees and disbursements of the
Company's counsel and accountants, (iv) the expenses in connection with the
qualification of the Securities under state securities laws in accordance with
the provisions of Section 3(g), including filing fees and the reasonable fees
and disbursements of counsel to the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky and Legal Investment Surveys,
(v) the printing and delivery to the Underwriters of copies of the Registration
Statement and all amendments thereto, of any Preliminary Prospectuses and of the
Prospectus and any amendments or supplements thereto, (vi) the printing and
delivery to the Underwriters of copies of the Blue Sky and Legal Investment
Surveys, (vii) any fees charged by securities rating services for rating the
Securities; and (viii) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of the Trustee's counsel, in connection
with the Indenture and the Securities.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 5 or Section 9(i), the Company shall reimburse the
Underwriters for all of their reasonable out-of-pocket expenses incurred from
and after the
<PAGE>
11
date of this Agreement, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations
---------------------------------------
of the Underwriters to purchase and pay for the Securities are subject to the
accuracy of the representations and warranties of the Company herein contained
at and as of the date hereof and the Closing Time, to the performance by the
Company of its obligations hereunder, and to the following further conditions:
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 3(a); and at Closing Time, no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus shall have been complied with and there shall
not have come to the attention of any Underwriter any facts that would
cause such Underwriter to believe that the Prospectus, at the time it was
required to be delivered to a purchaser of the Securities, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances existing at such time, not misleading.
(b) At Closing Time you shall have received:
(1) The favorable opinion, dated as of Closing Time, of Morgan, Lewis
& Bockius LLP, counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania.
(ii) The Company has the corporate power and authority to
own and lease its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under
this Agreement and the Indenture; and the Company is duly registered
as a bank holding company under the Bank Holding Company Act of 1956,
as amended.
(iii) Each of the bank subsidiaries of the Company and each of the
other subsidiaries of the Company, if any, which either individually
or in the aggregate constitute a "significant subsidiary" as defined
in Rule 405 of the Securities Act Regulations (collectively, the
"Significant Subsidiaries"), has been duly incorporated and is validly
existing as a corporation or national banking association, as the
<PAGE>
12
case may be, under the laws of its jurisdiction of incorporation or
organization.
(iv) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of each
Significant Subsidiary of the Company are owned of record and, to the
best of such counsel's knowledge, beneficially by the Company, free
and clear of all liens, encumbrances, equities or claims.
(v) This Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The Securities have been duly authorized and executed by the
Company and, when authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Underwriters
against payment of the consideration set forth herein, will constitute
valid and legally binding obligations of the Company enforceable in
accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other laws relating to or
affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law), and entitled to the benefits provided
by the Indenture.
(vii) The Indenture has been duly authorized, executed and
delivered by the Company and duly qualified under the Trust Indenture
Act, and, assuming due authorization, execution and delivery thereof
by the Trustee, constitutes a valid and legally binding instrument of
the Company enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws relating to or affecting enforcement of
creditors' rights generally or by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law).
(viii) The Registration Statement was declared effective under the
Securities Act as of the date specified in such opinion and, to the
best of such counsel's knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the Securities Act and no proceedings therefor have been
initiated or threatened by the Commission.
(ix) The Registration Statement and the Prospectus and any
amendment or supplement thereto made by the Company prior to the
Closing Time (other than the
<PAGE>
13
financial statements and financial and statistical data included
therein, as to which no opinion need be rendered), when it or they
became effective or were filed with the Commission, as the case may
be, and in each case at the Closing Time, complied as to form in all
material respects with the requirements of the Securities Act, the
Trust Indenture Act and the applicable rules and regulations under
said acts and the documents incorporated by reference into the
Prospectus (other than the financial statements and financial and
statistical data included therein, as to which no opinion need be
rendered) complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder, and such counsel have no reason to believe that
the Registration Statement, at the time it became effective, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or that the Prospectus, at the time
it was mailed to the Commission for filing or at Closing Time,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(x) To the best of their knowledge and information, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which are required to be
disclosed in the Registration Statement and are not so disclosed or
which, if adversely determined, would individually or in the aggregate
have a material adverse effect on the consolidated financial position
of the Company and its subsidiaries, considered as one enterprise or
which would affect the consummation of the transactions contemplated
in this Agreement, the Indenture or the Securities; and to the best of
their knowledge and information, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(xi) The information in the Prospectus under the captions
"Regulatory Matters" and "Description of Senior Notes," to the extent
that it constitutes matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been reviewed by
them and is correct in all material respects.
(xii) To the best of their knowledge and information, there are no
contracts, indentures,
<PAGE>
14
mortgages, loan agreements, notes, leases or other instruments
required to be described in the Registration Statement or to be filed
as exhibits thereto other than those described therein or filed or
incorporated by reference as exhibits thereto, and the descriptions
thereof in the Registration Statement are correct in all material
respects.
(xiii) No approval, authorization, consent, registration,
qualification or other order of any public board or body is required
in connection with the execution and delivery of this Agreement and
the Indenture or the issuance and sale of the Securities or the
consummation by the Company of the other transactions contemplated by
this Agreement or the Indenture, except such as have been obtained
under the Securities Act and the Trust Indenture Act or such as may be
required under the blue sky or securities laws of various states in
connection with the offering and sale of the Securities (as to which
such counsel need express no opinion).
(xiv) The execution and delivery of this Agreement and the
Indenture, the issue and sale of the Securities, the compliance by the
Company with the provisions of the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or constitute a breach of, or
default under, the articles of incorporation or by-laws of the Company
or a breach or default under any contract, indenture, mortgage, loan
agreement, note, lease or other instrument known to such counsel to
which either the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties may be bound
except for such breaches as would not have a material adverse effect,
individually or in the aggregate, on the conduct of the business,
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise, nor will such action (assuming compliance by the
Underwriters with all applicable state securities or blue sky laws)
result in a violation on the part of the Company or any of its
subsidiaries of any applicable law or regulation or of any
administrative, regulatory or court decree known to such counsel.
In rendering their opinion, such counsel may rely, as to matters of
fact relating to the Company, upon certificates or representations of
officers of the Company relating to such facts.
(2) The favorable opinion, dated as of Closing Time, of your
counsel, Simpson Thacher & Bartlett, with
<PAGE>
15
respect to the matters set forth in (i), (v), (vi), (vii) and, solely
as it relates to the information set forth under the caption
"Description of Senior Notes" in the Prospectus, (xi), of subsection
(b)(1) of this Section. In rendering their opinion, Simpson Thacher &
Bartlett may rely as to matters of Pennsylvania law upon the opinion
of Morgan, Lewis & Bockius LLP.
(c) At Closing Time there shall not have been, since the respective
dates as of which information is given in the Registration Statement, any
material adverse change in the condition, financial or otherwise, of the
Company and its subsidiaries considered as one enterprise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and you shall have received a certificate of
the President or the Vice President and Secretary of the Company and the
principal financial or accounting officer of the Company, dated as of
Closing Time, to the effect that there has been no such material adverse
change and to the effect that the other representations and warranties of
the Company contained in Section 1 are true and correct with the same force
and effect as though expressly made at and as of Closing Time and that the
Company has complied with all its agreements contained herein and that they
have examined the Registration Statement and the Prospectus and that, in
their opinion, as of the Effective Date and as of the Closing Date, the
Registration Statement and the Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(d) At the time of the execution of this Agreement, the Underwriters
shall have received from Coopers & Lybrand L.L.P. a letter dated such date,
in form and substance satisfactory to the Underwriters, to the effect that
(i) they are independent public accountants as required by the Securities
Act and the Securities Act Regulations; (ii) it is their opinion that the
financial statements included or incorporated by reference in the
Registration Statement and covered by their opinion therein comply as to
form in all material respects with the applicable accounting requirements
of the Securities Act and the Exchange Act and the applicable rules and
regulations thereunder; (iii) based upon limited procedures set forth in
detail in such letter, nothing has come to their attention which causes
them to believe that (A) the unaudited pro forma financial statements
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or, after making inquiries of certain officials of the
Company as to the basis for their determination of the pro forma
adjustments, that the pro forma adjustments in such unaudited pro forma
financial statements have not been
<PAGE>
16
properly applied to the historical amounts in the unaudited pro forma
consolidated financial statements, (B) the unaudited financial statements
of the Company and its subsidiaries included in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995 do not comply
as to form in all material respects with the applicable accounting
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis consistent in
all material respects with the audited financial statements included in the
Registration Statement, or (C) during the period from September 30, 1995 to
a specified date not more than five days prior to the date of this
Agreement, there has been any change in the capital stock or long-term
debt of the Company or its subsidiaries or any decrease in consolidated
total assets or shareholder's equity of the Company and its subsidiaries as
compared with the amounts shown in the September 30, 1995 consolidated
balance sheet incorporated by reference in the Registration Statement, or
any decrease, as compared with the corresponding period in the preceding
year, in net interest income or in the total or per share amounts of net
income of the Company and its subsidiaries on a consolidated basis, except
in each case as set forth or contemplated in the Registration Statement;
(iv) they have read in the Registration Statement the information in the
table under the caption "Capitalization" and the notes thereto and certain
dollar amounts, percentages and other financial information specified by
the Underwriters which is included or incorporated by reference in the
Registration Statement and have performed the procedures set forth in
detail in such letter and have found such amounts, percentages or other
financial information to be in agreement with the relevant accounting and
financial records of the Company and its subsidiaries.
(e) At the time of the execution of this Agreement, the Underwriters
shall have received letters dated such date, in form and substance
satisfactory to the Underwriters from KPMG Peat Marwick LLP, to the effect
set forth in clauses (i), (ii) and (iii)(C) of paragraph (d) above with
respect to the financial statements of Fairfax incorporated by reference in
the Registration Statement.
(f) At Closing Time the Underwriters shall have received from Coopers
& Lybrand LLP a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to paragraph
(d) of this Section, except that the "specified date" referred to shall be
a date not more than five days prior to Closing Time.
(g) At Closing Time counsel for the Underwriters shall have been
furnished with such documents, certificates and
<PAGE>
17
opinions as they may reasonably require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated
and related proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated shall
be satisfactory in form and substance to you and your counsel.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriters by notice to the Company at any time at or prior to Closing
Time, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 6 and 7 hereof
shall survive such termination.
SECTION 6. Indemnification.
---------------
(a) The Company agrees to indemnify each Underwriter and hold each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act harmless as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto) or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement
or omission, if such settlement is effected with the written consent of the
Company, which shall not be unreasonably withheld; and
(iii) against any and all expense whatsoever (including, subject
to Section 6(c) hereof, the fees and disbursements of counsel chosen by
such Underwriter) reasonably incurred in investigating, preparing or
defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
<PAGE>
18
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that the Company shall not be liable under this paragraph
- --------
6(a) in any case for any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter expressly for use in
the Registration Statement (or any amendment thereto) or any Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto); and
provided further that as to any Preliminary Prospectus this indemnity agreement
- ----------------
shall not inure to the benefit of any Underwriter or any person controlling that
Underwriter on account of any loss, liability, claim, damage or expense arising
from the sale of Securities to any person by that Underwriter if that
Underwriter failed to send or give a copy of the Prospectus, as amended or
supplemented at that time, to that person within the time required by the
Securities Act, and the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in the Prospectus as so amended or
supplemented, unless such failure to deliver the Prospectus resulted from non-
compliance by the Company with paragraph 3(d) hereof. For purposes of the last
proviso to the immediately preceding sentence, the term "Prospectus" shall not
be deemed to include the documents incorporated therein by reference, and no
Underwriter shall be obligated to send or give any supplement or amendment to
any document incorporated by reference in any Preliminary Prospectus or the
Prospectus to any person other than a person to whom such Underwriter had
delivered such incorporated document or documents in response to a written
request therefor.
In case of any notice to the Company under this indemnity agreement with respect
to any loss, liability, claim, damage or expense with respect to any claim made
against any Underwriter or any person controlling such Underwriter, the Company
shall be entitled to participate at its own expense in the defense, or if it so
elects within a reasonable time after receipt of such notice, to assume the
defense of any suit brought to enforce any such claim, but if it so elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
reasonably satisfactory to such Underwriter or any person or persons controlling
such Underwriter, defendant or defendants in any suit so brought. In the event
that the Company elects to assume the defense of any such suit and retain such
counsel, such Underwriter or such controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel thereafter retained by such Underwriter or such controlling person or
persons; provided, however, that, subject to Section 6(c) hereof, any
Underwriter shall have the right to employ counsel to represent such Underwriter
or any
<PAGE>
19
person who controls such Underwriter who may be subject to liability arising out
of any action in respect of which indemnity may be sought against the Company
if, in the reasonable judgment of counsel for such Underwriter, representation
of such Underwriter and the Company by the same counsel would be inappropriate
because there may be one or more legal defenses available to such Underwriter or
any such controlling person or persons which are different from or additional to
those available to the Company, in which event the fees and expenses of
appropriate separate counsel shall be borne by the Company.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, each of its officers who signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, but only arising out of untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any Preliminary Prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
expressly for use in the Registration Statement (or any amendment thereto) or
such Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action threatened or commenced against it in respect
of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement except to the extent that
the indemnifying party has been prejudiced in any material respect by such
failure. An indemnifying party may participate at its own expense in the
defense of such action. In no event shall an indemnifying party be liable for
the fees and expenses of more than one counsel (in addition to local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(d) The provisions of this Section 6 shall apply only to losses,
liabilities, claims, damages and expenses arising out of the types of untrue
statements or alleged untrue statements or omissions or alleged omissions
described in paragraphs 6(a) and 6(b), respectively. The obligations of the
Company and the Underwriters under this Section 6 shall be in addition to any
liability which the Company or the Underwriters may otherwise have.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 shall for any reason be held to be
<PAGE>
20
unenforceable by the indemnified party under Section 6(a) or 6(b), although
applicable in accordance with its terms, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other with respect to
the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other with respect to such offering shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Securities purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7 were to be determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public was offered to the public
exceeds the amount of any damages which such Underwriter has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this
<PAGE>
21
Section 7 are several in proportion to their respective underwriting obligations
and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, although speaking only as of the dates at which such
representations, warranties and agreements are made, shall remain operative and
in full force and effect, regardless of any investigation made by or on behalf
of the Underwriters or by or on behalf of any person controlling the
Underwriters, or by or on behalf of the Company, and shall survive delivery of
the Securities to the Underwriters.
SECTION 9. Termination of Agreement. The Underwriters may also
------------------------
terminate this Agreement, by notice to the Company, at any time at or prior to
Closing Time (i) if there has been, since the respective dates as of which
information is given in the Registration Statement, any material adverse change
in the condition, financial or otherwise, of the Company and its subsidiaries
considered as one enterprise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any new outbreak of hostilities or escalation of any existing
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the reasonable
professional judgment of the Underwriters, impracticable to market the
Securities or to enforce contracts for the sale of the Securities, or (iii) if
trading in the securities of the Company has been suspended by the Commission or
if trading or quotation generally on either the New York Stock Exchange, the
American Stock Exchange, or the Nasdaq National Market has been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said Exchanges or the
Nasdaq National Market or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either federal,
Pennsylvania or Maryland authorities, or if the rating assigned by any
nationally recognized statistical rating agency to any debt securities of the
Company as of the time of this Agreement shall have been lowered since that date
or if any such agency shall have publicly announced that it has placed under
surveillance or review with possible negative implications its rating of any
debt securities of the Company.
If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
as provided in Section 4, and provided further that Sections 6 and 7 hereof
shall survive such termination.
<PAGE>
22
SECTION 10. Default by An Underwriter. If one of the Underwriters
-------------------------
shall fail at the Closing Time to purchase the Securities which it is obligated
to purchase under this Agreement (the "Defaulted Securities"), the non-
defaulting Underwriters shall have the right, within 24 hours thereafter, to
purchase, or make arrangements for any other underwriters to purchase, all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the non-defaulting
Underwriters shall not have completed such arrangements within such 24-hour
period, then:
(a) if the principal amount of Defaulted Securities does not exceed
10% of the aggregate principal amount of the Securities, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof, or
(b) if the principal amount of Defaulted Securities exceeds 10% of
the aggregate principal amount of the Securities, this Agreement shall
terminate without liability on the part of the non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of such default which does not result in a termination of
this Agreement, either the non-defaulting Underwriter or the Company shall have
the right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Prospectus or in any other documents
or arrangements.
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to Oppenheimer & Co., Inc., Oppenheimer Tower,
World Financial Tower, New York, New York 10281, Attention of Michael
McClintock; and notices to the Company shall be directed to it at 26 North Cedar
Street, Lititz, Pennsylvania 17543, Attention of Richard M. Cloney, Vice
President and Secretary.
SECTION 12. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
parties hereto and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto and their
<PAGE>
23
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from an Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. SPECIFIED TIMES OF DAY REFER
TO NEW YORK CITY TIME.
<PAGE>
24
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
SUSQUEHANNA BANCSHARES, INC.
By:_______________________________
Name and Title
Confirmed and accepted, as of the date
first above written.
OPPENHEIMER & CO., INC.
LEGG MASON WOOD WALKER, INCORPORATED
By: OPPENHEIMER & CO., INC.
By:______________________________
<PAGE>
SCHEDULE A
----------
Name of Underwriter
- -------------------
Oppenheimer & Co. Inc. ...................................... $
Legg Mason Wood Walker, Incorporated ........................
-----------
Total $35,000,000
===========
<PAGE>
EXHIBIT 4.1
-----------
<PAGE>
==============================================
SUSQUEHANNA BANCSHARES, INC.
TO
MELLON BANK, N.A., Trustee
_______________
SENIOR DEBT SECURITIES
_______________
INDENTURE
Dated as of ___________ __, 1996
______________
==============================================
<PAGE>
TABLE OF CONTENTS
_________
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY........................... 1
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION............................ 1
Section 1.1 Definitions.............................................. 1
Section 1.2 Compliance Certificates and Opinions..................... 7
Section 1.3 Form of Documents Delivered to Trustee................... 8
Section 1.4 Acts of Holders; Record Dates............................ 9
Section 1.5 Notices, Etc., to Trustee and Company.................... 10
Section 1.6 Notice to Holders; Waiver................................ 10
Section 1.7 Conflict with Trust Indenture Act........................ 11
Section 1.8 Effect of Headings and Table of Contents................. 11
Section 1.9 Successors and Assigns................................... 11
Section 1.10 Separability Clause...................................... 11
Section 1.11 Benefits of Indenture.................................... 11
Section 1.12 Governing Law............................................ 11
Section 1.13 Legal Holidays........................................... 12
<CAPTION>
ARTICLE II
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SECURITY FORMS................................ 12
Section 2.1 Forms Generally.......................................... 12
Section 2.2 Form of Face of Security................................. 13
Section 2.3 Form of Reverse of Security.............................. 14
Section 2.4 Form of Legend for Global Securities..................... 18
Section 2.5 Form of Trustee's Certificate of
Authentication..................................... 18
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ARTICLE III
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THE SECURITIES................................ 18
Section 3.1 Amount Unlimited; Issuable in Series..................... 18
Section 3.2 Denominations............................................ 21
Section 3.3 Execution, Authentication, Delivery
</TABLE>
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NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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and Dating............................................... 21
Section 3.4 Temporary Securities..................................... 23
Section 3.5 Registration, Registration of
Transfer and Exchange.................................... 23
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities........................................ 25
Section 3.7 Payment of Interest; Interest
Rights Preserved......................................... 26
Section 3.8 Persons Deemed Owners.................................... 27
Section 3.9 Cancellation............................................. 28
Section 3.10 Computation of Interest.................................. 28
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ARTICLE IV
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SATISFACTION AND DISCHARGE.......................... 28
Section 4.1 Satisfaction and Discharge of Indenture.................. 28
Section 4.2 Application of Trust Money............................... 29
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ARTICLE V
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REMEDIES................................... 30
Section 5.1 Events of Default........................................ 30
Section 5.2 Acceleration of Maturity;
Rescission and Annulment................................. 32
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee............................... 33
Section 5.4 Trustee May File Proofs of Claim......................... 34
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities................................. 34
Section 5.6 Application of Money Collected........................... 34
Section 5.7 Limitation on Suits...................................... 35
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest.................. 36
Section 5.9 Restoration of Rights and Remedies....................... 36
Section 5.10 Rights and Remedies Cumulative........................... 36
Section 5.11 Delay or Omission Not Waiver............................. 36
Section 5.12 Control by Holders....................................... 36
Section 5.13 Waiver of Past Defaults.................................. 37
Section 5.14 Undertaking for Costs.................................... 37
Section 5.15 Waiver of Usury, Stay or Extension Laws.................. 38
</TABLE>
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NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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ARTICLE VI
THE TRUSTEE............................... 38
Section 6.1 Certain Duties and Responsibilities...................... 38
Section 6.2 Notice of Defaults....................................... 38
Section 6.3 Certain Rights of Trustee................................ 38
Section 6.4 Not Responsible for Recitals
or Issuance of Securities................................ 39
Section 6.5 May Hold Securities...................................... 40
Section 6.6 Money Held in Trust...................................... 40
Section 6.7 Compensation and Reimbursement........................... 40
Section 6.8 Disqualification; Conflicting Interests.................. 41
Section 6.9 Corporate Trustee Required;
Eligibility.............................................. 41
Section 6.10 Resignation and Removal;
Appointment of Successor................................. 41
Section 6.11 Acceptance of Appointment by Successor................... 43
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business................................ 44
Section 6.13 Preferential Collection of Claims
Against Company.......................................... 44
Section 6.14 Appointment of Authenticating Agent...................... 44
<CAPTION>
ARTICLE VII
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HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY............ 46
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders................................. 46
Section 7.2 Preservation of Information;
Communications to Holders................................ 46
Section 7.3 Reports by Trustee....................................... 47
Section 7.4 Reports by Company....................................... 47
<CAPTION>
ARTICLE VIII
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CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE......... 47
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms.................................... 47
Section 8.2 Successor Substituted.................................... 48
</TABLE>
_______________
NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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ARTICLE IX
SUPPLEMENTAL INDENTURES........................... 49
Section 9.1 Supplemental Indentures Without
Consent of Holders....................................... 49
Section 9.2 Supplemental Indentures with
Consent of Holders....................................... 50
Section 9.3 Execution of Supplemental Indentures..................... 51
Section 9.4 Effect of Supplemental Indentures........................ 51
Section 9.5 Conformity with Trust Indenture Act...................... 51
Section 9.6 Reference in Securities to
Supplemental Indentures.................................. 52
<CAPTION>
ARTICLE X
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COVENANTS.................................. 52
Section 10.1 Payment of Principal, Premium
and Interest............................................. 52
Section 10.2 Maintenance of Office or Agency.......................... 52
Section 10.3 Money for Securities Payments
to Be Held in Trust...................................... 53
Section 10.4 Statement by Officers as to Default...................... 54
Section 10.5 Existence................................................ 54
Section 10.6 Limitation on Disposition of Voting Stock of,
and Merger and Sale of Assets by, Principal Subsidiary
Banks.................................................... 54
Section 10.7 Exempted Transactions.................................... 55
Section 10.8 Maintenance of Properties................................ 55
Section 10.9 Payment of Taxes and Other Claims........................ 56
Section 10.10 Waiver of Certain Covenants.............................. 56
<CAPTION>
ARTICLE XI
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REDEMPTION OF SECURITIES.......................... 56
Section 11.1 Applicability of Article................................. 56
Section 11.2 Election to Redeem; Notice to Trustee.................... 56
Section 11.3 Selection by Trustee of Securities
to Be Redeemed........................................... 57
Section 11.4 Notice of Redemption..................................... 57
Section 11.5 Deposit of Redemption Price.............................. 58
Section 11.6 Securities Payable on Redemption Date.................... 58
</TABLE>
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NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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Section 11.7 Securities Redeemed in Part.............................. 58
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ARTICLE XII
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SINKING FUNDS.............................. 59
Section 12.1 Applicability of Article................................. 59
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities................................. 59
Section 12.3 Redemption of Securities for
Sinking Fund............................................. 59
<CAPTION>
ARTICLE XIII
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DEFEASANCE AND COVENANT DEFEASANCE.................. 60
Section 13.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance........................ 60
Section 13.2 Defeasance and Discharge................................. 60
Section 13.3 Covenant Defeasance...................................... 61
Section 13.4 Conditions to Defeasance or
Covenant Defeasance...................................... 61
Section 13.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions........................... 63
Section 13.6 Reinstatement............................................ 64
</TABLE>
______________
NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
INDENTURE, dated as of ________ __, 1996, between SUSQUEHANNA
BANCSHARES, INC., a corporation duly organized and existing under the laws of
the State of Pennsylvania (herein called the "Company"), having its principal
office at 26 North Cedar Street, Lititz, Pennsylvania 17543 and MELLON BANK,
N.A., a national banking association, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured senior
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 1.1 Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted
<PAGE>
2
hereunder shall mean such accounting principles as are generally accepted
at the date of such computation; and
(4) 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.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Authorized Officer" means any officer of the Company designated by a
resolution of the Board of Directors to take certain actions as specified
in this Indenture.
"Banking Subsidiary" means any Subsidiary organized under the laws of
the United States or of any state, commonwealth, territory or possession
thereof and which conducts a commercial, merchant or other banking
business, or a trust business.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, or by action of an Authorized Officer
designated as such pursuant to a resolution of 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", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in that Place of Payment are authorized or
obligated by law or executive order to close.
<PAGE>
3
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at such
time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, its Chief Financial Officer or a Vice
President, and by its Controller, an Assistant Controller, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Consolidated Banking Assets" means all assets owned directly or
indirectly by a Banking Subsidiary and reflected on the Company's most
recent audited consolidated balance sheet prepared in accordance with
generally accepted accounting principles applicable to banks and bank
holding companies.
"Controlled Subsidiary" means any Subsidiary more than 80% of the
outstanding shares of the Voting Stock of which is at the time owned
directly or indirectly by the Company or by one or more Controlled
Subsidiaries or by the Company and one or more Controlled Subsidiaries.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office as of the date hereof is located at Two Mellon
Bank Center, Room 325, Pittsburgh, PA 15259-0001, Attention: Corporate
Trust Group.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary for such series by the
Company pursuant to Section 3.1, which Person shall be a clearing agency
registered under the Securities Exchange Act of 1934, as amended.
"Event of Default" has the meaning specified in Section 5.1.
<PAGE>
4
"Exchange Act" means the Securities Exchange Act of 1934 as it may be
amended and any successor act thereto.
"Global Security" means a Security bearing the legend prescribed in
Section 2.4 evidencing all or part of a series of Securities, authenticated
and delivered to the Depositary for such series or its nominee, and
registered in the name of such Depositary or nominee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof, including, for all purposes of this instrument, and any such
supplemental indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively. The term "Indenture" shall also include the terms
of particular series of Securities established as contemplated by Section
3.1.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an instalment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or
otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President, the Chief Financial
Officer or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Controller, an Assistant Controller, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 10.4
shall be the principal executive, financial or accounting officer of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 5.2.
<PAGE>
5
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that,
--------
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; and
(iv) Securities which have been defeased pursuant to Section 13.2
hereof;
provided, however, that in determining whether the Holders of the requisite
-------- -------
principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, (i)
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof pursuant to Section 5.2, (ii) the
principal amount of a Security denominated in one or more foreign
currencies or currency units shall be the U.S. dollar equivalent,
determined in the manner provided as contemplated by Section 3.1 on the
date of original issuance of such Security, of the principal amount (or, in
the case of an Original Issue Discount Security, the U.S. dollar equivalent
on the date of original issuance of such Security of the amount determined
as provided in (i) above) of such Security, and (iii) Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee
knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor.
<PAGE>
6
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium
and interest on the Securities of that series are payable as specified as
contemplated by Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or
in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed
to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"Principal Subsidiary Bank" means any Banking Subsidiary, the
Consolidated Banking Assets of which constitute 10% or more of the
Company's Consolidated Banking Assets.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 3.1.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors,
the chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
senior trust officer, trust officer or assistant trust officer, the
controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
<PAGE>
7
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such instalment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or
by one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder, and if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean
the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided,
--------
however, that in the event the Trust Indenture Act of 1939 is amended after
-------
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president (but shall not include any assistant vice
president), whether or not designated by a number or a word or words added
before or after the title "vice president".
"Voting Stock" means stock which ordinarily has voting power for the
election of a majority of the board of directors (irrespective of whether
or not at the time stock of any other class or classes shall have
contingent voting rights).
<PAGE>
8
"Wholly-owned Subsidiary" means any Subsidiary all of whose
outstanding voting stock (other than directors' qualifying shares) shall at
the time be owned by the Company or one or more of its Wholly-owned
Subsidiaries.
Section 1.2 Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion (other than the Officers' Certificate
delivered under Section 10.4 hereof) with respect to compliance with a condition
or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(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 each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based,
<PAGE>
9
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective upon action by the requisite percentage of Holders
when such instrument or instruments are delivered to the Trustee and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including
a Depositary that is a Holder of a Global Security, may make, give or take, by a
proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders, and a
Depositary that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interest in any such Global Security.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Securities of any series entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to
<PAGE>
10
be given or taken by Holders of Securities of such series. If not set by the
Company prior to the first solicitation of a Holder of Securities of such series
made by any Person in respect of any such action, or, in the case of any such
vote, prior to such vote, the record date for any such action or vote shall be
the 30th day (or, if later, the date of the most recent list of Holders required
to be provided pursuant to Section 7.1) prior to such first solicitation or
vote, as the case may be. With regard to any record date for action to be taken
by the Holders of one or more series of Securities, only the Holders of
Securities of such series on such date (or their duly designated proxies) shall
be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any action hereunder with regard to any particular Security may do
so with regard to all or any part of the principal amount of such Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
Section 1.5 Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Two Mellon Bank
Center, Room 325, Pittsburgh, PA 15259-0001, Attention: Corporate Trust
Group, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company, Attention: Richard M.
Cloney, Vice President and Secretary.
Section 1.6 Notice to Holders; Waiver.
-------------------------
<PAGE>
11
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 1.7 Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 1.8 Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11 Benefits of Indenture.
---------------------
<PAGE>
12
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than (a) the parties hereto and their successors
hereunder and (b) the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 1.12 Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES OF SUCH COMMONWEALTH.
Section 1.13 Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of the Securities of any series which specifically
states that such provision shall apply in lieu of this Section)) payment of
interest or principal (and premium, if any) need not be made at such Place of
Payment on such date, but may be made on the next succeeding Business Day at
such Place of Payment with the same force and effect as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity, provided that no
--------
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
ARTICLE II
SECURITY FORMS
Section 2.1 Forms Generally.
---------------
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
<PAGE>
13
Section 2.2 Form of Face of Security.
------------------------
THIS SECURITY IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY FEDERAL OR OTHER GOVERNMENTAL AGENCY.
[Insert any legend required by the Internal Revenue Code of 1986, as
-------------------------------------------------------------------
amended, and the regulations thereunder.]
- ---------------------------------------
SUSQUEHANNA BANCSHARES, INC.
...........................
No........... $ ........
Susquehanna Bancshares, Inc., a corporation duly organized and
existing under the laws of the Commonwealth of Pennsylvania (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
........................................... , or registered assigns, the
principal sum of.................. ................... Dollars on
................................. [if the Security is to bear interest prior to
--------------------------------------------
Maturity, insert -- , and to pay interest thereon from ............. or from the
- ----------------
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on ............ and ............ in each year,
commencing .........., at the rate of ....% per annum, until the principal
hereof is paid or made available for payment [if applicable, insert -- , and (to
---------------------
the extent that the payment of such interest shall be legally enforceable) at
the rate of ....% per annum on any overdue principal and premium and on any
overdue instalment of interest]. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the ....... or ....... (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either 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 for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert --
------------------------------------------------ ----------------
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of ....% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date
<PAGE>
14
of such default in payment to the date payment of such principal has been made
or duly provided for. Interest on any overdue principal shall be payable on
demand. Any interest on any overdue principal shall bear interest at the rate of
.....% per annum (to the extent that the payment of such interest shall be
legally enforceable), which shall accrue from the date of such default in
payment to the date payment of such interest has been made or duly provided for,
and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
--------------
insert --any such] interest on this Security will be made at the office or
- ------
agency of the Company maintained for that purpose in [the Commonwealth of
Pennsylvania], in such coin or currency of [the United States of America]
[insert other currency, if applicable] as at the time of payment is legal tender
for payment of public and private debts [if applicable, insert -- ; provided,
--------------------- --------
however, that at the option of the Company payment of interest may be made by
- -------
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register].
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
SUSQUEHANNA BANCSHARES, INC.
By............................................
Attest:
......................
Section 2.3 Form of Reverse of Security.
--------------------------
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of _____________, 1996 (herein called the
"Indenture"), between the
<PAGE>
15
Company and Mellon Bank, N.A., as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof[, limited in
aggregate principal amount to $ ...........].
[If applicable, insert -- The Securities of this series are subject to
---------------------
redemption upon not less than 30 days' notice by mail, [if applicable, insert --
---------------------
(1) on ........... in any year commencing with the year ...... and ending with
the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [on
or after ..........., 19..], as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed [on or before ................, ___%, and if
redeemed] during the 12-month period beginning ............. of the years
indicated,
Redemption Redemption
Year Price Year Price
- ---- ----- ---- -----
and thereafter at a Redemption Price equal to ....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
---------------------
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert -- The Securities of this series are subject to
---------------------
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [on or
after ............], as a whole or in part, at the election of the Company, at
the Redemption Prices for redemption otherwise than through operation of the
sinking fund (expressed as percentages of the principal amount) set forth in the
table below: If redeemed during the 12-month period beginning ............ of
the years indicated,
<PAGE>
16
Redemption Price Redemption Price For
For Redemption Redemption Otherwise
Through Operation Than Through Operation
Year of the Sinking Fund of the Sinking Fund
- ---- ------------------- ----------------------
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to
.............., redeem any Securities of this series as contemplated by [Clause
(2) of] the preceding paragraph as a part of, or in anticipation of, any
refunding operation by the application, directly or indirectly, of moneys
borrowed having an interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than .....% per annum.]
[The sinking fund for this series provides for the redemption on
........... in each year beginning with the year ....... and ending with the
year ...... of [not less than $.......... ("mandatory sinking fund") and not
more than] $......... aggregate principal amount of Securities of this series.
Securities of this series acquired or redeemed by the Company otherwise than
through [mandatory] sinking fund payments may be credited against subsequent
[mandatory] sinking fund payments otherwise required to be made [in the inverse
order in which they become due].]
[If the Security is subject to redemption, insert -- In the event of
------------------------------------------------
redemption of this Security in part only, a new Security or Securities of this
series and of like tenor for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert -- The Indenture contains provisions for
---------------------
defeasance at any time of [(a)] [the entire indebtedness evidenced by this
Security] [and (b)] [certain restrictive covenants,] [in each case] upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.]
[If the Security is not an Original Issue Discount Security, insert --
------------------------------------------------- ----------------
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If
--------------------------------------------- ----------------
an Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- insert formula for
------------------
<PAGE>
17
determining the amount. Upon payment [if applicable, insert -- (i)] of the
- ---------------------- ---------------------
amount of principal so declared due and payable [if applicable, insert -- and
---------------------
(ii) of interest on any overdue principal and overdue interest (in each case to
the extent that the payment of such interest shall be legally enforceable)], all
of the Company's obligations in respect of the payment of the principal of and
interest, if any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
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 any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $....... and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
<PAGE>
18
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Section 2.4 Form of Legend for Global Securities.
------------------------------------
Any Global Security authenticated and delivered hereunder shall bear a
legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee thereof. This Security may not be transferred to,
or registered or exchanged for Securities registered in the name of, any
Person other than the Depositary or a nominee thereof or a successor of
such Depositary or a nominee of such successor and no such transfer may be
registered, except in the limited circumstances described in the Indenture.
Every Security authenticated and delivered upon registration of transfer
of, or in exchange for or in lieu of, this Security shall be a Global
Security subject to the foregoing, except in such limited circumstances."
Section 2.5 Form of Trustee's Certificate of
Authentication.
--------------------------------
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
__________________________,
As Trustee
By..........................................
Authorized Officer
<PAGE>
19
ARTICLE III
THE SECURITIES
Section 3.1 Amount Unlimited; Issuable in Series.
------------------------------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securi ties of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3,6, 9.6 or 11.7 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of the Securities of the
series is payable;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for any interest payable on any
Interest Payment Date;
(6) the place or places in addition to the Commonwealth of
Pennsylvania, where the principal of and any premium and interest on
Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company;
<PAGE>
20
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(10) the currency, currencies or currency units in which payment of
the principal of and any premium and interest on any Securities of the
series shall be payable if other than the currency of the United States of
America and the manner of determining the equivalent thereof in the
currency of the United States of America for purposes of the definition of
"Outstanding" in Section 1.1;
(11) if the amount of payments of principal of or any premium or
interest on any Securities of the series may be determined with reference
to an index or formula, the manner in which such amounts shall be
determined;
(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or a Holder
thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on Securities of such series as to which such election
is made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made;
(13) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
5.2;
(14) the application, if any, of either or both of Section 13.2 and
Section 13.3 to the Securities of the series;
(15) whether the Securities of the series shall be issuable in whole
or in part in the form of one or more Global Securities and, in such case,
the Depositary or Depositaries for such Global Security or Global
Securities and any circumstances other than those set forth in Section 3.5
in which any such Global Security may be transferred to, and registered and
exchanged for Securities registered in the name of, a Person other than the
Depositary for such Global Security or a nominee thereof and in which any
such transfer may be registered;
(16) if other than as specified in Section 5.1, the Events of Default
applicable with respect to the Securities of the series;
<PAGE>
21
(17) the Events of Default set forth in Section 5.1 applicable with
respect to the Securities of the series, if fewer than all of the Events of
Default set forth in Section 5.1;
(18) if other than as specified in Section 5.2, the Events of Default
the occurrence of which would permit the declaration of the acceleration of
Maturity pursuant to Section 5.2;
(19) the Events of Default the occurrence of which would permit the
declaration of Maturity pursuant to Section 5.2, if fewer than all of the
Events of Default set forth in Section 5.2;
(20) any other covenant or warranty included for the benefit of
Securities of the series in addition to (and not inconsistent with) those
included in this Indenture for the benefit of Securities of all series, or
any other covenant or warranty included for the benefit of Securities of
the series in lieu of any covenant or warranty included in this Indenture
for the benefit of Securities of all series, or any provision that any
covenant or warranty included in this Indenture for the benefit of
Securities of all series shall not be for the benefit of Securities of such
series, or any combination of such covenants, warranties or provisions; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 9.1(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 3.3) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
Unless otherwise provided with respect to the Securities of any
series, at the option of the Company, interest on the Securities of any series
that bears interest may be paid by mailing a check to the address of the person
entitled thereto as such address shall appear in the Security Register.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 3.2 Denominations.
-------------
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 3.1. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
<PAGE>
22
Section 3.3 Execution, Authentication, Delivery
and Dating.
------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established in or
pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 6.1) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such form
has been established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities (or the manner of determining
such terms) have been established by or pursuant to Board Resolution as
permitted by Section 3.1, that such terms (or the manner of determining
such terms) have been established in conformity with the provisions of this
Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
<PAGE>
23
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents are
delivered at or prior to the authentication upon original issuance of the first
Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an Authorized Officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities.
--------------------
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, 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
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the prep aration of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and tenor. Until so exchanged the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.
Section 3.5 Registration, Registration of
Transfer and Exchange.
-----------------------------
<PAGE>
24
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount and tenor.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 11.3 and ending
at the close of business on the day of such mailing, or (ii) to 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.
<PAGE>
25
Notwithstanding the foregoing and except as otherwise specified or
contemplated by Section 3.1, if at any time the Depositary for the Securities of
a series notifies the Company that it is unwilling or unable to continue as a
Depositary for the Securities of such series or if at any time the Depositary
for Securities of a series shall no longer be registered or in good standing
under the Securities Exchange Act of 1934, as amended, or other applicable
statute or regulation, the Company shall appoint a successor Depositary with
respect to the Securities of such series. If a successor Depositary for the
Securities of such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, the Company
will execute, and the Trustee, upon Company Request, will authenticate and
deliver Securities of such series in definitive form in an aggregate principal
amount equal to the principal amount of the Global Security or Global Securities
representing Securities of such series in exchange for such Global Security or
Global Securities.
In the event that (i) the Company at any time and in its sole
discretion determines that the Securities of any series issued in the form of
one or more Global Securities shall no longer be represented by such Global
Security or Global Securities or (ii) there shall have occurred and be
continuing an Event of Default or an event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default with respect to the
Securities of any series, the Company will execute, and the Trustee, upon
Company Request, will authenticate and deliver Securities of such series in
definitive form and in an aggregate principal amount equal to the principal
amount of the Global Security or Global Securities representing such series in
exchange for such Global Security or Global Securities.
Upon the occurrence in respect of any Global Security of any series of
any one or more of the conditions specified in the preceding two paragraphs or
such other conditions as may be specified as contemplated by Section 3.1 for
such series, such Global Security may be exchanged for Securities registered in
the names of, and the transfer of such Global Security may be registered to,
such Persons (including Persons other than the Depositary with respect to such
series and its nominees) as such Depositary shall direct. Notwithstanding any
other provision of this Indenture, any Security authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, any Global
Security shall also be a Global Security and shall bear the legend specified in
Section 2.4 except for any Security authenticated and delivered in exchange for,
or upon registration of transfer of, a Global Security pursuant to the preceding
sentence.
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities.
------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or
<PAGE>
26
indemnity as may be required by them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and the Trustee shall authenticate and deliver, in lieu of
any such destroyed, lost or stolen Security, a new Security of the same series
and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest
Rights Preserved.
-----------------------------
Except as otherwise provided as contemplated by Section 3.1 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which 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 may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (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
<PAGE>
27
the amount of Defaulted Interest proposed to be paid on each Security of
such series 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
be not more than 15 days and not 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 Holder of Securities of such series at
his 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 so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 3.8 Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 3.7) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
<PAGE>
28
No holder of any beneficial interest in any Global Security held on
its behalf by a Depositary shall have any rights under this Indenture with
respect to such Global Security, and such Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by a Depositary or impair, as between a Depositary
and such holders of beneficial interests, the operation of customary practices
governing the exercise of the rights of the Depositary (or its nominee) as
Holder of any Security.
Section 3.9 Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
Section 3.10 Computation of Interest.
-----------------------
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
<PAGE>
29
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 10.3) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of
such deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations (if
any) of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of clause
(1) of this Section, the obligations of the Trustee under Section 4.2 and the
last paragraph of Section 10.3 shall survive.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of all series as to which it is
<PAGE>
30
Trustee and if the other conditions thereto are met. In the event there are two
or more Trustees hereunder, then the effectiveness of any such instrument shall
be conditioned upon receipt of such instruments from all Trustees hereunder.
Section 4.2 Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE V
REMEDIES
Section 5.1 Events of Default.
-----------------
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) the failure of the Company, subject to the provisions of Section
10.10, to observe and perform the covenants contained in Sections 10.6 and
10.7; or
(5) 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 or which has expressly been included
in this Indenture solely for the benefit of series of Securities other than
that series), and continuance of such default or breach for a period of 60
days after there has been given, by
<PAGE>
31
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 principal amount
of the Outstanding Securities of that series 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
(6) indebtedness for borrowed money of the Company or any Principal
Subsidiary Bank in excess of $5,000,000 (whether such indebtedness now
exists or is hereafter created) is not paid at final maturity or becomes or
is declared due and payable prior to the date or dates on which such
indebtedness would otherwise have become due and payable as a result of the
occurrence of one or more events of default as defined in any mortgages,
indentures, or instruments under which such indebtedness may have been
issued or by which such indebtedness may have been secured, and such
failure to pay or acceleration or accelerations, as the case may be, shall
not be rescinded, annulled, or cured prior to the expiration of 30 days
after the date such failure to pay or acceleration or accelerations
occurred; provided, however, that if, prior to a declaration of
-------- -------
acceleration of the maturity of the Securities of that series or the entry
of judgment in favor of the Trustee in a suit pursuant to Section 5.3, such
failure to pay or acceleration or accelerations, as the case may be, shall
be rescinded, annulled or cured, then the Event of Default hereunder by
reason thereof shall be deemed likewise to have been thereupon rescinded,
annulled or cured without further action upon the part of either the
Trustee or any of the Holders of Securities; and provided further that,
-------- -------
subject to the provisions of Section 6.1 and 6.2, the Trustee shall not be
charged with knowledge of any such failure to pay or acceleration unless
either (a) a Responsible Officer of the Trustee assigned to its corporate
trust department shall, as such officer, have actual knowledge of such
default or (b) the Trustee shall have received written notice from the
Company or any Principal Subsidiary Bank, any Holder, or the holder of any
such indebtedness; or
(7) the entry by a court or a governmental authority having
jurisdiction in the premises of (A) a decree or order for relief in respect
of the Company or any Principal Subsidiary Bank in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company or any Principal Subsidiary Bank a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Principal
Subsidiary Bank under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Principal Subsidiary Bank or
substantially all of its assets or ordering the winding up or liquidation
of the affairs of the respective entity, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
<PAGE>
32
(8) the commencement by the Company or any Principal Subsidiary Bank
of a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
the Company or any Principal Subsidiary Bank in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Principal Subsidiary Bank or substantially
all of its assets; or
(9) any other Event of Default provided with respect to Securities of
that series.
Section 5.2 Acceleration of Maturity;
Rescission and Annulment.
------------------------
If an Event of Default (other than an Event of Default specified in
clauses (7) and (8) of Section 5.1) with respect to Securities of any series at
the time Outstanding occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
any of the Securities of that series are Discount Securities, such portion of
the principal amount of such Original Issue Discount Securities as may be
specified in the terms of thereof) of all of the Securities of that series to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal
amount (or specified amount) shall become immediately due and payable. If any
Event of Default specified in clause (7) or (8) of Section 5.1 occurs, such
principal amount shall automatically become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
<PAGE>
33
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and any interest thereon at the rate or rates
prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee.
------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof, or
(3) default is made in the making or satisfaction of any sinking fund
payment or analogous obligation when the same becomes due pursuant to the
terms of any Security,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the
<PAGE>
34
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
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 Holder in any such proceeding; provided,
--------
however, the Trustee may vote on behalf of the Holders for the election of a
- -------
trustee in bankruptcy or similar official and may be a member of a creditors' or
other similar committee.
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities.
----------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
<PAGE>
35
Section 5.6 Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively.
Section 5.7 Limitation on Suits.
-------------------
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders 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 of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under
<PAGE>
36
this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all of such Holders.
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest.
---------------------------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 3.7)
any interest on such Security on the Stated Maturity or Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date), and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 5.9 Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
<PAGE>
37
Section 5.12 Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities of any series 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, with respect to the
Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would involve the Trustee in personal
liability.
Section 5.13 Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Securities
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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of
<PAGE>
the claims or defenses made by such party litigant; but the provisions of this
Section 5.14 shall not apply to any suit instituted by the Company, to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Securities on or after the Stated Maturity or Maturities
expressed in such Securities (or, in the case of redemption, on or after the
Redemption Date).
Section 5.15 Waiver of Usury, Stay or Extension Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
Section 6.1 Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 6.2 Notice of Defaults.
------------------
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series notice
of such default as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified in
- -------- -------
Section 5.1(5) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
<PAGE>
39
Section 6.3 Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, 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 or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(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, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the 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; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
<PAGE>
40
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 6.4 Not Responsible for Recitals
or Issuance of Securities.
----------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 6.5 May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 6.6 Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 6.7 Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith;
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part,
<PAGE>
41
arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the reasonable costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder;
(4) to secure the Company's obligations under this Section, the
Trustee shall have a lien prior to the Securities upon all money or
property held or collected by the Trustee in its capacity as Trustee,
except for such money and property which is held in trust to pay principal
(and premium, if any) or interest on particular Securities; and
(5) when the Trustee incurs any expenses or renders any services
after the occurrence of an Event of Default specified in Section 5.1(7) or
(8), such expenses and the compensation for such services are intended to
constitute expenses of administration under the United States Bankruptcy
Code (Title 11 of the United States Code) or any similar federal or state
law for the relief of debtors.
Section 6.8 Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 6.9 Corporate Trustee Required;
Eligibility.
---------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Section 6.10 Resignation and Removal;
Appointment of Successor.
------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
<PAGE>
42
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, 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, (i) the Company by a Board Resolution may remove the
Trustee with respect to all securities, or (ii) subject to Section 5.14, any
Holder 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 with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 6.11. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any Series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
6.11, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the
<PAGE>
43
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any Series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 6.11, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all Holders of Securities of such series in the manner provided in Section
1.6. Each notice shall include the name of the successor Trustee with respect to
the Securities of such series and the address of its Corporate Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees cotrustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided
<PAGE>
44
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business.
---------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 6.13 Preferential Collection of Claims
Against Company.
---------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 6.14 Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents (which may
be an affiliate of the Company) with respect to one or more series of Securities
which shall be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
3.6, and Securities so authenticated shall be entitled to the benefits of this
<PAGE>
45
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
Unless the Authenticating Agent has been appointed by the Trustee at
the request of the Company, the Trustee agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its services under this
Section, and the Trustee shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 6.7.
<PAGE>
46
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
___________________________,
MELLON BANK, N.A.
As Trustee
By_________________________
As Authenticating Agent
By_________________________
Authorized Officer
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders.
--------------------------------
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than June 30 and December 31 in each
year, a list for each series, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Securities of such
series as of the preceding June 15 or December 15, as the case may be, 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;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
Section 7.2 Preservation of Information;
Communications to Holders.
----------------------------
<PAGE>
47
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) 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 agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 7.3 Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders 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. To
the extent that any such report is required by the Trust Indenture Act with
respect to any 12-month period, such report shall cover the 12-month period
ending March 15 and shall be transmitted by the next succeeding March 15.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when any Securities are listed on any stock
exchange.
Section 7.4 Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
--------
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms.
------------------------------
<PAGE>
48
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, shall be organized and
validly existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of and any premium and interest on all the Securities and the
performance or observance of every covenant of this Indenture on the part
of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with;
provided, however, the Company may, without the consent of the Holder or Holders
- -------- -------
of any series of Securities, convey or transfer its assets substantially as an
entirety to any Person in connection with a transfer that is assisted or
sponsored by a Federal bank regulatory authority, and in such case the Company's
obligations under the Indenture need not be assumed by the entity acquiring such
assets.
Section 8.2 Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 8.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such
<PAGE>
49
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 Supplemental Indentures Without
Consent of Holders.
-------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any
--------
such addition, change or elimination (i) shall neither (A) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (B) modify the
rights of the Holder of any such Security with respect to such provision or
(ii) shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Securities; or
<PAGE>
50
(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 6.11(b); or
(9) to provide that Securities of any Series may be convertible into
other securities or other property and to set forth the terms and
conditions of conversion of any such convertible Securities; or
(10) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause
--------
(10) shall not adversely affect the interests of the Holders of Securities
of any series in any material respect.
Section 9.2 Supplemental Indentures with
Consent of Holders.
----------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto 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 Securities of such series under this Indenture; provided, however,
-------- -------
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
5.2, or adversely affect any right of repayment at the option of the Holder
of any Security, or reduce the amount of, or postpone the date fixed for,
the payment of any sinking fund payment or analogous obligation, or change
the coin or currency in which, any Security or any premium or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or
<PAGE>
51
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver of certain defaults hereunder and their consequences
provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.10, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, provided, however, that this clause shall not be deemed to require
-------- -------
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 6.11(b) and
9.1(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
<PAGE>
52
Section 9.5 Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 9.6 Reference in Securities to
Supplemental Indentures.
--------------------------
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
Section 10.1 Payment of Principal, Premium
and Interest.
-----------------------------
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-------- -------
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any
<PAGE>
53
series for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
Section 10.3 Money for Securities Payments
to Be Held in Trust.
-----------------------------
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (i) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for
<PAGE>
54
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, the City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 10.4 Statement by Officers as to Default.
-----------------------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate (one of the signers of which shall be the principal executive
officer, principal financial officer or principal accounting officer of the
Company), stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 10.5 Existence.
---------
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
-------- -------
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not and is not reasonably likely to be disadvantageous in any
material respect to the Holders.
Section 10.6 Limitation on Disposition of Voting Stock of, and Merger
and Sale of Assets by, Principal Subsidiary Banks.
--------------------------------------------------------
Except as provided in Article VIII, so long as any of the Securities shall
be outstanding, the Company will not and will not permit any Subsidiary to
(a) sell, assign, transfer or otherwise dispose of any shares of, or
securities convertible into or options, warrants or rights to subscribe for
or purchase shares of, Voting Stock of a Principal Subsidiary Bank, and
will not permit a Principal Subsidiary Bank or any Subsidiary owning,
directly or indirectly, any shares of Voting Stock of a Principal
Subsidiary Bank to issue any shares of, or securities convertible into or
options, warrants or rights to subscribe for or purchase shares of, such
Voting Stock of a Principal Subsidiary Bank if, after giving effect to any
such transaction and to the issuance of the maximum number of shares of
Voting Stock of
<PAGE>
55
such Principal Subsidiary Bank issuable upon the exercise of all such
convertible securities, options, warrants or rights, the Principal
Subsidiary Bank would cease to be a Controlled Subsidiary, except as
otherwise provided below in this Section 10.6 or in Section 10.7.
(b) permit a Principal Subsidiary Bank to
(i) merge or consolidate with or into any other corporation,
unless the surviving corporation is, or upon consummation of the
merger or consolidation will become a Controlled Subsidiary and
immediately after giving effect thereto and treating any such
surviving corporation thereafter as a Principal Subsidiary Bank and as
a Subsidiary for purposes of this Indenture, no Event of Default, and
no event which, after notice or lapse of time or both, would become an
Event of Default, shall have occurred and be continuing, or
(ii) lease, sell or transfer all or substantially all of its
properties and assets to any corporation or other Person, except to a
Controlled Subsidiary or a Person that, upon such lease, sale or
transfer, will become a Controlled Subsidiary and immediately after
giving effect thereto and treating any such Person thereafter as a
Principal Subsidiary Bank and as a Subsidiary for purposes of this
Indenture, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
occurred and be continuing.
Section 10.7 Exempted Transactions.
---------------------
Notwithstanding Section 10.6(a), the Company may sell, assign,
transfer or otherwise dispose of any shares of, or securities convertible into,
or options, warrants or rights to subscribe for or purchase shares of, Voting
Stock of a Principal Subsidiary Bank
(i) in compliance with an order of a court or regulatory
authority of competent jurisdiction or as a condition imposed by such
court or authority to the acquisition by the Company, directly or
indirectly, of any other corporation or entity; or
(ii) where the proceeds, if any, from any such sale, assignment
or disposition are within a reasonable period of time invested in any
Controlled Subsidiary (including any person which upon such investment
becomes a Controlled Subsidiary) engaged in a banking business or any
other business then legally permissible for bank holding companies
pursuant to an understanding or agreement in principle reached at the
time of such sale, assignment or disposition.
Section 10.8 Maintenance of Properties.
-------------------------
<PAGE>
56
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
Section 10.9 Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which adequate provision is made.
Section 10.10 Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 10.5 to 10.9, inclusive, with
respect to the Securities of any series if before the time for such compliance
the Holders of a majority in principal amount of the Outstanding Securities of
such series shall, by act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Applicability of Article.
------------------------
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.1 for Securities of any series)
in accordance with this Article.
<PAGE>
57
Section 11.2 Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all the Securities of any series, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed. In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
Section 11.3 Selection by Trustee of Securities
to Be Redeemed.
----------------------------------
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series and of a specified tenor are to be
redeemed), the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series. If less than
all of the Securities of such series and of a specified tenor are to be
redeemed, the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously called for
redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 11.4 Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
<PAGE>
58
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued interest, if any,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption of
any Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price and accrued
interest, if any, will become due and payable upon each such Security to be
redeemed and, if applicable, that interest thereon will cease to accrue on
and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any,
(6) that the redemption is for a sinking fund, if such is the case,
and
(7) the CUSIP numbers, if any, of the Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Section 11.5 Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
Section 11.6 Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
-------- -------
contemplated by Section 3.1, installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more
<PAGE>
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 11.7 Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE XII
SINKING FUNDS
Section 12.1 Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 3.1 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 12.2. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities.
----------------------------
The Company (1) may deliver Securities of a series (other than any
previously called for redemption) and (2) may apply as a credit Securities of a
series which theretofore have been redeemed or otherwise acquired by the Company
either at the election of the Company pursuant to the terms of such Securities
or through the application of permitted
<PAGE>
60
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to the Securities of such series required to be made pursuant to the terms of
such Securities as provided for by the terms of such series; provided that such
--------
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
Section 12.3 Redemption of Securities for
Sinking Fund.
----------------------------
Not less than 90 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 12.2 and the basis for such credit and will also deliver to
the Trustee any Securities to be so delivered. Not less than 30 days before each
such sinking fund payment date the Trustee shall select the Securities to be
redeemed upon such sinking fund payment date in the manner specified in Section
11.3 and cause notice of the redemption thereof to be given in the name of and
at the expense of the Company in the manner provided in Section 11.4. Such
notice having been duly given, the redemption of such Securities shall be made
upon the terms and in the manner stated in Sections 11.6 and 11.7.
ARTICLE XIII
DEFEASANCE AND COVENANT DEFEASANCE
Section 13.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance.
---------------------------------
If pursuant to Section 3.1 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 13.2 or (b) covenant
defeasance of the Securities of a series under Section 13.3, then the provisions
of such Section or Sections, as the case may be, together with the other
provisions of this Article XIII, shall be applicable to the Securities of such
series, and the Company may at its option by Board Resolution, at any time, with
respect to the Securities of such series, elect to have either Section 13.2 (if
applicable) or Section 13.3 (if applicable) be applied to the Outstanding
Securities of such series upon compliance with the conditions set forth below in
this Article XIII.
Section 13.2 Defeasance and Discharge.
------------------------
Upon the Company's exercise of the above option applicable to this
Section, the Company shall be deemed to have been discharged from its
obligations with respect to
<PAGE>
61
the Outstanding Securities of such series on and after the date the conditions
precedent set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities of
such series and to have satisfied all its other obligations under such
Securities and this Indenture, insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
outstanding Securities of such series to receive, solely from the trust fund
described in Section 13.4 as more fully set forth in such Section, payments of
the principal of (and premium, if any) and interest on such Securities when such
payments are due, (B) the Company's obligations with respect to such Securities
under Sections 3.4, 3.5, 3.6, 10.2 and 10.3 and such obligations as shall be
ancillary thereto, (C) the rights, powers, trusts, duties, immunities and other
provisions in respect of the Trustee hereunder and (D) this Article XIII.
Subject to compliance with this Article XIII, the Company may exercise its
option under this Section 13.2 notwithstanding the prior exercise of its option
under Section 13.3 with respect to the Securities of such series. Following a
defeasance, payment of the Securities of such series may not be accelerated
because of an Event of Default.
Section 13.3 Covenant Defeasance.
-------------------
Upon the Company's exercise of the above option applicable to this
Section and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), the Company shall be released from its
obligations under any covenant applicable to such Securities that is determined
pursuant to Section 3.1 to be subject to this provision, and the occurrence of
an event specified in Section 5.1(4) (with respect to any Section applicable to
such Securities that are determined pursuant to Section 3.1 to be subject to
this provision) and 5.1(5) shall not be deemed to be an Event of Default with
respect to the outstanding Securities of such series. For this purpose, such
covenant defeasance means that, with respect to the Outstanding Securities of
such series, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section or by reason of any reference in any such Section to any other
provision herein or in any other document, but the remainder of this Indenture
and such Securities shall be unaffected thereby.
Section 13.4 Conditions to Defeasance or
Covenant Defeasance.
---------------------------
The following shall be the conditions precedent to application of
either Section 13.2 or Section 13.3 to the Outstanding Securities of such
series:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or
<PAGE>
62
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest 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 (C) a combination thereof, sufficient, without
reinvestment, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by the
Trustee to pay and discharge, the principal of (and premium, if any) and
interest on the Outstanding Securities of such series on the Maturity of
such principal, premium, if any, or interest and any mandatory sinking fund
payments or analogous payments applicable to the Outstanding Securities of
such series on the due dates thereof. Before such a deposit the Company may
make arrangements satisfactory to the Trustee for the redemption of
Securities at a future date or dates in accordance with Article XI, which
shall be given effect in applying the foregoing. For this purpose, "U.S.
Government Obligations" means securities that are (x) direct obligations of
the United States of America for the payment of which its full faith and
credit is pledged or (y) 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, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian
with respect to any such U.S. Government Obligation or a specific payment
of principal of or interest on any such U.S. Government Obligation held by
such custodian for the account of the holder of such 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 principal of or
interest on the U.S. Government Obligation evidenced by such depository
receipt.
(2) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing (A) on the date of such
deposit or (B) insofar as subsections 5.1(7) and (8) are concerned, at any
time during the period ending on the 123rd day after the date of such
deposit or, if longer, ending on the day following the expiration of the
longest preference period applicable to the Company in respect of such
deposit (it being understood that the condition in this Clause (B) shall
not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not (A) cause the
Trustee for the Securities of such series to have a conflicting interest as
defined in Section 6.8 or for purposes of the Trust Indenture Act with
respect to any securities of the Company or (B) result in the trust arising
from such
<PAGE>
63
deposit to constitute, unless it is qualified as, a regulated investment
company under the Investment Company Act of 1940, as amended.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
(5) Such defeasance or covenant defeasance shall not cause any
Securities of such series then listed on any registered national securities
exchange under the Securities Exchange Act of 1934, as amended, to be
delisted.
(6) In the case of an election under Section 13.2, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred.
(7) In the case of an election under Section 13.3, the Company shall
have delivered to the Trustee an opinion of Counsel to the effect that the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(8) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which may
be imposed on the Company in connection therewith pursuant to Section 3.1.
(9) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 13.2
or the covenant defeasance under Section 13.3 (as the case may be) have
been complied with.
<PAGE>
64
Section 13.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.
-----------------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee pursuant to Section 13.4 in respect of the Outstanding
Securities of such series shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (but not including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Securities, of all sums due and to become due thereon in respect
of principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 13.4 or the principal and interest
received in respect thereof.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 13.4 which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance.
Section 13.6 Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 13.5 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article XIII until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 13.5; provided, however, that if
-------- -------
the Company makes any payment of principal of (and premium, if any) or interest
on any such Security following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money held by the Trustee or the Paying Agent.
<PAGE>
65
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
SUSQUEHANNA BANCSHARES, INC.
By___________________________
Title:
Attest:
By______________________
Title: Secretary
MELLON BANK, N.A.,
As Trustee
By___________________________
Attest: Title: Assistant Vice President
By______________________
Title: Assistant Officer
<PAGE>
66
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the ____ day of ______________, 1996 before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he is an Assistant Vice President of Mellon Bank, N.A., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
______________________
Notary Public
<PAGE>
67
STATE OF ________ )
) ss.:
COUNTY OF ________ )
On the _____ day of _______________, 1996 before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is __________________ of _________________________, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
________________________________
<PAGE>
EXHIBIT 5.1
-----------
MORGAN, LEWIS & BOCKIUS LLP
ONE COMMERCE SQUARE
417 WALNUT STREET
HARRISBURG PA 17101
TEL: (717) 237-4000
FAX: (717) 237-4004
January 9, 1996
Susquehanna Bancshares, Inc.
26 North Cedar Street
P.O. Box 1000
Lititz, PA 17543
Re: Susquehanna Bancshares, Inc.
Registration Statement on Form S-3
----------------------------------
Gentlemen:
We have acted as counsel for Susquehanna Bancshares, Inc., a Pennsylvania
corporation (the "Company"), in connection with the preparation of the
subject registration statement (the "Registration Statement"), filed with
the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Act"), to register the public offering of up to
$35,000,000 aggregate principal amount of the Company's senior debt
securities ("Debt Securities") to be issued under and pursuant to an
indenture to be dated on or before the date of issue of the Debt Securities
(the "Indenture") between the Company and Mellon Bank, N.A., as trustee
(the "Trustee"). In this connection, we have reviewed (a) the Registration
Statement; (b) the Company's Articles of Incorporation, as amended, and
Bylaws; (c) the Indenture; and (d) certain records of the Company's
corporate proceedings as reflected in its minute books. In our
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the
conformity with the original of all documents submitted to us as copies
thereof.
Assuming (i) the Indenture has been duly executed and delivered by the
parties, (ii) the Company duly authorizes the issuance of the Debt
Securities under the Indenture, and (iii) the Debt Securities have been
duly executed by the Company and authenticated and delivered, against
payment therefor, by the Trustee under the terms of the Indenture, in our
opinion the Debt Securities will be legal, valid and binding obligations of
the Company and entitled to the benefit of the Indenture.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to all references to our firm in the
Registration Statement. In giving such consent, we do not thereby admit
that we are acting within the category of persons whose consent is required
under Section 7 of the Act and the rules and regulations of the Securities
and Exchange Commission thereunder.
Very truly yours,
MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
Exhibit 12.1
------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HISTORICAL Nine Months
Ended
September 30, Year Ended December 31,
----------------------- ----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- -------------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Income before income taxes
extraordinary item/cumulative effect of
a change in accounting principle $27,052 $ 24,507 $32,546 $31,709 $ 30,713 $ 27,802 $ 23,837
Fixed charges (excluding interest on
deposits) 8,423 3,972 5,754 4,701 5,452 6,584 7,551
------- -------- ------- ------- -------- -------- --------
Total $35,475 $ 28,479 $38,300 $36,410 $ 36,165 $ 34,386 $ 31,388
======= ======== ======= ======= ======== ======== ========
Ratio of earnings to fixed charges 4.21x 7.17x 6.66x 7.75x 6.63x 5.22x 4.16x
======= ======== ======= ======= ======== ======== ========
Income before income taxes and
extraordinary item/cumulative effect of
a change in accounting principle $27,052 $ 24,507 $32,546 $31,709 $ 30,713 $ 27,802 $ 23,837
Fixed charges (including interest on
deposits) 60,845 41,161 56,968 56,460 70,258 91,495 98,561
------- -------- ------- ------- -------- -------- --------
Total $87,897 $ 65,668 $89,514 $88,169 $100,971 $119,297 $122,398
======= ======== ======= ======= ======== ======== ========
Ratio of earnings to fixed charges 1.44x 1.60x 1.57x 1.56x 1.44x 1.30x 1.24x
======= ======== ======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA Nine Months
Ended Year Ended
September 30, December 31,
1995 1994
-------- -------
<S> <C> <C>
Income before income taxes and
extraordinary item/cumulative effect of a
change in accounting principle $ 31,221 $ 45,295
Fixed charges (excluding interest on
deposits) 11,685 11,759
-------- --------
Total $ 42,906 $ 57,054
======== ========
Ratio of earnings to fixed charges 3.67x 4.85x
======== ========
Income before income taxes and
extraordinary item/cumulative effect of a
change in accounting principle $ 31,221 $ 45,295
Fixed charges (including interest on
deposits) 80,298 86,723
-------- --------
Total $111,519 $132,018
======== ========
Ratio of earnings to fixed charges 1.39x 1.52x
======== ========
</TABLE>
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-3 of our reports, which include explanatory paragraphs relating to the
change in method of accounting for investments and income taxes in 1993, on our
audits of the financial statements of Susquehanna Bancshares, Inc. prior to the
pooling with Atlanfed Bancorp, Inc., dated February 13, 1995, and as restated
for the pooling, dated February 13, 1995, except for note 2 as to which the date
is April 1, 1995. We also consent to the reference to our firm under the caption
"Experts".
COOPERS & LYBRAND L.L.P.
Harrisburg, Pennsylvania
January 5, 1996
<PAGE>
EXHIBIT 23.3
------------
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Susquehanna Bancshares, Inc.
Lititz, Pennsylvania:
We consent to the use of our report dated May 5, 1995 on the financial
statements of Atlanfed Bancorp, Inc. incorporated herein by reference to
the Susquehanna Bancshares, Inc. Form 8-K/A-1 dated May 26, 1995 and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
January 8, 1996
<PAGE>
EXHIBIT 23.4
------------
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Fairfax Financial Corporation
Baltimore, Maryland:
We consent to the use of our report dated November 14, 1995 on the
financial statements of Fairfax Financial Corporation and subsidiaries (the
Company) incorporated herein by reference to the Susquehanna Bancshares,
Inc. Form 8-K dated November 21, 1995 and to the reference to our firm
under the heading "Experts" in the prospectus.
Our report refers to the Company's adoption in 1995 of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
KPMG PEAT MARWICK LLP
Baltimore, Maryland
January 8, 1996
<PAGE>
EXHIBIT 23.5
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Susquehanna Bancshares, Inc. on Form S-3 of our report, which includes an
explanatory paragraph relating to the change in method of accounting for income
taxes in 1993 and of accounting for certain debt and equity securities in 1995,
dated April 12, 1995, on our audits of the consolidated financial statements of
Reisterstown Holdings, Inc. as of March 31, 1995 and September 30, 1994 and for
the six months ended March 31, 1995 and for the years ended September 30, 1994
and 1993. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 5, 1996
<PAGE>
EXHIBIT 25.1
------------
[CONFORMED COPY]
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM T-1
__________________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
__________________
Check if an application to determine eligibility of
a Trustee pursuant to Section 305(b) (2) [_]
MELLON BANK, N.A.
(Name of Trustee)
25-0659306 U.S.
(I.R.S. Employer Identification No.) (Jurisdiction of incorporation)
One Mellon Bank Center
Pittsburgh, PA 15258-0001
(Address of Principal Executive Office)
PETER J. GERMANOWSKI
Vice President
MELLON BANK, N.A.
ONE MELLON BANK CENTER
PITTSBURGH, PENNSYLVANIA 15258-0001
412-234-2472
(Name, Address and Telephone Number of Agent for Service)
__________________
SUSQUEHANNA BANCSHARES, INC.
(Name of Obligor)
PENNSYLVANIA
(State or Other Jurisdiction of Incorporation or Organization)
23-2201716
(I.R.S. Employer Identification No.)
26 NORTH CEDAR STREET, LITITZ, PENNSYLVANIA 17543
(Address of Principal Executive Offices)
SENIOR DEBT SECURITIES
(Title of Indenture Securities)
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE--
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of Cleveland Cleveland, Ohio
Federal Deposit Insurance Corporation Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
The obligor is not an affiliate of the trustee.
ITEMS 3-15 ARE NOT APPLICABLE SINCE THE OBLIGOR IS NOT IN DEFAULT ON SECURITIES
ISSUED UNDER INDENTURES UNDER WHICH THE APPLICANT IS TRUSTEE.
16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
STATEMENT OF ELIGIBILITY.
EXHIBIT 1 -- Copy of articles of association of the trustee as now in
effect, filed as Exhibit 1 to trustee's statement of
eligibility and qualification, Registration No. 33-
46990, and incorporated herein by reference.
EXHIBIT 2 -- Copy of certificate of the authority of the trustee to
commence business, copy of certificate of consolidation
with the Union Trust Company of Pittsburgh and copy of
certificate approving merger of Mellon National Bank and
Trust Company into Mellon Bank, N.A. filed as Exhibit
T1A(b) to trustee's statement of eligibility and
qualification, Registration No. 33-13020, and
incorporated herein by reference.
EXHIBIT 3 -- Copy of certificate as to authority of the trustee to
exercise corporate trust powers, filed as Exhibit T1A(c)
to trustee's statement of eligibility and qualification,
Registration No. 33-13020, and incorporated herein by
reference.
EXHIBIT 4 -- Copy of existing by-laws of the trustee, filed as
Exhibit 4 to trustee's statement of eligibility and
qualification, Registration No. 33-46990, and
incorporated herein by reference.
EXHIBIT 5 -- Copy of each indenture referred to in Item 4, if the
obligor is in default. Not applicable.
EXHIBIT 6 -- Consent of the trustee required by Section 321(b) of the
Act, filed as Exhibit T1D to trustee's statement of
eligibility and qualification, Registration No. 33-
13020, and incorporated herein by reference.
EXHIBIT 7 -- Copy of the latest report of condition of the trustee
transmitted electronically pursuant to law or the
requirements of its supervising or examining authority.
1
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE
TRUSTEE, MELLON BANK, N.A., A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF PITTSBURGH, AND COMMONWEALTH OF
PENNSYLVANIA, ON THE 9TH DAY OF JANUARY, 1996.
MELLON BANK, N.A.
TRUSTEE
By Peter J. Germanowski
----------------------------
Peter J. Germanowski
Vice President
2
<PAGE>
EXHIBIT 7
REPORT OF CONDITION
CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF
MELLON BANK, N.A.
FOR SEPTEMBER 30, 1995
IN THE COMMONWEALTH OF PENNSYLVANIA, AT THE CLOSE OF BUSINESS ON
SEPTEMBER 30, 1995; TRANSMITTED ELECTRONICALLY IN RESPONSE TO CALL MADE BY
COMPTROLLER OF THE CURRENCY, UNDER TITLE 12, UNITED STATES CODE, SECTION 161.
CHARTER NO. 6301 NORTHEASTERN DISTRICT
STATEMENT OF RESOURCES AND LIABILITIES
(in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................... $ 2,344,825
Interest-bearing balances............................................ 1,316,765
Securities:
Held-to-maturity securities.......................................... 2,987,033
Available-for-sale securities........................................ 2,214,934
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds sold................................................... 659,394
Loans and lease financing receivables:
Loans and leases, net of unearned income............. $23,320,570
LESS: Allowance for loan and lease losses............ 370,631
Loans and leases, net of unearned income, allowance, and reserve..... 22,949,939
Assets held in trading accounts........................................... 494,269
Premises and fixed assets (including capitalized leases).................. 461,270
Other real estate owned................................................... 65,309
Customers' liability to this bank on acceptances outstanding.............. 243,233
Intangible assets......................................................... 1,043,614
Other assets.............................................................. 1,300,202
-----------
TOTAL ASSETS....................................................... $36,080,787
===========
LIABILITIES
Deposits:
In domestic offices.................................................. $20,373,634
Noninterest-bearing................................. $ 5,840,842
Interest-bearing.................................... 14,532,792
In foreign offices, Edge and Agreement subsidiaries, and IBFs........ 5,503,623
Noninterest-bearing................................. 14,238
Interest-bearing.................................... 5,489,385
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased.............................................. 2,074,873
Securities sold under agreements to repurchase....................... 282,043
Demand notes issued to the U.S. Treasury.................................. 446,667
Trading liabilities....................................................... 436,119
Other borrowed money:
With original maturity of one year or less........................... 2,262,992
With original maturity of more than one year......................... 163,040
Mortgage indebtedness and obligations under capitalized leases............ 2,875
Bank's liability on acceptances executed and outstanding.................. 243,233
Subordinated notes and debentures......................................... 398,143
Other liabilities......................................................... 693,477
TOTAL LIABILITIES................................................... 32,880,719
EQUITY CAPITAL
Common stock.............................................................. 167,285
Surplus (exclude all surplus related to preferred stock).................. 1,030,737
Undivided profits and capital reserves.................................... 2,027,876
Net unrealized holding gains (losses) on available-for-sale securities.... (19,918)
Cumulative foreign currency translation adjustments....................... (5,912)
-----------
TOTAL EQUITY CAPITAL................................................ 3,200,068
-----------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY CAPITAL. $36,080,787
===========
</TABLE>
3
<PAGE>
I, Michael K. Hughey, Senior Vice President and Corporate Controller
of the above-named bank, do hereby declare that this Report of Condition is true
and correct to the best of my knowledge and belief.
Michael K. Hughey
November 8, 1995
We, the undersigned directors, attest to the correctness of this
Statement of Resources and Liabilities. We declare that it has been examined by
us, and to the best of our knowledge and belief has been prepared in conformance
with the instructions and is true and correct.
FRANK V. CAHOUET
W. KEITH SMITH
CHARLES A. CORRY
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