<PAGE>
As filed with the Securities and Exchange Commission on May 12, 1997.
REGISTRATION NO. 333-25393
333-25393-01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KEYSTONE FINANCIAL KEYSTONE FINANCIAL, INC.
MID-ATLANTIC FUNDING CORP.
(Exact name of registrants as specified in their charters)
PENNSYLVANIA PENNSYLVANIA
(State or other jurisdiction of incorporation or organization)
23-2894664 23-2289209
(I.R.S. Employer Identification No.)
ONE KEYSTONE PLAZA ONE KEYSTONE PLAZA
FRONT AND MARKET STREETS FRONT AND MARKET STREETS
P.O. BOX 3660 P.O. BOX 3660
HARRISBURG, PA 17105-3660 HARRISBURG, PA 17105-3660
(717) 233-1555 (717) 233-1555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BEN G. ROOKE, ESQ.
EXECUTIVE VICE PRESIDENT AND COUNSEL
ONE KEYSTONE PLAZA
FRONT AND MARKET STREETS
P.O. BOX 3660
HARRISBURG, PA 17105-3660
(717) 233-1555
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
COPIES TO:
DANIEL P. GALLAGHER, JR., ESQ. DANIEL M. ROSSNER, ESQ.
REED SMITH SHAW & MCCLAY BROWN & WOOD LLP
435 SIXTH AVENUE ONE WORLD TRADE CENTER
PITTSBURGH, PA 15219 NEW YORK, NY 10048
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
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. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<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 PRICING SUPPLEMENT 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 MAY 12, 1997
PRICING SUPPLEMENT TO PROSPECTUS SUPPLEMENT DATED MAY , 1997 TO PROSPECTUS
DATED MAY , 1997
$100,000,000
KEYSTONE FINANCIAL MID-ATLANTIC FUNDING CORP.
% SENIOR MEDIUM-TERM NOTES DUE
UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY
KEYSTONE FINANCIAL, INC.
----------
This document (the "Pricing Supplement") is issued to give details of an
issue by Keystone Financial Mid-Atlantic Funding Corp. (the "Issuer") of its
Medium-Term Notes unconditionally guaranteed as to payment of principal,
premium, if any, and interest, if any, by Keystone Financial, Inc. (the
"Guarantor").
This Pricing Supplement relating to $100,000,000 of the Issuer's Senior
Medium-Term Notes (the "Senior Notes") supplements the terms and conditions in,
and incorporates by reference, the Prospectus dated May , 1997 and the
Prospectus Supplement dated May , 1997 relating to up to $400,000,000 of the
Issuer's Medium-Term Notes unconditionally guaranteed as to payment of
principal, premium, if any, and interest, if any, by the Guarantor, and all
documents incorporated by reference therein (together, the "Prospectus"), and
should be read in conjunction with the Prospectus. Unless otherwise defined in
this Pricing Supplement, terms used herein have the same meaning as in the
Prospectus.
----------
THE SENIOR NOTES AND RELATED GUARANTEE WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS
OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRICING SUPPLEMENT OR THE
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) ISSUER (1)(3)
------------------ ------------ -------------
<S> <C> <C> <C>
Per Senior Note............................ % % %
Total...................................... $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from May , 1997.
(2) The Issuer and the Guarantor have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the
Securities Act of 1933.
(3) Before deducting estimated expenses of $ payable by the Issuer.
----------
The Senior Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Senior Notes will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York on or about May , 1997 against payment
therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KEEFE, BRUYETTE & WOODS, INC.
----------
The date of this Pricing Supplement is May , 1997.
<PAGE>
DESCRIPTION OF NOTES
The following items under this heading "Description of Notes" are
the particular terms which relate to the issue which is the subject of
this Pricing Supplement.
<TABLE>
<S> <C>
Type of Notes: Senior Fixed Rate Notes
Principal Amount: $100,000,000
Issue Price: % of the Principal Amount
Date of Issue: May , 1997
Maturity Date: May ,
Specified Currency: U.S. Dollars
Interest Rate: %
Interest Payment Dates: and of each year, commencing , 1997
Regular Record Dates: and preceding the related Interest Payment Date
</TABLE>
RECENT DEVELOPMENTS
The Guarantor recently reported its unaudited results for the
quarter ended March 31, 1997. The Guarantor reported total assets of
$5.19 billion, deposits of $4.08 billion, and net loans and leases of
$3.5 billion. The Guarantor reported net income of $17.129 million or
$0.46 per share. The $0.46 earnings per share represents a $0.02 per
share increase over the Guarantor's $0.44 per share earnings for the
quarter ended March 31, 1996. Certain additional information with respect
to the Guarantor's first quarter results is contained in the Guarantor's
Current Report on Form 8-K dated April 18, 1997. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus.
The Guarantor's acquisition of First Financial Corporation of
Western Maryland ("FFWM") was approved by FFWM shareholders on May 8,
1997. The Guarantor's acquisition of Financial Trust Corp ("FTC") was
approved by FTC shareholders on May 7, 1997 and by the Guarantor's
shareholders on May 8, 1997. The Guarantor expects to complete these
transactions during the second quarter of 1997. See "Keystone Financial,
Inc." in the accompanying Prospectus.
USE OF PROCEEDS
The Issuer will advance the net proceeds from the sale of the
Senior Notes to the Guarantor. The Guarantor, including its banking
subsidiaries, will use the proceeds for general corporate purposes,
including to finance the acquisition of FFWM.
UNDERWRITING
Subject to the terms and conditions set forth in the Distribution
Agreement, dated May , 1997 (the "Distribution Agreement"), and a Terms
Agreement, dated May , 1997 (the "Terms Agreement"), each among the
Issuer, the Guarantor and the Underwriters, the Issuer has agreed to sell
to each of the Underwriters named below and each of the Underwriters has
severally agreed to purchase the Senior Notes set forth opposite its name
below:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT OF
- ----------- SENIOR NOTES
-------------------
<S> <C>
Goldman, Sachs & Co....................................
Bear, Stearns & Co. Inc................................
Keefe, Bruyette & Woods, Inc...........................
---------------------
Total.............................................. $100,000,000
=====================
</TABLE>
Under the terms and conditions of the Distribution Agreement and
related Terms Agreement, the Underwriters are committed to take and pay
for all of the Senior Notes, if any are taken.
The Underwriters propose to offer the Senior Notes in part directly to
the public at the initial pubic offering price set forth on the cover
page of this Pricing Supplement, and in part to certain securities
dealers at such price less a concession of % of the principal amount of
the Senior Notes. The Underwriters may allow, and such dealers may
reallow, to certain brokers and dealers a concession not to exceed % of
the principal amount of the Senior Notes. After the Senior Notes are
released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Guarantor and the Issuer have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the Securities
Act of 1933.
P-2
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 12, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY , 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 SUPPLEMENT 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
$400,000,000
KEYSTONE FINANCIAL MID-ATLANTIC FUNDING CORP.
SENIOR/SUBORDINATED MEDIUM-TERM NOTES
DUE 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST, IF ANY, BY
KEYSTONE FINANCIAL, INC.
----------
Keystone Financial Mid-Atlantic Funding Corp. (the "Issuer"), may offer from
time to time up to $400,000,000 aggregate initial offering price of its Senior
Medium-Term Notes (the "Senior Notes") and Subordinated Medium-Term Notes (the
"Subordinated Notes" and, together with the Senior Notes, the "Notes"). The
Senior Notes will be unconditionally guaranteed as to payment of principal,
premium, if any, and interest, if any (the "Senior Guarantees"), by Keystone
Financial, Inc. (the "Guarantor"). The Subordinated Notes will be fully and
unconditionally guaranteed, on a subordinated basis, as to payment of
principal, premium, if any, and interest, if any (the "Subordinated Guarantees"
and, together with the Senior Guarantees, the "Guarantees") by the Guarantor.
The Notes may be denominated in U.S. dollars or in such foreign currencies or
composite currencies as may be designated by the Issuer at the time of
offering. The Issuer will set forth the specific currency or composite
currency, interest rate (if any), issue price and maturity date of any Note in
the related Pricing Supplement to this Prospectus Supplement. Unless otherwise
specified in the applicable Pricing Supplement, Goldman, Sachs & Co., Bear,
Stearns & Co. Inc. and Keefe, Bruyette & Woods, Inc. (the "Agents") will not
sell Notes denominated other than in U.S. dollars or ECUs in, or to residents
of, the country issuing the Specified Currency. See "Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each January 15 and July 15 and at
maturity. Interest on Floating Rate Notes will be payable on the dates
specified therein and in the applicable Pricing Supplement.
Unless the Issuer specifies an Initial Redemption Date in the applicable
Pricing Supplement, the Notes will not be redeemable prior to their Stated
Maturity Date. If an Initial Redemption Date is so specified, the Notes will be
redeemable at the option of the Issuer at any time after such date as described
herein. The Subordinated Notes will be subject to acceleration of maturity only
in the case of certain events of bankruptcy, insolvency or reorganization. See
"Certain Terms Relating to Subordinated Debt Securities" in the accompanying
Prospectus.
The Notes offered hereby will be issued only in fully registered book-entry
form in minimum denominations of $100,000 and integral multiples of $1,000 in
excess thereof, or the approximate equivalent thereof in the Specified
Currency. See "Description of Notes."
SEE "RISK FACTORS" ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY.
----------
THE NOTES AND RELATED GUARANTEES WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) ISSUER (3)
---------- --------------- -----------
<S> <C> <C> <C>
Per Note.............. 100% .125%-.750% 99.250%-99.875%
Total (4)............. $400,000,000 $500,000-3,000,000 $397,000,000-399,500,000
</TABLE>
- -----
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Issuer will pay the Agents a commission ranging from .125% to .750%,
depending upon the maturity, of the principal amount of any Notes sold
through them as Agents (or sold to such Agents as principal in
circumstances in which no other discount is agreed). The Issuer may also
sell Notes directly to investors on its own behalf, in which case no
commission will be payable. The Guarantor and the Issuer have agreed to
indemnify the Agents against certain liabilities, including liabilities
under the Securities Act of 1933. See "Supplemental Plan of Distribution."
(3) Before deducting estimated expenses of $374,712.12 payable by the Issuer,
including expenses of the Agents to be reimbursed by the Issuer.
(4) Or the equivalent thereof in another currency or composite currency.
----------
Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Issuer. Notes may be sold to
the Agents on their own behalf at negotiated discounts. The Issuer reserves the
right to sell Notes directly on its own behalf. The Issuer also reserves the
right to withdraw, cancel or modify the offering contemplated hereby without
notice. The Issuer or the Agents may reject any order as a whole or in part.
See "Supplemental Plan of Distribution."
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KEEFE, BRUYETTE & WOODS, INC.
----------
The date of this Prospectus Supplement is May , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF
THE NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"SUPPLEMENTAL PLAN OF DISTRIBUTION."
__________________
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in the medium-term notes due 9 months to 30 years from date of
issue (the "Notes") of the Issuer that result from such Notes being
denominated or payable in or determined by reference to a currency or
composite currency other than United States dollars or to one or more
interest rate, currency or other indices or formulas. The Issuer, the
Guarantor and the Agents disclaim any responsibility to advise
prospective investors of such risks as they exist at the date of this
Prospectus Supplement or as they change from time to time. Prospective
investors should consult their own financial and legal advisors as to the
risks entailed by an investment in such Notes. Such Notes are not an
appropriate investment for investors who are unsophisticated with respect
to foreign currency transactions or transactions involving the applicable
interest rate index or currency index or other indices or formulas.
RISKS OF ILLIQUIDITY
The Notes will not have an established trading market when issued,
and there can be no assurance of a secondary market for the Notes or the
liquidity of such market if one develops. See "Supplemental Plan of
Distribution."
The secondary market for Notes will be affected by a number of
factors independent of the creditworthiness of the Issuer and the
Guarantor and the value of the applicable index or indices or formula or
formulas, including the complexity and volatility of each such index or
formula, the method of calculating the principal, premium, if any, and/or
interest, if any, in respect of such Notes, the time remaining to the
maturity of such Notes, the outstanding amount of such Notes, any
redemption features of such Notes, the amount of other debt securities
linked to such index or formula and the level, direction and volatility
of market interest rates generally. Such factors also will affect the
market value of such Notes. In addition, certain Notes may be designed
for specific investment objectives or strategies and, therefore, may have
a more limited secondary market and experience more price volatility than
conventional debt securities. Investors may not be able to sell such
Notes readily or at prices that will enable investors to realize their
anticipated yield. No investor should purchase Notes unless such
investor understands and is able to bear the risk that such Notes may not
be readily saleable, that the value of such Notes will fluctuate over
time and that such fluctuations may be significant.
RISKS ASSOCIATED WITH INDEXED NOTES
An investment in Notes indexed, as to principal or interest or both,
to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant
risks that are not associated with similar investments in a conventional
fixed rate or floating rate debt security. If the interest rate on such
a Note is so indexed, it may result in an interest rate that is less than
that payable on a conventional fixed rate or floating rate debt security
issued at the same time, including the possibility that no interest will
be paid or that negative interest will accrue, and, if the principal
amount of such a Note is so indexed or if such principal amount is
utilized to net against accrued negative interest, the principal amount
payable at maturity may be less than the original purchase price of such
Note if allowed pursuant to the terms of such Note, including the
possibility that no principal will be paid. The secondary market for
Indexed Notes (as defined below) will be affected by a number of factors
independent of the creditworthiness of the Issuer and the Guarantor,
including the value of the applicable currency, commodity or interest
rate index, the time remaining to the maturity of such Indexed Notes, the
amount outstanding of such Indexed Notes and market interest rates. The
value of the applicable currency, commodity or interest rate index
depends on a number of interrelated factors, including economic,
financial and political events, over which the Issuer has no control.
Additionally, if the formula
S-2
<PAGE>
used to determine the principal amount or interest payable with respect
to such Indexed Notes contains a multiple or leverage factor, the effect
of any change in the applicable currency, commodity or interest rate
index will be increased. The historical experience of the relevant
currency, commodities or interest rate indices should not be taken as an
indication of future performance of such currency, commodities or
interest rate indices during the term of any Indexed Note. Accordingly,
prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of Indexed Notes in light of their particular circumstances.
Any optional redemption feature of Notes might affect the market
value of such Notes. Since the Issuer may be expected to redeem such
Notes when prevailing interest rates are relatively low, an investor
might not be able to reinvest the redemption proceeds at an effective
interest rate as high as the interest rate on such Notes.
FOREIGN CURRENCY RISKS
General
Exchange Rates and Exchange Controls. An investment in Notes
denominated in other than U.S. dollars entails significant risks that are
not associated with a similar investment in a security denominated in
U.S. dollars. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the U.S. dollar and the
various foreign currencies or composite currencies, and the possibility
of the imposition or modification of foreign exchange controls by either
the U.S. or foreign governments. Such risks generally depend on economic
and political events over which the Issuer has no control. In recent
years, rates of exchange between the U.S. dollar and certain foreign
currencies have been highly volatile, and such volatility may be expected
to continue in the future. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however,
of fluctuations in the rate that may occur during the term of any Note.
Depreciation of the Specified Currency other than U.S. dollars against
the U.S. dollar would result in a decrease in the effective yield of such
Note below its coupon rate, and in certain circumstances could result in
a loss to the investor on a U.S. dollar basis.
Governments have imposed from time to time and may in the future
impose exchange controls that could affect exchange rates as well as the
availability of a specified foreign currency at a Note's maturity. Even
if there are no actual exchange controls, it is possible that the
Specified Currency for any particular Note would not be available at such
Note's maturity. In that event, the Issuer will repay such Note at
maturity in U.S. dollars on the basis of the most recently available
Market Exchange Rate.
This Prospectus Supplement does not describe all the risks of an
investment in Notes denominated in other than U.S. dollars. Prospective
investors should consult their own financial and legal advisors as to the
risks entailed by an investment in Debt Securities denominated in other
than U.S. dollars. Notes denominated in other than U.S. dollars are not
an appropriate investment for investors who are unsophisticated about
foreign currency transactions.
Currently, there are limited facilities in the United States for
conversion of U.S. dollars into certain foreign currencies, and vice
versa.
Unless otherwise specified in the applicable Pricing Supplement,
Notes denominated in other than U.S. dollars or European currency units
will not be sold in, or to residents of, the country issuing the
Specified Currency in which particular Notes are denominated. The
information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Issuer
disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States as to any matters
that may affect the purchase, holding, or receipt of payments of
principal of and interest on the Notes. Such persons should consult their
own financial and legal advisors with regard to such matters.
Governing Law and Judgments. The Notes will be governed by and
construed in accordance with the laws of the State of New York. Under
the Judiciary Law of the State of New York, a judgment in an action based
upon an obligation denominated in a currency other than U.S. dollars will
be rendered in the
S-3
<PAGE>
foreign currency of the underlying obligation and converted into U.S.
dollars at the rate of exchange prevailing on the date of the entry of
the judgment or decree.
EXCHANGE RATE AND CONTROLS FOR SPECIFIED CURRENCIES
For any Note denominated in other than U.S. dollars, the Pricing
Supplement relating to such Notes will contain information concerning
exchange rates. The information concerning exchange rates will be
furnished as a matter of information only and should not be regarded as
indicative of the rate of or trends in future fluctuations in currency
exchange rates.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes
offered hereby (referred to in the Prospectus as "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of Debt Securities set
forth in the Prospectus, to which description reference is hereby made.
The following description will apply to each Note unless otherwise
specified in the applicable Pricing Supplement.
GENERAL
The Notes are to be issued as one or more series of Debt Securities,
and will be either Senior Debt Securities or Subordinated Debt Securities
of the Issuer (each as defined in the accompanying Prospectus). At the
date hereof, the maximum amount of Debt Securities authorized for
issuance is $400,000,000. Whether an offering of Notes will constitute
Senior Debt Securities ("Senior Notes") or Subordinated Debt Securities
("Subordinated Notes") will be set forth in a Pricing Supplement hereto.
The Senior Notes will be issued under an Indenture, dated as of May 1,
1997 (the "Senior Indenture"), between the Issuer, the Guarantor and
Bankers Trust Company, as senior trustee (the "Senior Trustee"), and the
Subordinated Notes will be issued under an Indenture, dated as of May 1,
1997 (the "Subordinated Indenture"), between the Issuer, the Guarantor
and Bankers Trust Company, as subordinated trustee (the "Subordinated
Trustee"). The Senior Indenture and the Subordinated Indenture are
collectively referred to herein as "Indentures" and are more fully
described in the accompanying Prospectus. The Senior Trustee and the
Subordinated Trustee are referred to herein collectively or individually
as the "Trustee." The following summaries of certain provisions of the
Indentures encompass all their material terms and provisions but are
subject to, and are qualified in their entirety by reference to, all of
the provisions of the Indentures, including the definitions therein of
certain terms. The Indentures provide that such Debt Securities may be
issued in one or more series up to the aggregate principal amount that
may be authorized from time to time by the Issuer.
All Senior Debt Securities, including the Senior Notes, will be
unsecured obligations and will rank pari passu with all other unsecured
and unsubordinated indebtedness of the Issuer. As of the date hereof, no
Senior Debt Securities of the Issuer were outstanding.
All Subordinated Debt Securities, including the Subordinated Notes,
will be unsecured and subordinated to Senior Issuer Indebtedness as set
forth under "Certain Terms Relating to Subordinated Debt Securities" in
the accompanying Prospectus.
Except as set forth under "Description of Debt Securities--
Restrictive Covenants" in the accompanying Prospectus, the Indentures do
not contain provisions which would provide protection to noteholders
against a sudden and dramatic decline in credit quality resulting from
takeovers, recapitalizations or similar restructurings. See "Description
of Debt Securities--Restrictive Covenants" in the accompanying
Prospectus.
The Notes are currently limited to up to $400,000,000 aggregate
initial offering price, or the equivalent thereof in one or more foreign
or composite currencies. The Notes will be offered on a continuous basis
and will mature on any day nine months to 30 years from their dates of
issue (each, a "Stated Maturity Date"), as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, notes will bear interest at fixed rates ("Fixed Rate Notes")
or at floating
S-4
<PAGE>
rates ("Floating Rate Notes"), as specified in the applicable Pricing
Supplement. Notes may also be issued that do not bear any interest
currently or that bear interest at a below market rate.
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will be denominated in, and payments of principal, premium, if any,
and/or interest, if any, will be made in, United States dollars. The
Notes also may be denominated in, and payments of principal, premium, if
any, and/or interest, if any, may be made in, one or more foreign
currencies or composite currencies ("Foreign Currency Notes"). See
"Special Provisions Relating to Foreign Currency Notes-Payment of
Principal, Premium, if any, and Interest, if any." The currency or
composite currency in which a Note is denominated, whether United States
dollars or otherwise, is herein referred to as the "Specified Currency."
References herein to "United States dollars," "U.S. dollars" or "$" are
to the lawful currency of the United States of America (the "United
States").
Unless otherwise specified in the applicable Pricing Supplement,
purchasers are required to pay for the Notes in the applicable Specified
Currencies. At the present time, there are limited facilities in the
United States for the conversion of United States dollars into foreign
currencies or composite currencies and vice versa, and commercial banks
do not generally offer non-United States dollar checking or savings
account facilities in the United States. Each applicable Agent is
prepared to arrange for the conversion of United States dollars into the
Specified Currency in which the related Foreign Currency Note is
denominated in order to enable the purchaser to pay for such Foreign
Currency Note, provided that a request is made to such Agent on or prior
to the fifth Business Day (as hereinafter defined) preceding the date of
delivery of such Foreign Currency Note, or by such other day as
determined by such Agent. Each such conversion will be made by an Agent
on such terms and subject to such conditions, limitations and charges as
such Agent may from time to time establish in accordance with its regular
foreign exchange practices. All costs of exchange will be borne by the
purchaser of each such Foreign Currency Note. See "Special Provisions
Relating to Foreign Currency Notes."
Interest rates offered by the Issuer with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount
of Notes purchased in any single transaction. Interest rates or formulas
and other terms of Notes are subject to change by the Issuer from time to
time, but no such change will affect any Note already issued or as to
which an offer to purchase has been accepted by the Issuer.
Each Note will be issued in fully registered form as a Book-Entry
Note. The authorized denominations of each Note other than a Foreign
Currency Note will be $100,000 and integral multiples of $1,000 in excess
thereof, unless otherwise specified in the applicable Pricing Supplement,
while the authorized denominations of each Foreign Currency Note will be
specified in the applicable Pricing Supplement.
Payments of principal of, and premium, if any, and interest, if any,
on, Book-Entry Notes will be made by the Issuer through the Trustee to
the Depositary. See "--Book-Entry System." Notwithstanding the
foregoing, a Holder of $10,000,000 (or, if the applicable Specified
Currency is other than United States dollars, the equivalent thereof in
such Specified Currency) or more in aggregate principal amount of Notes
(whether having identical or different terms and provisions) will be
entitled to receive interest payments, if any, on any Interest Payment
Date other than the Maturity Date by wire transfer of immediately
available funds if appropriate wire transfer instructions have been
received in writing by the Trustee not less than 15 days prior to such
Interest Payment Date. Any such wire transfer instructions received by
the Trustee shall remain in effect until revoked by such Holder. For
special payment terms applicable to Foreign Currency Notes, see "Special
Provisions Relating to Foreign Currency Notes-Payment of Principal,
Premium, if any, and Interest, if any."
As used herein, "Business Day" means any day, other than a Saturday
or Sunday, that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law, regulation or executive
order to close in The City of New York or the City of Harrisburg,
Pennsylvania; provided, however, that, with respect to Foreign Currency
Notes, such day is also not a day on which banking institutions are
authorized or required by law, regulation or executive order to close in
the Principal Financial Center (as hereinafter defined) of the country
issuing the Specified Currency (or, in the case of European Currency
Units ("ECU"), is not a day that appears as an ECU non-settlement day on
the display
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designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day
so designated by the ECU Banking Association) or, if ECU non-settlement
days do not appear on that page (and are not so designated), is not a day
on which payments in ECU cannot be settled in the international interbank
market); provided, further, that, with respect to Notes as to which LIBOR
is an applicable Interest Rate Basis (as defined below), such day is also
a London Business Day (as hereinafter defined). "London Business Day"
means (i) if the Index Currency (as hereinafter defined) is other than
ECU, any day on which dealings in such Index Currency are transacted in
the London interbank market or (ii) if the Index Currency is ECU, any day
that does not appear as an ECU non-settlement day on the display
designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day
so designated by the ECU Banking Association) or, if ECU non-settlement
days do not appear on that page (and are not so designated), is not a day
on which payments in ECU cannot be settled in the international interbank
market.
"Principal Financial Center" means the capital city of the country
issuing the Specified Currency or, solely with respect to the calculation
of LIBOR, the Index Currency, except that with respect to United States
dollars, Australian dollars, Deutsche marks, Dutch guilders, Italian
lire, Swiss francs and ECUs, the Principal Financial Center shall be The
City of New York, Sydney, Frankfurt, Amsterdam, Milan, Zurich and
Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes." No service charge will be made by
the Issuer or the Trustee for any such registration of transfer or
exchange of Notes, but the Issuer may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
connection therewith (other than exchanges pursuant to the Indenture not
involving any transfer).
REDEMPTION AT THE OPTION OF THE ISSUER
Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to any sinking fund. The Notes will be
redeemable at the option of the Issuer prior to the Stated Maturity Date
only if an Initial Redemption Date is specified in the applicable Pricing
Supplement. If so specified, the Notes will be subject to redemption at
the option of the Issuer on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of
$1,000 (provided that any remaining principal amount thereof shall be at
least $100,000), at the applicable Redemption Price (as hereinafter
defined), together with unpaid interest accrued to the date of
redemption, on notice given not more than 60 nor less than 30 calendar
days prior to the date of redemption and in accordance with the
provisions of the Indenture. "Redemption Price," with respect to a Note,
means an amount equal to the Initial Redemption Percentage specified in
the applicable Pricing Supplement (as adjusted by the Annual Redemption
Percentage Reduction, if applicable) multiplied by the unpaid principal
amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the applicable Annual Redemption
Percentage Reduction, if any, until the Redemption Price is equal to 100%
of the unpaid principal amount to be redeemed. See also "--Original
Issue Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Issuer at the option of the
Holders thereof prior to the Stated Maturity Date only if one or more
Optional Repayment Dates are specified in the applicable Pricing
Supplement. If so specified, the Notes will be subject to repayment at
the option of the Holders thereof on any Optional Repayment Date in whole
or from time to time in part in increments of $1,000 (provided that any
remaining principal amount thereof shall be at least $100,000), at a
repayment price equal to 100% of the unpaid principal amount to be
repaid, together with unpaid interest accrued to the date of repayment.
For any Note to be repaid, such Note must be received, together with the
form thereon entitled "Option to Elect Repayment" duly completed, by the
Trustee at its Corporate Trust Office (or such other address of which the
Issuer shall from time to time notify the Holders) not more than 60 nor
less than 30 calendar days prior to the date of repayment. Exercise of
such repayment option by the Holder will be irrevocable. See also "--
Original Issue Discount Notes."
Only the Depositary may exercise the repayment option in respect of
Global Securities representing Book-Entry Notes. Accordingly, Beneficial
Owners (as hereinafter defined) of Global
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Securities that desire to have all or any portion of the Book-Entry Notes
represented by such Global Securities repaid must instruct the
Participant (as hereinafter defined) through which they own their
interest to direct the Depositary to exercise the repayment option on
their behalf by delivering the related Global Security and duly completed
election form to the Trustee as aforesaid. In order to ensure that such
Global Security and election form are received by the Trustee on a
particular day, the applicable Beneficial Owner must so instruct the
Participant through which it owns its interest before such Participant's
deadline for accepting instructions for that day. Different firms may
have different deadlines for accepting instructions from their customers.
Accordingly, Beneficial Owners should consult the Participants through
which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from Beneficial
Owners of Global Securities relating to the option to elect repayment
shall be irrevocable. In addition, at the time such instructions are
given, each such Beneficial Owner shall cause the Participant through
which it owns its interest to transfer such Beneficial Owner's interest
in the Global Security or Securities representing the related Book-Entry
Notes, on the Depositary's records, to the Trustee. See "--Book-Entry
Notes."
If applicable, the Issuer will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any other securities laws or regulations in
connection with any such repayment.
The Issuer may at any time purchase Notes at any price or prices in
the open market or otherwise. Notes so purchased by the Issuer may, at
the discretion of the Issuer, be held, resold or surrendered to the
Trustee for cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement,
each interest-bearing Note will bear interest from its date of issue at
the rate per annum, in the case of a Fixed Rate Note, or pursuant to the
interest rate formula, in the case of a Floating Rate Note, in each case
as specified in the applicable Pricing Supplement, until the principal
thereof is paid or duly made available for payment. Unless otherwise
specified in the applicable Pricing Supplement, interest payments in
respect of Fixed Rate Notes and Floating Rate Notes will equal the amount
of interest accrued from and including the immediately preceding Interest
Payment Date in respect of which interest has been paid or duly made
available for payment (or from and including the date of issue, if no
interest has been paid or duly made available for payment) to but
excluding the applicable Interest Payment Date or the Maturity Date, as
the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable
in arrears on each Interest Payment Date and on the Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, the
first payment of interest on any such Note originally issued between a
Record Date (as hereinafter defined) and the related Interest Payment
Date will be made on the Interest Payment Date immediately following the
next succeeding Record Date to the Holder on such next succeeding Record
Date. Unless otherwise specified in the applicable Pricing Supplement, a
"Record Date" shall be the fifteenth calendar day (whether or not a
Business Day) immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes will be payable on January 15 and July 15 of
each year (each, an "Interest Payment Date") and on the Maturity Date.
Unless otherwise specified in the applicable Pricing Supplement, interest
on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate
Note falls on a day that is not a Business Day, the required payment of
principal, premium, if any, and/or interest will be made on the next
succeeding Business Day as if made on the date such payment was due, and
no interest will accrue on such payment for the period from and after
such Interest Payment Date or the Maturity Date, as the case may be, to
the date of such payment on the next succeeding Business Day.
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Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement,
Floating Rate Notes will be issued as described below. The applicable
Pricing Supplement will specify certain terms with respect to which each
Floating Rate Note is being delivered, including: whether such Floating
Rate Note is a "Regular Floating Rate Note," a "Floating Rate/Fixed Rate
Note" or an "Inverse Floating Rate Note," the Fixed Rate Commencement
Date, if applicable, Fixed Interest Rate, if applicable, Interest Rate
Basis or Bases, Initial Interest Rate, if any, Initial Interest Reset
Date, Interest Reset Period and Dates, Interest Payment Period and Dates,
Index Maturity, Maximum Interest Rate and/or Minimum Interest Rate, if
any, and Spread and/or Spread Multiplier, if any, as such terms are
defined below. If one or more of the applicable Interest Rate Bases is
LIBOR or the CMT Rate, the applicable Pricing Supplement will also
specify the Index Currency, if any, or the Designated CMT Maturity Index
and Designated CMT Telerate Page, respectively, as such terms are defined
below.
The interest rate borne by the Floating Rate Notes will be
determined as follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note" or as
having an Addendum attached or having "Other/Additional Provisions"
apply relating to a different interest rate formula, such Floating
Rate Note will be designated as a "Regular Floating Rate Note" and,
except as described below or in the applicable Pricing Supplement,
will bear interest at the rate determined by reference to the
applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable
Spread Multiplier, if any. Commencing on the Initial Interest Reset
Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period,
if any, from the date of issue to the Initial Interest Reset Date
will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the
applicable Pricing Supplement, such Floating Rate Note will bear
interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable
Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date,
the rate at which interest on such Floating Rate/Fixed Rate Note
shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the
period, if any, from the date of issue to the Initial Interest Reset
Date will be the Initial Interest Rate and (z) the interest rate in
effect for the period commencing on the Fixed Rate Commencement Date
to the Maturity Date shall be the Fixed Interest Rate, if such rate
is specified in the applicable Pricing Supplement or, if no such
Fixed Interest Rate is specified, the interest rate in effect
thereon on the day immediately preceding the Fixed Rate Commencement
Date.
(iii)If such Floating Rate Note is designated as an "Inverse
Floating Rate Note," then, except as described below or in the
applicable Pricing Supplement, such Floating Rate Note will bear
interest at the Fixed Interest Rate minus the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or
minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that,
unless otherwise specified in the applicable Pricing Supplement, the
interest rate thereon will not be less than zero. Commencing on the
Initial Interest Reset Date, the rate at which interest on such
Inverse Floating Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that the interest rate
in effect for the period, if any, from the date of issue to the
Initial Interest Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or
subtracted from the related Interest Rate Basis or Bases applicable to
such Floating Rate Note. The "Spread Multiplier" is the percentage of
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note by which such Interest Rate Basis or Bases will be multiplied to
determine the applicable interest rate on such Floating Rate Note. The
"Index Maturity" is the period to maturity of the instrument or
obligation with respect to which the related Interest Rate Basis or Bases
will be calculated.
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Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined
in accordance with the applicable provisions below. Except as set forth
above or in the applicable Pricing Supplement, the interest rate in
effect on each day shall be (i) if such day is an Interest Reset Date,
the interest rate determined as of the Interest Determination Date (as
hereinafter defined) immediately preceding such Interest Reset Date or
(ii) if such day is not an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately preceding
the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to
the applicable Interest Rate Basis or Interest Rate Bases, which may, as
described below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the
Commercial Paper Rate, (iv) Eleventh District Cost of Funds Rate, (v) the
Federal Funds Rate, (vi) J.J. Kenny Rate, (vii) LIBOR, (viii) the Prime
Rate, (ix) the Treasury Rate (each, an "Interest Rate Basis"), or (x)
such other Interest Rate Basis or interest rate formula as may be
specified in the applicable Pricing Supplement; provided, however, that
the interest rate in effect on a Floating Rate Note for the period, if
any, from the date of issue to the Initial Interest Reset Date will be
the Initial Interest Rate; provided, further, that with respect to a
Floating Rate/Fixed Rate Note the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is specified, the
interest rate in effect thereon on the day immediately preceding the
Fixed Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually or on such other specified
basis (each, an "Interest Reset Period") and the dates on which such rate
of interest will be reset (each, an "Interest Reset Date"). Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Reset Dates will be, in the case of Floating Rate Notes which reset: (i)
daily, each Business Day; (ii) weekly, the Wednesday of each week (with
the exception of weekly reset Floating Rate Notes as to which the
Treasury Rate is an applicable Interest Rate Basis, which will reset the
Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month; (iv) quarterly, the third Wednesday of
March, June, September and December of each year; (v) semiannually, the
third Wednesday of the two months specified in the applicable Pricing
Supplement; and (vi) annually, the third Wednesday of the month specified
in the applicable Pricing Supplement; provided however, that, with
respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to
the next succeeding Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis and such
Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day. In addition,
in the case of a Floating Rate Note as to which the Treasury Rate is an
applicable Interest Rate Basis and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date
will be postponed to the next succeeding Business Day.
The interest rate applicable to each Interest Reset Period
commencing on the related Interest Reset Date will be the rate determined
as of the applicable Interest Determination Date and calculated on or
prior to the Calculation Date (as hereinafter defined). The "Interest
Determination Date" with respect to the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Federal Funds Rate, the Prime Rate and the
J.J. Kenny Rate will be the second Business Day immediately preceding the
applicable Interest Reset Date; the Interest Determination Date with
respect to the Eleventh District Cost of Funds Rate will be the last
working day of the month immediately preceding each Interest Reset Date
on which the Federal Home Loan Bank of San Francisco (the "FHLB of San
Francisco") publishes the Index (as herein defined); and the "Interest
Determination Date" with respect to LIBOR will be the second London
Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date.
With respect to the Treasury Rate, the "Interest Determination Date" will
be the day in the week in which the applicable Interest Reset Date falls
on which day Treasury Bills (as hereinafter defined) are normally
auctioned (Treasury Bills are normally sold at an auction held on Monday
of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday); provided, however, that if
an auction is held on the Friday
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of the week preceding the applicable Interest Reset Date, the Interest
Determination Date will be such preceding Friday. The "Interest
Determination Date" pertaining to a Floating Rate Note the interest rate
of which is determined by reference to two or more Interest Rate Bases
will be the most recent Business Day which is at least two Business Days
prior to the applicable Interest Reset Date for such Floating Rate Note
on which each Interest Rate Basis is determinable. Each Interest Rate
Basis will be determined as of such date, and the applicable interest
rate will take effect on the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following:
(i) a Maximum Interest Rate, or ceiling, that may accrue during any
Interest Period and (ii) a Minimum Interest Rate, or floor, that may
accrue during any Interest Period. In addition to any Maximum Interest
Rate that may apply to any Floating Rate Note, the interest rate on
Floating Rate Notes will in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States
law of general application.
Except as provided below or in the applicable Pricing Supplement,
interest will be payable, in the case of Floating Rate Notes which reset:
(i) daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year,
as specified in the applicable Pricing Supplement; (ii) quarterly, on the
third Wednesday of March, June, September and December of each year;
(iii) semiannually, on the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and (iv) annually, on the
third Wednesday of the month of each year specified in the applicable
Pricing Supplement (each, an "Interest Payment Date") and, in each case,
on the Maturity Date. If any Interest Payment Date other than the
Maturity Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Payment Date will be postponed to the
next succeeding Business Day, except that in the case of a Floating Rate
Note as to which LIBOR is an applicable Interest Rate Basis and such
Business Day falls in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Business Day. If the
Maturity Date of a Floating Rate Note falls on a day that is not a
Business Day, the required payment of principal, premium, if any, and
interest, if any, will be made on the next succeeding Business Day as if
made on the date such payment was due, and no interest will accrue on
such payment for the period from and after the Maturity Date to the date
of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate
Notes will be rounded to the nearest one hundred-thousandth of a
percentage point, with five-one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all amounts used in or resulting from such calculation on
Floating Rate Notes will be rounded, in the case of United States
dollars, to the nearest cent or, in the case of a foreign currency or
composite currency, to the nearest unit (with one-half cent or unit being
rounded upwards).
With respect to each Floating Rate Note, accrued interest is
calculated by multiplying its principal amount by an accrued interest
factor. Such accrued interest factor is computed by adding the interest
factor calculated for each day in the applicable Interest Period. Unless
otherwise specified in the applicable Pricing Supplement, the interest
factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, in the case of Floating Rate Notes for
which an applicable Interest Rate Basis is the CD Rate, the Commercial
Paper Rate, the Eleventh District Cost of Funds Rate, the Federal Funds
Rate, the J.J. Kenny Rate, LIBOR or the Prime Rate, or by the actual
number of days in the year in the case of Floating Rate Notes for which
an applicable Interest Rate Basis is the CMT Rate or the Treasury Rate.
Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for Floating Rate Notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be
calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied as specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
Trustee will be the "Calculation Agent." Upon request of the Holder of
any Floating Rate Note, the Calculation Agent will disclose the interest
rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date, or, if such day is not a Business
Day, the next succeeding
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Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or the Maturity Date, as the case may
be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance
with the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing
Supplement, "CD Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is
determined with reference to the CD Rate (a "CD Rate Interest
Determination Date"), the rate on such date for negotiable United States
dollar certificates of deposit having the Index Maturity specified in the
applicable Pricing Supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected
Interest Rates" or any successor publication of the Board of Governors of
the Federal Reserve System ("H.15(519)") under the heading "CDs
(Secondary Market)." If such rate is not published in H.15(519) before
9:00 A.M., New York City time, on the related Calculation Date, then the
CD Rate on such CD Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on such CD
Rate Interest Determination Date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in The City of
New York (which may include the Agents or their affiliates) selected by
the Calculation Agent for negotiable United States dollar certificates of
deposit of major United States money center banks for negotiable
certificates of deposit with a remaining maturity closest to the Index
Maturity specified in the applicable Pricing Supplement in a denomination
of U.S.$5,000,000; provided, however, that if fewer than three dealers so
selected by the Calculation Agent are quoting as mentioned in this
sentence, the CD Rate determined as of such CD Rate Interest
Determination Date will be the CD Rate in effect on such CD Rate Interest
Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing
Supplement, "CMT Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is
determined with reference to the CMT Rate (a "CMT Rate Interest
Determination Date"), the rate displayed on the Designated CMT Telerate
Page under the caption "...Treasury Constant Maturities...Federal Reserve
Board Release H.15...Mondays Approximately 3:45 P.M.," under the column
for the Designated CMT Maturity Index for (i) if the Designated CMT
Telerate Page is 7055, the rate on such CMT Rate Interest Determination
Date and (ii) if the Designated CMT Telerate Page is 7052, the week or
the month, as applicable, ended immediately preceding the week in which
the related CMT Rate Interest Determination Date occurs. If such rate is
no longer displayed on the relevant page or is not displayed by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such treasury
constant maturity rate for the Designated CMT Maturity Index as published
in H.15(519). If such rate is no longer published or is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
CMT Rate on such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index)
for the CMT Rate Interest Determination Date with respect to such
Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department
of the Treasury that the Calculation Agent determines to be comparable to
the rate formerly displayed on the Designated CMT Telerate Page and
published in H.15(519). If such information is not provided by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT
Rate on the CMT Rate Interest Determination Date will be calculated by
the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Agents
or their affiliates) selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest)),
for the most recently issued direct noncallable fixed rate obligations of
the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one
year. If the Calculation Agent is unable to obtain three such Treasury
Note quotations, the CMT Rate on such CMT Rate Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to
maturity based on the arithmetic mean of the secondary market offer side
prices as of approximately 3:30 P.M., New York City
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time, on such CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is
the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an
amount of at least $100,000,000. If three or four (and not five) of such
Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither
the highest nor the lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers so selected by the
Calculation Agent are quoting as mentioned herein, the CMT Rate
determined as of such CMT Rate Interest Determination Date will be the
CMT Rate in effect on such CMT Rate Interest Determination Date. If two
Treasury Notes with an original maturity as described in the second
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the Calculation Agent will obtain from the
five Reference Dealers quotations for the Treasury Note with the shorter
remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service (or any successor service) on the page specified in the
applicable Pricing Supplement (or any other page as may replace such page
on such service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is specified in the
applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to
maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or
30 years) specified in the applicable Pricing Supplement with respect to
which the CMT Rate will be calculated. If no such maturity is specified
in the applicable Pricing Supplement, the Designated CMT Maturity Index
shall be 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable
Pricing Supplement, "Commercial Paper Rate" means, with respect to any
Interest Determination Date relating to a Floating Rate Note for which
the interest rate is determined with reference to the Commercial Paper
Rate (a "Commercial Paper Rate Interest Determination Date"), the Money
Market Yield (as hereinafter defined) on such date of the per annum rate
(quoted on a bank discount basis) for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." If such rate is not
published in H.15(519) by 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate on such Commercial Paper
Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the Money Market Yield of the arithmetic mean of the
offered per annum rates (quoted on a bank discount basis) as of 11:00
A.M., New York City time, on such Commercial Paper Rate Interest
Determination Date of three leading dealers of commercial paper in The
City of New York (which may include the Agents or their affiliates)
selected by the Calculation Agent for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if fewer
than three dealers so selected by the Calculation Agent are quoting as
mentioned in this sentence, the Commercial Paper Rate determined as of
such Commercial Paper Rate Interest Determination Date will be the
Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.
"Money Market Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
D x 360 X 100
Money Market Yield = -------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper
quoted on a bank discount basis and expressed as a decimal, and "M"
refers to the period from the Interest Reset Date to but excluding the
day that numerically corresponds to such Interest Reset Date (or, if
there is not any numerically corresponding day, the last day) in the
calendar month that is the number of months corresponding to the
specified Index Maturity after the month in which such Interest Reset
Date falls.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in
the applicable Pricing Supplement, "Eleventh District Cost of Funds Rate"
means, with respect to any Interest Determination Date relating to an
Eleventh District Cost of Funds Rate Note or any Floating Rate Note for
which the interest
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rate is determined with reference to the Eleventh District Cost of Funds
Rate (an "Eleventh District Cost of Funds Rate Interest Determination
Date"), the rate equal to the monthly weighted average cost of funds for
the calendar month immediately preceding the month in which such eleventh
District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 (as defined
below) as of 11:00 A.M., San Francisco time, on such Eleventh District
Cost of Funds Rate Interest Determination Date. If such rate does not
appear on Telerate Page 7058 on any related Eleventh District Cost of
Funds Rate Interest Determination Date, the Eleventh District Cost of
Funds Rate for such Eleventh District Cost of Funds Rate Interest
Determination Date shall be the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of
San Francisco as such cost of funds for the calendar month immediately
preceding the date of such announcement. If the FHLB of San Francisco
fails to announce such rate for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date,
then the Eleventh District Cost of Funds Rate determined as of such
Eleventh District Cost of Funds Rate Interest Determination Date shall be
the Eleventh District Cost of Funds Rate in effect on such Eleventh
District Cost of Funds Rate Interest Determination Date.
"Telerate Page 7058" means the display designated as page "7058" on
the Dow Jones Telerate Service (or such other page as may replace the
7058 page on that service for the purpose of displaying the monthly
weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District).
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable
Pricing Supplement, "Federal Funds Rate" means, with respect to any
Interest Determination Date relating to a Floating Rate Note for which
the interest rate is determined with reference to the Federal Funds Rate
(a "Federal Funds Rate Interest Determination Date"), the rate on such
date for United States dollar federal funds as published in H.15(519)
under the heading "Federal Funds (Effective)." If such rate is not
published in H.15(519) by 3:00 P.M., New York City time, on the related
Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates as of 9:00 A.M., New York
City time, on such Federal Funds Rate Interest Determination Date, for
the last transaction in overnight federal funds arranged by three leading
brokers of federal funds transactions in The City of New York (which may
include the Agents or their affiliates) selected by the Calculation
Agent; provided, however, that if fewer than three brokers so selected by
the Calculation Agent are quoting as mentioned in this sentence, the
Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
J.J. KENNY RATE. Unless otherwise indicated in the applicable
Pricing Supplement, "J.J. Kenny Rate" means, with respect to any Interest
Determination Date relating to a J.J. Kenny Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
J.J. Kenny Rate (a "J.J. Kenny Interest Determination Date"), the rate
specified in the high grade weekly index (the "Weekly Index") on such
J.J. Kenny Interest Determination Date made available by Kenny
Information Systems ("Kenny") to the Calculation Agent. The Weekly Index
is based on 30-day yield evaluations at par of bonds, the interest of
which is exempt from federal income taxation under the Internal Revenue
Code of 1986, as amended (the "Code"), of not less than five high grade
component issuers selected by Kenny, which shall include, without
limitation, issuers of general obligation bonds. The specific issuers to
be included among the component issuers may be changed from time to time
by Kenny at its discretion. The bonds on which the Weekly Index is based
do not include any bonds on which the interest is subject to a minimum
tax or similar tax under the Code unless all tax-exempt bonds are subject
to such tax. In the event Kenny ceases to make available such Weekly
Index, a successor indexing agent will be selected by the Calculation
Agent, such index to reflect the prevailing rate for bonds rated in the
highest short-term rating category by Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group in respect of issuers most closely
resembling the high grade component issuers selected by Kenny for its
Weekly Index, the interest on which is (a) variable on a weekly basis,
(b) exempt from federal income taxation under the Code and (c) not
subject to a minimum tax or similar tax under the Code, unless all tax-
exempt bonds are subject to such tax. If such a successor indexing agent
is not available, the rate for any J.J. Kenny Interest Determination Date
will equal 67% of the rate calculated using methodology set forth below
under "Treasury Rate." The Calculation Agent shall calculate the J.J.
Kenny Rate in accordance with the foregoing. At the request of a holder
of a Floating Rate Note bearing interest at the J.J. Kenny Rate, the
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Calculation Agent will provide such holder with the interest rate that
will become effective as of the next Interest Reset Date.
LIBOR. Unless otherwise specified in the applicable Pricing
Supplement, "LIBOR" means the rate determined by the Calculation Agent in
accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with
reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR
will be either: (a) the arithmetic mean of the offered rates for
deposits in the Index Currency for the period of the applicable
Index Maturity which appear on the Reuters Screen LIBO Page at
approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date if at least two such offered rates appear on the
Reuters Screen LIBO Page" ("LIBOR Reuters"), or (b) the rate for
deposits in the Index Currency for the period of the applicable
Index Maturity that appears on the Telerate Page 3750 as of 11:00
A.M., London time, on such LIBOR Interest Determination Date ("LIBOR
Telerate"). "Reuters Screen LIBO Page" means the display designated
as Page "LIBO" on the Reuters Monitor Money Rate Service (or such
other page as may replace the LIBO page on the service for the
purpose of displaying London interbank offered rates of major
banks). "Telerate Page 3750" means the display designated as page
"3750" on the Telerate Service (or such other page as may replace
the 3750 page on that service or such other service or services as
may be nominated by the British Bankers' Association for the purpose
of displaying London Interbank offered rates for deposits in the
Index Currency). If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Pricing Supplement, LIBOR will be
determined as if LIBOR Telerate is specified. If fewer than two
offered rates appear on the Reuters Screen LIBO Page, or if no rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect
of that LIBOR Interest Determination Date will be determined as if
the parties had specified the rates described in (ii) below.
(ii) If fewer than two offered rates appear on the Reuters Screen
LIBO page or no rate appears on Telerate Page 3750, as applicable,
the Calculation Agent will request the principal London offices of
four major banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotations for deposits in the Index Currency for the period of the
applicable Index Maturity to prime banks in the London interbank
market at approximately 11:00 A.M., London time, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date and in a principal amount that is representative
of a single transaction in such Index Currency in such market at
such time. If at least two such quotations are provided, LIBOR on
such LIBOR Interest Determination Date will be the arithmetic mean
of such quotations. If fewer than two quotations are provided,
LIBOR on such LIBOR Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M. in
the applicable Principal Financial Center by three major banks in
such Principal Financial Center for loans in the Index Currency to
leading European Banks, having the Index Maturity specified in the
applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in
such market at such time; provided, however, that if fewer than
three banks selected as aforesaid by the Calculation Agent are
quoting rates as mentioned in this sentence, the rate of interest in
effect for the applicable period will be the LIBOR in effect on such
LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in
the applicable Pricing Supplement as to which LIBOR shall be calculated.
If no such currency or composite currency is specified in the applicable
Pricing Supplement, the Index Currency shall be United States dollars.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the
interest rate is determined with reference to the Prime Rate (a "Prime
Rate Interest Determination Date"), the rate on such date as such rate is
published in H.15(519) under the heading "Bank Prime Loan." If such rate
is not published prior to 9:00 A.M., New York City time, on the related
Calculation Date, then the Prime Rate shall be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the
Reuters Screen US PRIME 1 Page (as hereinafter defined) as such bank's
prime rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such
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rates appear on the Reuters Screen US PRIME 1 Page for such Prime Rate
Interest Determination Date, then the Prime Rate shall be the arithmetic
mean of the prime rates quoted on the basis of the actual number of days
in the year divided by a 360-day year as of the close of business on such
Prime Rate Interest Determination Date by three major banks in The City
of New York selected by the Calculation Agent. If fewer than three such
quotations are so provided, then the Prime Rate shall be the Prime Rate
in effect on such Prime Rate Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display designated as page
"US PRIME 1" on the Reuter Monitor Money Rates Service (or any successor
service) (or such other page as may replace the US PRIME 1 page on such
service (or any successor service) for the purpose of displaying prime
rates or base lending rates of major United States banks).
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the
interest rate is determined by reference to the Treasury Rate (a
"Treasury Rate Interest Determination Date"), the rate from the auction
held on such Treasury Rate Interest Determination Date (the "Auction") of
direct obligations of the United States ("Treasury Bills") having the
Index Maturity specified in the applicable Pricing Supplement, as such
rate is published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Auction Average (Investment)" or, if not
published by 9:00 A.M., New York City time, on the related Calculation
Date, the auction average rate of such Treasury Bills (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the Auction
of Treasury Bills having the Index Maturity specified in the applicable
Pricing Supplement are not reported as provided by 3:00 P.M., New York
City time, on the related Calculation Date, or if no such auction is
held, then the Treasury Rate will be the rate set forth in H.15(519) for
the relevant Treasury Interest Determination Date for the specified Index
Maturity under the heading "U.S. Government Securities/Treasury
Bills/Secondary market." If such rate is not published by 3:00 P.M. New
York City time on the relevant Calculation Date, the Treasury Rate will
be calculated by the Calculation Agent and will be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New
York City time, on such Treasury Rate Interest Determination Date, of
three primary United States government securities dealers in The City of
New York (which may include the Agents or their affiliates) selected by
the Calculation Agent, for the issue of Treasury Bills with a remaining
maturity closest to the Index Maturity specified in the applicable
Pricing Supplement; provided, however, that if fewer than three dealers
so selected by the Calculation Agent are quoting as mentioned in this
sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury
Rate Interest Determination Date.
BOOK-ENTRY NOTES
Each Debt Security will be issued in fully registered book-entry form
(a "Book-Entry Note"). Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities")
deposited with or on behalf of The Depository Trust Company (the
"Depositary") and registered in the name of the Depositary or the
Depositary's nominee. Interests in the Global Securities will be shown
on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to its participants) and the
Depositary's participants (with respect to beneficial owners). Any
additional or differing terms of the depositary arrangement with respect
to the Book-Entry Notes will be described in the applicable Prospectus
Supplement. No Global Security may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
Upon issuance, all Book-Entry Notes bearing interest (if any) at the
same rate or pursuant to the same formula and having the same date of
issue, Specified Currency, Interest Payment Dates (if any), Stated
Maturity Date, redemption provisions (if any), repayment provisions (if
any) and other terms will be represented by a single Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will
be the sole Holder of the Book-Entry Notes
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represented thereby for all purposes under the Indenture. Except as
otherwise provided in this section, the Beneficial Owners of the Global
Security or Securities representing Book-Entry Notes will not be entitled
to receive physical delivery of Debt Securities in certificated form
("Certificated Notes") and will not be considered the Holders thereof for
any purpose under the Indenture, and no Global Security representing
Book-Entry Notes shall be exchangeable or transferable. Accordingly,
each Beneficial Owner must rely on the procedures of the Depositary and,
if such Beneficial Owner is not a Participant, on the procedures of the
Participant through which such Beneficial Owner owns its interest in
order to exercise any rights of a Holder under such Global Security or
the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Global Security representing Book-
Entry Notes.
Book-Entry Notes represented by a Global Security are exchangeable for
definitive Notes in registered form, of like tenor and of an equal
aggregate principal amount, only if (x) the Depositary notifies the
Issuer in writing that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time the Depositary
ceases to be a clearing agency registered under the Exchange Act, and a
successor depositary is not appointed by the Issuer within 60 days (y)
the Issuer in its sole discretion determines not to have such Book-Entry
Notes represented by one or more Global Securities or (z) an event shall
have happened and be continuing which, after notice or lapse of time, or
both, would constitute an Event of Default with respect to such Book-
Entry Notes. Any Global Security representing Book-Entry Notes that is
exchangeable pursuant to the preceding sentence shall be exchangeable in
whole for definitive Notes in registered form, of like tenor and of an
equal aggregate principal amount, in minimum denominations of $100,000
and integral multiples of $1,000 in excess thereof (or in such amounts in
other currencies or composite currencies as specified in the applicable
Prospectus Supplement). Such definitive Notes shall be registered in the
name or names of such person or persons as the Depositary shall instruct
the Security Registrar. It is expected that such instructions may be
based upon directions received by the Depositary from its participants
with respect to ownership of Book-Entry Notes.
Except as provided above, owners of Book-Entry Notes will not be
entitled to receive physical delivery of Notes in definitive form and no
Global Security representing Book-Entry Notes shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the Depositary or its nominee. Accordingly,
each person owning a Book-Entry Note must rely on the procedures of the
Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns its beneficial interest,
to exercise any rights of a Holder under the Notes. The Issuer
understands that, under existing industry practices, in the event that
(i) the Issuer requests any action of Holders or (ii) an owner of a Book-
Entry Note desires to give or take any action which a Holder is entitled
to give or take under the Notes in accordance with the terms of the
Notes, the Depositary would authorize the participants owning the
relevant Book-Entry Notes to give or take such action, and such
participants would authorize beneficial owners owning through such
participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered
securities registered in the name of Cede & Co. (the Depositary's
partnership nominee). One fully registered Global Security will be
issued for each issue of Book-Entry Notes, each in the aggregate
principal amount of such issue, and will be deposited with the
Depositary.
The Depositary has advised the Issuer and the Agents 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
Securities Exchange Act of 1934. The Depositary holds securities that
its participants ("Participants") deposit with the Depositary. The
Depositary also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by
a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities
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Dealers, Inc. Access to the Depositary's system is also available to
others such as securities brokers and dealers, banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The
Rules applicable to the Depositary and its participants are on file with
the Securities and Exchange Commission.
Purchase of interests in the Book-Entry Notes under the Depositary's
system must be made by or through Direct Participants, which will receive
a credit for such interests on the Depositary's records. The ownership
interest of each actual purchaser of interests in the Book-Entry Notes
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Book-Entry
Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Book-
Entry Notes, except as described below.
To facilitate subsequent transfers, all Book-Entry Notes deposited by
Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Book-Entry
Notes with the Depositary and their registration in the name of Cede &
Co. affect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of the interests in the Book-
Entry Notes; the Depositary's records reflect only the identity of the
Direct Participants to whose accounts interests in the Book-Entry Notes
are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners
will be governed by arrangement among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all the
interests in the Book-Entry Notes are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such Book-Entry Note to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Book-Entry Notes. Under its usual procedures, the Depositary
mails an Omnibus Proxy to the issuer as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights
to those Direct Participants to whose accounts interests in the Book-
Entry Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments, if any, on the Book-Entry Notes will
be made in same-day funds to the Depositary. The Depositary's practice
is to credit Direct Participants' accounts on the payment date in
accordance with their respective holdings shown on the Depositary's
records unless the Depositary has reason to believe that it will not
receive payment on the payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of the Depositary, the related
Trustee, the Issuer or any paying agent or the Securities Registrar,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal and interest, if any, to the
Depositary is the responsibility of the Issuer or its paying agent,
disbursement of such payments to Direct and Indirect Participants shall
be the responsibility of the Depositary, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct
and Indirect Participants.
The Depositary may discontinue providing its services as depository
with respect to the Notes at any time by giving reasonable notice to the
Issuer or its paying agent. The Issuer may decide to discontinue use of
the system of book-entry transfers through the Depositary (or a successor
securities depository). In either of those events, Certificated Notes
will be printed and delivered.
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GUARANTEES
The Senior Notes will be fully and unconditionally guaranteed (the
"Senior Guarantees") by the Guarantor as to payment of principal,
premium, if any, and interest, if any, when and as the same shall become
due and payable, whether at maturity or upon redemption, repayment or
otherwise. The Senior Guarantees will rank pari passu with all other
unsecured and unsubordinated obligations of the Guarantor that. As of
March 31, 1997, the Guarantor had approximately $1,125,000 principal
amount of Senior Guarantor Indebtedness (as defined in the accompanying
Prospectus) outstanding, excluding trade payables, guarantees and other
contingent obligations of the Guarantor.
The Subordinated Notes will be fully and unconditionally guaranteed
(the "Subordinated Guarantees" and, together with the Senior Guarantees,
the "Guarantees") by the Guarantor, on a subordinated basis, as to
payment of principal, premium, if any, and interest, if any, when and as
the same shall become due and payable, whether at maturity or upon
redemption, repayment or otherwise. The Subordinated Guarantees will be
unsecured and will be subordinated as set forth under "Guarantees" in the
accompanying Prospectus.
The obligations of the Guarantor under the Guarantees will be full and
unconditional regardless of the enforceability of the applicable Notes or
the related Indenture and will not be discharged until all obligations
contained in such Notes and the related Indenture are satisfied. Holders
of the Notes may proceed directly against the Guarantor in the event of a
default under the applicable Notes without first proceeding against the
Issuer.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification
and determination of one or more Interest Rate Bases, the calculation of
the interest rate applicable to a Floating Rate Note, the Interest
Payment Dates, the Maturity Date or any other term relating thereto, may
be modified and/or supplemented as specified under "Other/Additional
Provisions" on the face thereof or in an Addendum relating thereto, if so
specified on the face thereof. Such provisions will be described in the
applicable Pricing Supplement.
AMORTIZING NOTES
The Issuer may from time to time offer Amortizing Notes. Unless
otherwise specified in the applicable Pricing Supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of
twelve 30-day months. Payments with respect to Amortizing Notes will be
applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. Further information
concerning additional terms and provisions of Amortizing Notes will be
specified in the applicable Pricing Supplement, including a table setting
forth repayment information for such Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Issuer may offer Notes ("Original Issue Discount Notes") from time
to time that have an Issue Price (as specified in the applicable Pricing
Supplement) that is less than 100% of the principal amount thereof (i.e.
par). Original Issue Discount Notes may not bear any interest currently
or may bear interest at a rate that is below market rates at the time of
issuance. The difference between the Issue Price of an Original Issue
Discount Note and par is referred to herein as the "Discount." In the
event of redemption, repayment or acceleration of maturity of an Original
Issue Discount Note, the amount payable to the Holder of such Original
Issue Discount Note, unless otherwise specified in the applicable Pricing
Supplement, will be equal to the sum of (i) the Issue Price (increased by
any accruals of Discount) and, in the event of any redemption of such
Original Issue Discount Note (if applicable), multiplied by the Initial
Redemption Percentage specified in the applicable Pricing Supplement (as
adjusted by the Annual Redemption Percentage Reduction, if applicable)
and (ii) any unpaid interest on such Original Issue Discount Note accrued
from the date of issue to the date of such redemption, repayment or
acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any
date on which a redemption, repayment or acceleration
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of maturity occurs for an Original Issue Discount Note, such Discount
will be accrued using a constant yield method. The constant yield will
be calculated using a 30-day month, 360-day year convention, a
compounding period that, except for the Initial Period (as hereinafter
defined), corresponds to the shortest period between Interest Payment
Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial
coupon rate applicable to such Original Issue Discount Note and an
assumption that the maturity of such Original Issue Discount Note will
not be accelerated. If the period from the date of issue to the initial
Interest Payment Date for an Original Issue Discount Note (the "Initial
Period") is shorter than the compounding period for such Original Issue
Discount Note, a proportionate amount of the yield for an entire
compounding period will be accrued. If the Initial Period is longer than
the compounding period, then such period will be divided into a regular
compounding period and a short period with the short period being treated
as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
certain Original Issue Discount Notes may not be treated as having
original issue discount within the meaning of the Code, and Notes other
than Original Issue Discount Notes may be treated as issued with original
issue discount for Federal income tax purposes. See "Certain United
States Federal Income Tax Considerations."
INDEXED NOTES
The Issuer may from time to time offer Notes ("Indexed Notes") the
principal amount of which payable on the Stated Maturity Date or earlier
redemption or repayment and/or interest thereon is determined by
reference to such objective price or economic measures as are described
in the Book-Entry Note representing such Note. The manner of determining
the amount of interest payable and the amount of principal payable on the
Stated Maturity Date or upon earlier redemption or repayment of an
Indexed Note will be set forth in such Book-Entry Note, and historical
and other information concerning the price or economic measures used in
such determination, will be set forth in a supplement to this Prospectus
Supplement.
AN INVESTMENT IN NOTES INDEXED, AS TO PRINCIPAL OR INTEREST OF BOTH, TO
ONE OR MORE VALUES OF CURRENCIES (INCLUDING EXCHANGE RATES BETWEEN
CURRENCIES), COMMODITIES OR INTEREST RATE INDICES ENTAILS SIGNIFICANT
RISKS THAT ARE NOT ASSOCIATED WITH SIMILAR INVESTMENTS IN A CONVENTIONAL
FIXED RATE OR FLOATING RATE DEBT SECURITY. IF THE INTEREST RATE ON SUCH
A NOTE IS SO INDEXED, IT MAY RESULT IN AN INTEREST RATE THAT IS LESS THAN
THAT PAYABLE ON A CONVENTIONAL FIXED RATE OR FLOATING RATE DEBT SECURITY
ISSUED AT THE SAME TIME, INCLUDING THE POSSIBILITY THAT NO INTEREST WILL
BE PAID OR THAT NEGATIVE INTEREST WILL ACCRUE, AND, IF THE PRINCIPAL
AMOUNT OF SUCH A NOTE IS SO INDEXED OR IF SUCH PRINCIPAL AMOUNT IS
UTILIZED TO NET AGAINST ACCRUED NEGATIVE INTEREST, THE PRINCIPAL AMOUNT
PAYABLE AT MATURITY MAY BE LESS THAN THE ORIGINAL PURCHASE PRICE OF SUCH
NOTE IF ALLOWED PURSUANT TO THE TERMS OF SUCH NOTE, INCLUDING THE
POSSIBILITY THAT NO PRINCIPAL WILL BE PAID. The secondary market for
Indexed Notes will be affected by a number of factors independent of the
creditworthiness of the Issuer and the Guarantor, including the value of
the applicable currency, commodity or interest rate index, the time
remaining to the maturity of such Indexed Notes, the amount outstanding
of such Indexed Notes and market interest rates. The value of the
applicable currency, commodity or interest rate index depends on a number
of interrelated factors, including economic, financial and political
events, over which the Issuer has no control. Additionally, if the
formula used to determine the principal amount or interest payable with
respect to such Indexed Notes contains a multiple or leverage factor, the
effect of any change in the applicable currency, commodity or interest
rate index will be increased. The historical experience of the relevant
currency, commodities or interest rate indices should not be taken as an
indication of future performance of such currency, commodities or
interest rate indices during the term of any Indexed Note. Accordingly,
prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of Indexed Notes in light of their particular circumstances.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement,
Foreign Currency Notes will not be sold in, or to residents of, the
country issuing the applicable specified currency. The information set
forth in this Prospectus Supplement is directed to prospective purchasers
who are United States residents and, with respect to Foreign Currency
Notes, is by necessity incomplete. The Issuer and the Guarantor disclaim
any responsibility to advise prospective purchasers who are residents of
countries other than the United States with respect to any matters that
may affect the purchase, holding or receipt of payments of principal of,
and premium, if any, and interest, if any, on, the Foreign Currency
Notes. Such persons should consult their own financial and legal advisors
with regard to such matters. See "Risk Factors--Exchange Rate and
Controls for Specified Currencies."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY
Unless otherwise specified in the applicable Pricing Supplement, the
Issuer is obligated to make payments of principal of, and premium, if
any, and interest, if any, on, Foreign Currency Notes in the applicable
Specified Currency (or, if such Specified Currency is not at the time of
such payment legal tender for the payment of public and private debts, in
such other coin or currency of the country which issued such Specified
Currency as at the time of such payment is legal tender for the payment
of such debts). Any such amounts payable by the Issuer in the Specified
Currency will, unless otherwise specified in the applicable Pricing
Supplement, be converted by the exchange rate agent named in the
applicable Pricing Supplement (the "Exchange Rate Agent") into United
States dollars for payment to Holders. However, the Holder of a Foreign
Currency Note may elect to receive such amounts payable in the Specified
Currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of
New York received by the Exchange Rate Agent at approximately 11:00 A.M.,
New York City time, on the second Business Day preceding the applicable
payment date from three recognized foreign exchange dealers (one of whom
may be the Exchange Rate Agent) selected by the Exchange Rate Agent and
approved by the Issuer for the purchase by the quoting dealer of the
Specified Currency for United States dollars for settlement on such
payment date in the aggregate amount of such Specified Currency payable
to all Holders of Foreign Currency Notes scheduled to receive United
States dollar payments and at which the applicable dealer commits to
execute a contract. All currency exchange costs will be borne by the
Holders of such Foreign Currency Notes by deductions from such payments.
If three such bid quotations are not available, payments will be made in
the Specified Currency.
Holders of Foreign Currency Notes may elect to receive all or a
specified portion of any payments of principal, premium, if any, and/or
interest, if any, in the Specified Currency by submitting a written
request for such payment to the Trustee at its corporate trust office in
The City of New York on or prior to the applicable Record Date or at
least fifteen calendar days prior to the Maturity Date, as the case may
be. Such written request may be mailed or hand delivered or sent by
cable, telex or other form of facsimile transmission. Holders of Foreign
Currency Notes may elect to receive all or a specified portion of all
future payments in the Specified Currency and need not file a separate
election for each payment. Such election will remain in effect until
revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity Date,
as the case may be. Holders of Foreign Currency Notes to be held in the
name of a broker or nominee should contact such broker or nominee to
determine whether and how an election to receive payments in the
Specified Currency may be made.
Payments of the principal of, and premium, if any, and/or interest, if
any, on, Foreign Currency Notes which are to be made in United States
dollars will be made in the manner specified herein with respect to Notes
denominated in United States dollars. See "Description of
Notes-General." Payments of interest, if any, on Foreign Currency Notes
which are to be made in the Specified Currency on an Interest Payment
Date other than the Maturity Date will be made by check mailed to the
address of the Holders of such Foreign Currency Notes as they appear in
the Security Register, subject to the right to
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receive such interest payments by wire transfer of immediately available
funds under the circumstances described under "Description of
Notes-General." Payments of principal of, and premium, if any, and/or
interest, if any, on, Foreign Currency Notes which are to be made in the
Specified Currency on the Maturity Date will be made by wire transfer of
immediately available funds to an account with a bank designated at least
fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the
principal corporate trust office of the Trustee in time for the Trustee
to make such payments in such funds in accordance with its normal
procedures.
Unless otherwise specified in the applicable Pricing Supplement, if the
Specified Currency is other than United States dollars, a Beneficial
Owner of the related Global Security or Securities which elects to
receive payments of principal, premium, if any, and/or interest, if any,
in the Specified Currency must notify the Participant through which it
owns its interest on or prior to the applicable Record Date or at least
fifteen calendar days prior to the Maturity Date, as the case may be, of
such Beneficial Owner's election. Such Participant must notify the
Depositary of such election on or prior to the third Business Day after
such Record Date or at least twelve calendar days prior to the Maturity
Date, as the case may be, and the Depositary will notify the Trustee of
such election on or prior to the fifth Business Day after such Record
Date or at least ten calendar days prior to the Maturity Date, as the
case may be. If complete instructions are received by the Participant
from the Beneficial Owner and forwarded by the Participant to the
Depositary, and by the Depositary to the Trustee, on or prior to such
dates, then such Beneficial Owner will receive payments in the applicable
foreign currency or composite currency.
AVAILABILITY OF SPECIFIED CURRENCY
If the Specified Currency for a Foreign Currency Note is not available
for the required payment of principal, premium, if any, and/or interest,
if any, due to the imposition of exchange controls or other circumstances
beyond the control of the Issuer, the Issuer will be entitled to satisfy
its obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars on the basis of the Market Exchange
Rate on the second Business Day prior to such payment or, if such Market
Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate or as otherwise specified in the
applicable Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made
in any composite currency, and such composite currency is unavailable due
to the imposition of exchange controls or other circumstances beyond the
control of the Issuer, the Issuer will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such
payment in United States dollars. The amount of each payment in United
States dollars shall be computed by the Exchange Rate Agent on the basis
of the equivalent of the composite currency in United States dollars.
The component currencies of the composite currency for this purpose
(collectively, the "Component Currencies" and each, a "Component
Currency") shall be the currency amounts that were components of the
composite currency as of the last day on which the composite currency was
used. The equivalent of the composite currency in United States dollars
shall be calculated by aggregating the United States dollar equivalents
of the Component Currencies. The United States dollar equivalent of each
of the Component Currencies shall be determined by the Exchange Rate
Agent on the basis of the most recently available Market Exchange Rate
for each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a
Component Currency shall be divided or multiplied in the same proportion.
If two or more Component Currencies are consolidated into a single
currency, the amounts of those currencies as Component Currencies shall
be replaced by an amount in such single currency equal to the sum of the
amounts of the consolidated Component Currencies expressed in such single
currency. If any Component Currency is divided into two or more
currencies, the amount of the original Component Currency shall be
replaced by the amounts of such two or more currencies, the sum of which
shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a currency or composite currency other
than United States dollars means the noon dollar buying rate in The City
of New York for cable transfers for such currency or composite currency
as certified for customs purposes by (or if not so certified, as
otherwise determined
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by) the Federal Reserve Bank of New York. Any payment made in United
States dollars under such circumstances where the required payment is in
a currency or composite currency other than United States dollars will
not constitute an Event of Default under the Indenture with respect to
the Notes.
All determinations referred to above made by the Exchange Rate Agent
shall be at its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and binding on the Holders of the
Foreign Currency Notes.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws
of the State of New York. Under current New York law, a state court in
the State of New York rendering a judgment on a Foreign Currency Note
would be required to render such judgment in the Specified Currency, and
such judgment would be converted into United States dollars at the
exchange rate prevailing on the date of entry of the judgment.
Accordingly, Holders of Foreign Currency Notes would be subject to of
exchange rate fluctuations after such date. It is not certain, however
that a non-New York court would follow the same rules and procedures with
respect to such conversions of the Specified Currency.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is
based upon laws, regulations, rulings and decisions now in effect, all of
which are subject to change (including changes in effective dates) or
possible differing interpretations. It deals only with Notes held as
capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies,
regulated investment companies, dealers in securities or currencies,
persons holding Notes as a hedge against currency risks or as a position
in a "straddle" for tax purposes, or persons whose functional currency is
not the United States dollar. It also does not deal with holders other
than original purchasers (except where otherwise specifically noted).
Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income
tax laws to their particular situations as well as any consequences of
the purchase, ownership and disposition of the Notes arising under the
laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes (i) a citizen
or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United
States or of any political subdivision thereof, (iii) an estate that is
described in Section 7701(a)(30)(D) of the Code or a trust that is
described in Section 7701(a)(30)(E) of the Code, (iv) any other person
whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the
term "non-U.S. Holder" means a beneficial owner of a Note that is not a
U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued
or are received (in accordance with the U.S. Holder's regular method of
tax accounting).
Original Issue Discount
The following summary is a general discussion of the United States
Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue
Service ("IRS") on January 27, 1994, as amended on June 11, 1996, under
the original issue discount provisions of the Code.
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For United States Federal income tax purposes, original issue discount
is the excess of the stated redemption price at maturity of a Note over
its issue price, if such excess equals or exceeds a de minimis amount
(generally 1/4 of 1% of the Note's stated redemption price at maturity
multiplied by the number of complete years to its maturity from its issue
date or, in the case of a Note providing for the payment of any amount
other than qualified stated interest (as hereinafter defined) prior to
maturity, multiplied by the weighted average maturity of such Note). The
issue price of each Note in an issue of Notes equals the first price at
which a substantial amount of such Notes has been sold (ignoring sales to
bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a Note is the sum of all payments
provided by the Note other than "qualified stated interest" payments.
The term "qualified stated interest" generally means stated interest that
is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or
more accrual periods at a rate below the rate applicable for the
remaining term of such Note (e.g., Notes with teaser rates or interest
holidays), and if the greater of either the resulting foregone interest
on such Note or any "true" discount on such Note (i.e., the excess of the
Note's stated principal amount over its issue price) equals or exceeds a
specified de minimis amount, then the stated interest on the Note would
be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued
or are received (in accordance with the U.S. Holder's regular method of
tax accounting). A U.S. Holder of a Discount Note must include original
issue discount in income as ordinary interest for United States Federal
income tax purposes as it accrues under a constant yield method in
advance of receipt of the cash payments attributable to such income,
regardless of such U.S. Holder's regular method of tax accounting. In
general, the amount of original issue discount included in income by the
initial U.S. Holder of a Discount Note is the sum of the daily portions
of original issue discount with respect to such Discount Note for each
day during the taxable year (or portion of the taxable year) on which
such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating
to each day in any accrual period a ratable portion of the original issue
discount allocable to that accrual period. An "accrual period" may be of
any length and the accrual periods may vary in length over the term of
the Discount Note, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs
either on the final day of an accrual period or on the first day of an
accrual period. The amount of original issue discount allocable to each
accrual period is generally equal to the difference between (i) the
product of the Discount Note's adjusted issue price at the beginning of
such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual
period) and (ii) the amount of any qualified stated interest payments
allocable to such accrual period. The "adjusted issue price" of a
Discount Note at the beginning of any accrual period is the sum of the
issue price of the Discount Note plus the amount of original issue
discount allocable to all prior accrual periods minus the amount of any
prior payments on the Discount Note that were not qualified stated
interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is
greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Discount Note
after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Discount Note at an "acquisition
premium." Under the acquisition premium rules, the amount of original
issue discount which such U.S. Holder must include in its gross income
with respect to such Discount Note for any taxable year (or portion
thereof in which the U.S. Holder holds the Discount Note) will be reduced
(but not below zero) by the portion of the acquisition premium properly
allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes
("Variable Notes") are subject to special rules whereby a Variable Note
will qualify as a "variable rate debt instrument" if (a) its issue price
does not exceed the total noncontingent principal payments due under the
Variable Note by more than a specified de minimis amount and (b) it
provides for stated interest, paid or compounded at least
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annually, at current values of (i) one or more qualified floating rates,
(ii) a single fixed rate and one or more qualified floating rates, (iii)
a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in
the value of such rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which the Variable Note is denominated. Although a multiple
of a qualified floating rate will generally not itself constitute a
qualified floating rate, a variable rate equal to the product of a
qualified floating rate and a fixed multiple that is greater than .65 but
not more than 1.35 will constitute a qualified floating rate. A variable
rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating
rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the
same values throughout the term of the Variable Note (e.g., two or more
qualified floating rates with values within 25 basis points of each other
as determined on the Variable Note's issue date) will be treated as a
single qualified floating rate. Notwithstanding the foregoing, a
variable rate that would otherwise constitute a qualified floating rate
but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation
(i.e., a floor) may, under certain circumstances, fail to be treated as a
qualified floating rate under the OID Regulations unless such cap or
floor is fixed throughout the term of the Note. An "objective rate" is a
rate that is not itself a qualified floating rate but which is determined
using a single fixed formula and that is based on objective financial or
economic information. A rate will not qualify as an objective rate if it
is based on information that is within the control of the issuer (or a
related party) or that is unique to the circumstances of the issuer (or a
related party), such as dividends, profits, or the value of the issuer's
stock (although a rate does not fail to be an objective rate merely
because it is based on the credit quality of the issuer). A "qualified
inverse floating rate" is any objective rate where such rate is equal to
a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate. The OID Regulations also
provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable
rate that is either a qualified floating rate or an objective rate and if
the variable rate on the Variable Note's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the
issue date does not differ from the value of the fixed rate by more than
25 basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as
the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument" under the OID
Regulations, and if the interest on such Note which is unconditionally
payable in cash or property (other than debt instruments of the issuer)
at least annually, then all stated interest on the Note will constitute
qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the
OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true"
discount (i.e., at a price below the Note's stated principal amount) in
excess of a specified de minimis amount. The amount of qualified stated
interest and the amount of original issue discount, if any, that accrues
during an accrual period on such a Variable Note is determined under the
rules applicable to fixed rate debt instruments by assuming that the
variable rate is a fixed rate equal to (i) in the case of a qualified
floating rate or qualified inverse floating rate, the value, as of the
issue date, of the qualified floating rate or qualified inverse floating
rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is
reasonably expected for the Variable Note. The qualified stated interest
allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than)
the interest assumed to be paid during the accrual period pursuant to the
foregoing rules.
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In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original
issue discount and qualified stated interest on the Variable Note. The
OID Regulations generally require that such a Variable Note be converted
into an "equivalent" fixed rate debt instrument by substituting any
qualified floating rate or qualified inverse floating rate provided for
under the terms of the Variable Note with a fixed rate equal to the value
of the qualified floating rate or qualified inverse floating rate, as the
case may be, as of the Variable Note's issue date. Any objective rate
(other than a qualified inverse floating rate) provided for under the
terms of the Variable Note is converted into a fixed rate that reflects
the yield that is reasonably expected for the Variable Note. In the case
of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either
one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating
rate (or a qualified inverse floating rate, if the Variable Note provides
for a qualified inverse floating rate). Under such circumstances, the
qualified floating rate or qualified inverse floating rate that replaces
the fixed rate must be such that the fair market value of the Variable
Note as of the Variable Note's issue date is approximately the same as
the fair market value of an otherwise identical debt instrument that
provides for either the qualified floating rate or qualified inverse
floating rate rather than the fixed rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original
issue discount and qualified stated interest, if any, are determined for
the "equivalent" fixed rate debt instrument by applying the general
original issue discount rules to the "equivalent" fixed rate debt
instrument and a U.S. Holder of the Variable Note will account for such
original issue discount and qualified stated interest as if the U.S.
Holder held the "equivalent" fixed rate debt instrument. Each accrual
period appropriate adjustments will be made to the amount of qualified
stated interest or original issue discount assumed to have been accrued
or paid with respect to the "equivalent" fixed rate debt instrument in
the event that such amounts differ from the actual amount of interest
accrued or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Variable Note would be
treated as a contingent payment debt obligation. U.S. Holders should be
aware that on June 11, 1996, the Treasury Department issued final
regulations (the "CPDI Regulations") concerning the proper United States
Federal income tax treatment of contingent payment debt instruments. In
general, the CPDI Regulations would cause the timing and character of
income, gain or loss reported on a contingent payment debt instrument to
substantially differ from the timing and character of income, gain or
loss reported on a contingent payment debt instrument under general
principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of
such an instrument to include future contingent and noncontingent
interest payments in income as such interest accrues based upon a
projected payment schedule. Moreover, in general, under the CPDI
Regulations, any gain recognized by a U.S. Holder on the sale, exchange,
or retirement of a contingent payment debt instrument will be treated as
ordinary income and all or a portion of any loss realized could be
treated as ordinary loss as opposed to capital loss (depending upon the
circumstances). The CPDI Regulations apply to debt instruments issued on
or after August 13, 1996. Moreover, certain Indexed Notes may not
constitute indebtedness for United States Federal income tax purposes.
In such case, the United States Federal income tax treatment of such
Indexed Notes would not significantly differ from the treatment thereof
if such Indexed Notes were to constitute indebtedness. The proper United
States Federal income tax treatment of Variable Notes that are treated as
contingent payment debt obligations will be more fully described in the
applicable Pricing Supplement. Furthermore, any other special United
States Federal income tax considerations, not otherwise discussed herein,
which are applicable to any particular issue of Notes will be discussed
in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Issuer
prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the holder prior to their stated maturity (a
"put
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<PAGE>
option"). Notes containing such features may be subject to rules that
differ from the general rules discussed above. Investors intending to
purchase Notes with such features should consult their own tax advisors,
since the original issue discount consequences will depend, in part, on
the particular terms and features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all
interest (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis
market discount, and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium) that accrues on a debt instrument by
using the constant yield method applicable to original issue discount,
subject to certain limitations and exceptions.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term
Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is
not required to accrue such original issue discount unless the U.S.
Holder elects to do so. If such an election is not made, any gain
recognized by the U.S. Holder on the sale, exchange or maturity of the
Short-Term Note will be ordinary income to the extent of the original
issue discount accrued on a straight-line basis, or upon election under
the constant yield method (based on daily compounding), through the date
of sale or maturity, and a portion of the deductions otherwise allowable
to the U.S. Holder for interest on borrowings allocable to the Short-Term
Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including
banks and dealers in securities, are required to accrue original issue
discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield
method (based on daily compounding).
Market Discount
If a U.S. Holder purchases a Note, other than a Discount Note, for an
amount that is less than its issue price (or, in the case of a subsequent
purchaser, its stated redemption price at maturity) or, in the case of a
Discount Note, for an amount that is less than its adjusted issue price
as of the purchase date, such U.S. Holder will be treated as having
purchased such Note at a "market discount," unless such market discount
is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to
treat any partial principal payment (or, in the case of a Discount Note,
any payment that does not constitute qualified stated interest) on, or
any gain realized on the sale, exchange, retirement or other disposition
of, a Note as ordinary income to the extent of the lesser of (i) the
amount of such payment or realized gain or (ii) the market discount which
has not previously been included in income and is treated as having
accrued on such Note at the time of such payment or disposition. Market
discount will be considered to accrue ratably during the period from the
date of acquisition to the maturity date of the Note, unless the U.S.
Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a Note with market discount until the
maturity of the Note or certain earlier dispositions, because a current
deduction is only allowed to the extent the interest expense exceeds an
allocable portion of market discount. A U.S. Holder may elect to include
market discount in income currently as it accrues (on either a ratable or
semiannual compounding basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition
of the Note and upon the receipt of certain cash payments and regarding
the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for
United States Federal income tax purposes. Such an election will apply
to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
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<PAGE>
Premium
If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium"
equal in amount to such excess. A U.S. Holder may elect to amortize such
premium using a constant yield method over the remaining term of the Note
and may offset interest otherwise required to be included in respect of
the Note during any taxable year by the amortized amount of such excess
for the taxable year. However, if the Note may be optionally redeemed
after the U.S. Holder acquires it at a price in excess of its stated
redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies
to all taxable debt instruments acquired by the U.S. Holder on or after
the first day of the first taxable year to which such election applies
and may be revoked only with the consent of the IRS.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a
Note, a U.S. Holder generally will recognize taxable gain or loss equal
to the difference between the amount realized on the sale, exchange or
retirement (other than amounts representing accrued and unpaid interest)
and such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's
adjusted tax basis in a Note generally will equal such U.S. Holder's
initial investment in the Note increased by any original issue discount
included in income (and accrued market discount, if any, if the U.S.
Holder has included such market discount in income) and decreased by the
amount of any payments, other than qualified stated interest payments,
received and amortizable bond premium taken with respect to such Note.
Such gain or loss generally will be long-term capital gain or loss if the
Note were held for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A
FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit
other than U.S. dollars.
Payments of Interest in a Foreign Currency
CASH METHOD. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of
interest on a Note (other than original issue discount or market
discount) will be required to include in income the U.S. dollar value of
the Foreign Currency payment (determined on the date such payment is
received) regardless of whether the payment is in fact converted to U.S.
dollars at that time, and such U.S. dollar value will be the U.S.
Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of
accounting for United States Federal income tax purposes, or who
otherwise is required to accrue interest prior to receipt, will be
required to include in income the U.S. dollar value of the amount of
interest income (including original issue discount or market discount and
reduced by amortizable bond premium to the extent applicable) that has
accrued and is otherwise required to be taken into account with respect
to a Note during an accrual period. The U.S. dollar value of such accrued
income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period
that spans two taxable years, at the average rate for the partial period
within the taxable year. A U.S. Holder may elect, however, to translate
such accrued interest income using the rate of exchange on the last day
of the accrual period or, with respect to an accrual period that spans
two taxable years, using the rate of exchange on the last day of the
taxable year. If the last day of an accrual period is within five
business days of the date of receipt of the accrued interest, a U.S.
Holder may translate such interest using the rate of exchange on the date
of receipt. The above election will apply to other debt obligations held
by the U.S. Holder and may not be changed without the consent of the IRS.
A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will
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<PAGE>
be treated as ordinary income or loss) with respect to accrued interest
income on the date such income is received. The amount of ordinary
income or loss recognized will equal the difference, if any, between the
U.S. dollar value of the Foreign Currency payment received (determined on
the date such payment is received) in respect of such accrual period and
the U.S. dollar value of interest income that has accrued during such
accrual period (as determined above).
Purchase, Sale and Retirement of Notes
A U.S. Holder who purchases a Note with previously owned Foreign
Currency will recognize ordinary income or loss in an amount equal to the
difference, if any, between such U.S. Holder's tax basis in the Foreign
Currency and the U.S. dollar fair market value of the Foreign Currency
used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the
sale, exchange or retirement of a Note, a U.S. Holder will recognize
taxable gain or loss equal to the difference between the amount realized
on the sale, exchange or retirement and such U.S. Holder's adjusted tax
basis in the Note. Such gain or loss generally will be capital gain or
loss (except to the extent of any accrued market discount not previously
included in the U.S. Holder's income) and will be long-term capital gain
or loss if at the time of sale, exchange or retirement the Note has been
held by such U.S. Holder for more than one year. To the extent the
amount realized represents accrued but unpaid interest, however, such
amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign
Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement the amount realized will be based on the
U.S. dollar value of the Foreign Currency on the date the payment is
received or the Note is disposed of (or deemed disposed of as a result of
a material change in the terms of such Note). In the case of a Note that
is denominated in Foreign Currency and is traded on an established
securities market, a cash basis U.S. Holder (or, upon election, an
accrual basis U.S. Holder) will determine the U.S. dollar value of the
amount realized by translating the Foreign Currency payment at the spot
rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such
holder, increased by the amounts of any market discount or original issue
discount previously included in income by the holder with respect to such
Note and reduced by any amortized acquisition or other premium and any
principal payments received by the holder. A U.S. Holder's tax basis in
a Note, and the amount of any subsequent adjustments to such holder's tax
basis, will be the U.S. dollar value of the Foreign Currency amount paid
for such Note, or of the Foreign Currency amount of the adjustment,
determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note
that is attributable to fluctuations in currency exchange rates will be
ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates
will equal the difference between the U.S. dollar value of the Foreign
Currency principal amount of the Note, determined on the date such
payment is received or the Note is disposed of, and the U.S. dollar value
of the Foreign Currency principal amount of the Note, determined on the
date the U.S. Holder acquired the Note. Such Foreign Currency gain or
loss will be recognized only to the extent of the total gain or loss
realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount
In the case of a Discount Note or Short-Term Note, (i) original issue
discount is determined in units of the Foreign Currency, (ii) accrued
original issue discount is translated into U.S. dollars as described in
"Payments of Interest in a Foreign Currency-Accrual Method" above and
(iii) the amount of Foreign Currency gain or loss on the accrued original
issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on
the date of such receipt, with the amount of original issue discount
accrued, as translated above.
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Premium and Market Discount
In the case of a Note with market discount, (i) market discount is
determined in units of the Foreign Currency, (ii) accrued market discount
taken into account upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account
currently) is translated into U.S. dollars at the exchange rate on such
disposition date (and no part of such accrued market discount is treated
as exchange gain or loss) and (iii) accrued market discount currently
includible in income by a U.S. Holder for any accrual period is
translated into U.S. dollars on the basis of the average exchange rate in
effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the
sale, exchange, retirement or other disposition of the Note in the manner
described in "Payments of Interest in a Foreign Currency--Accrual Method"
above with respect to computation of exchange gain or loss on accrued
interest.
With respect to a Note issued with amortizable bond premium, such
premium is determined in the relevant Foreign Currency and reduces
interest income in units of the Foreign Currency. Although not entirely
clear, a U.S. Holder should recognize exchange gain or loss equal to the
difference between the U.S. dollar value of the bond premium amortized
with respect to a period, determined on the date the interest
attributable to such period is received, and the U.S. dollar value of the
bond premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any Foreign Currency received as
interest or on the sale, exchange or retirement of a Note equal to the
U.S. dollar value of such Foreign Currency, determined at the time the
interest is received or at the time of the sale, exchange or retirement.
Any gain or loss realized by a U.S. Holder on a sale or other disposition
of Foreign Currency (including its exchange for U.S. dollars or its use
to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income
taxes on payments of principal, premium (if any) or interest (including
original issue discount, if any) on a Note, unless such non-U.S. Holder
is a direct or indirect 10% or greater shareholder of the Issuer, a
controlled foreign corporation related to the Issuer or a bank receiving
interest described in section 881(c)(3)(A) of the Code. To qualify for
the exemption from taxation, the last United States payor in the chain of
payment prior to payment to a non-U.S. Holder (the "Withholding Agent")
must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a
statement that (i) is signed by the beneficial owner of the Note under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder
and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form,
and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a
Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide a
signed statement to the Withholding Agent. However, in such case, the
signed statement must be accompanied by a copy of the IRS Form W-8 or the
substitute form provided by the beneficial owner to the organization or
institution. The Treasury Department is considering implementation of
further certification requirements aimed at determining whether the
issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income
taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected
with the conduct of a trade or business in the United States by the non-
U.S. Holder. Certain other exceptions may be applicable, and a non-U.S.
Holder should consult its tax advisor in this regard.
S-29
<PAGE>
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder
of the Issuer or, at the time of such individual's death, payments in
respect of the Notes would have been effectively connected with the
conduct by such individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the Notes to registered owners
who are not "exempt recipients" and who fail to provide certain
identifying information (such as the registered owner's taxpayer
identification number) in the required manner. Generally, individuals
are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. Payments made in respect of
the Notes to a U.S. Holder must be reported to the IRS, unless the U.S.
Holder is an exempt recipient or establishes an exemption. Compliance
with the identification procedures described in the preceding section
would establish an exemption from backup withholding for those non-U.S.
Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i)
the broker determines that the seller is a corporation or other exempt
recipient or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Holder, certifies
that such seller is a non-U.S. Holder (and certain other conditions are
met). Such a sale must also be reported by the broker to the IRS, unless
either (i) the broker determines that the seller is an exempt recipient
or (ii) the seller certifies its non-U.S. status (and certain other
conditions are met). Certification of the registered owner's non-U.S.
status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against
such beneficial owner's United States Federal income tax provided the
required information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement, dated May , 1997, among the Issuer, the Guarantor and the
Agents, the Notes are being offered on a continuing basis by the
Issuer through the Agents, who have agreed to use reasonable efforts to
solicit purchases of the Notes. The Issuer will have the sole right to
accept offers to purchase Notes and may reject any proposed purchase of
Notes in whole or in part. The Agents shall have the right, in their
discretion reasonably exercised, to reject any offer to purchase Notes,
in whole or in part. The Issuer will pay the Agents a commission of from
0.125% to 0.750% of the principal amount of Notes, depending upon
maturity, for sales made through them as Agents.
The Issuer may also sell Notes to the Agents as principals for their
own accounts at a discount to be agreed upon at the time of sale, or the
purchasing Agents may receive from the Issuer a commission or discount
equivalent to that set forth on the cover page hereof in the case of any
such principal transaction in which no other discount is agreed. Such
Notes may be resold at prevailing market prices, or at prices related
thereto, at the time of such resale, as determined by the Agents. the
Issuer reserves the right to sell Notes directly on its own behalf. No
commission will be payable on any Notes sold directly by the Issuer.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing
Supplement, such discount allowed to any dealer may include all or part
of the discount to be received from the Issuer. Unless otherwise
indicated in the applicable Pricing Supplement, any Note sold to an Agent
as principal will be purchased by such Agent at a price equal to 100% of
the principal amount
S-30
<PAGE>
thereof less a percentage equal to the commission applicable to any
agency sale of a Note of identical maturity. After the initial public
offering of Notes to be resold to investors and other purchasers on a
fixed public offering price basis, the public offering price, concession
and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Securities Act").
The Issuer and the Guarantor have agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act. The
Issuer and the Guarantor have agreed to reimburse the Agents for certain
expenses.
The Agents may sell to or through dealers who may resell to investors,
and the Agents may pay all or part of their discount or commission to
such dealers. Such dealers may be deemed to be "underwriters" within the
meaning of the Securities Act.
Unless otherwise indicated in the applicable Pricing Supplement,
payment of the purchase price of Notes will be required to be made in
immediately available funds in The City of New York.
The Agents may be customers of, engage in transactions with and perform
services for the Issuer and/or the Guarantor in the ordinary course of
business.
The Notes are a new issue of securities with no established trading
market and will not be listed on any securities exchange. No assurance
can be given as to the existence or liquidity of the secondary market for
the Notes.
In connection with the offering, the Agents may purchase and sell the
Notes in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover short positions
created by the Agents in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Notes; and
short positions created by the Agents involve the sale by the Agents of a
greater number of Notes than they are required to purchase from the
Company in the offering. The Agents also may impose a penalty bid,
whereby selling concessions allowed to broker-dealers in respect of the
securities sold in the offering may be reclaimed by the Agents if such
Notes are repurchased by the Agents in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Notes, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be
effected in the over-the-counter market or otherwise.
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<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 MAY 12, 1997
KEYSTONE FINANCIAL MID-ATLANTIC FUNDING CORP.
DEBT SECURITIES
UNCONDITIONALLY GUARANTEED AS TO PAYMENT
OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY, BY
KEYSTONE FINANCIAL, INC.
-----------
Keystone Financial Mid-Atlantic Funding Corp. ("the Issuer") may from time to
time offer its debt securities (the "Debt Securities") in one or more series at
an aggregate initial offering price not to exceed $400,000,000 or its
equivalent in any other currency or composite currency on terms and conditions
to be determined at the time of sale. The Debt Securities may be offered as
separate series in amounts, at prices and on terms to be determined at the time
of the offering. The accompanying Prospectus Supplement sets forth, with regard
to the Debt Securities in respect of which this Prospectus is being delivered,
the title, aggregate principal amount, denominations (which may be in United
States dollars, in any other currency or in a composite currency), maturity
date, interest rate or rates, if any (which may be fixed or variable), and time
of payment of any interest, any terms for redemption at the option of the
Issuer or the holder, any terms for sinking fund payments, any listing on a
securities exchange, the initial public offering or purchase price and any
other terms in connection with the offering and sale of such series of Debt
Securities.
The Debt Securities may be senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities"). The Senior Debt Securities will be fully and unconditionally
guaranteed (the "Senior Guarantees") by Keystone Financial, Inc. (the
"Guarantor") as to payment of principal, premium, if any, and interest, if any,
and will rank equally with all other unsubordinated and unsecured indebtedness
of the Issuer. The Subordinated Debt Securities will be fully and
unconditionally guaranteed (the "Subordinated Guarantees" and, together with
the Senior Guarantees, the "Guarantees") by the Guarantor, on a subordinated
basis, as to payment of principal, premium, if any, and interest, if any, and
will be subordinated to all outstanding and future Senior Issuer Indebtedness
(as defined herein). Unless otherwise specified in the applicable Prospectus
Supplement, the Subordinated Debt Securities will be subject to acceleration of
maturity only in the case of certain events of bankruptcy, insolvency or
reorganization. See "Description of Debt Securities," "Certain Terms Relating
to Senior Debt Securities," "Certain Terms Relating to Subordinated Debt
Securities" and "Guarantees."
The Prospectus Supplement may contain information concerning certain United
States Federal income tax considerations applicable to the Debt Securities
offered therein.
The Debt Securities may be sold by the Issuer directly or through agents,
underwriters or dealers, as designated from time to time, or through a
combination of such methods. Such agents, underwriters or dealers may include
Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and Keefe, Bruyette & Woods,
Inc. or a group of agents, underwriters or dealers represented by firms
including Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and Keefe, Bruyette &
Woods, Inc. If agents of the Issuer or any dealers or underwriters are involved
in the sale of the Debt Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement with respect to such Debt Securities. See "Plan of
Distribution."
-----------
THE DEBT SECURITIES AND RELATED GUARANTEES WILL NOT BE SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KEEFE, BRUYETTE & WOODS, INC.
-----------
The date of this Prospectus is May , 1997.
<PAGE>
AVAILABLE INFORMATION
The Guarantor is subject to certain information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). The Issuer and the Guarantor have filed with the
Commission a registration statement on Form S-3 under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Debt
Securities offered hereby (together with any amendments thereto, the
"Registration Statement"). The Registration Statement and the exhibits
thereto, as well as the reports, proxy statements and other information
concerning the Guarantor can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
Northeast Regional Office, 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the
Commission. The Common Stock of the Guarantor is quoted on the NASDAQ
National Market System, and such reports, proxy statements and other
information can also be inspected at the offices of NASDAQ Operations,
1735 K St., NW, Washington, DC.
This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the
Issuer, the Guarantor and the Debt Securities offered hereby.
When used in this Prospectus, any related Prospectus Supplement or any
document incorporated herein and therein by reference, the words
"believes," "anticipates," "expects" and similar expressions are intended
to identify "forward-looking" statements. Such statements should not be
construed as guarantees of future performance. Furthermore, actual
results may differ from expectations contained in such "forward-looking"
information as a result of factors which are not predictable. Financial
institution performance can be affected by any number of factors, many of
which are outside of management's direct control. Examples include, but
are not limited to, the effect of prevailing economic conditions; the
overall direction of government policies; unforeseen changes in the
general interest rate environment; the actions and policy directives of
the Federal Reserve Board; competitive factors in the marketplace; and
business risks associated with the management of the credit extension
function and fiduciary activities. Each of these factors could affect
estimates, assumptions, uncertainties and risks considered in the
development of "forward-looking" information, and could cause actual
results to differ materially from management's expectations regarding
future performance.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Guarantor with the
Commission and are incorporated herein by reference: (i) the Guarantor's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and (ii) the Guarantor's Current Reports on Form 8-K dated January 20,
1997, January 28, 1997, and April 18, 1997.
All documents filed by the Guarantor with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the termination of the offering of the Debt
Securities shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained herein or 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
which also is or is deemed to be incorporated by reference herein,
modifies or supersedes
2
<PAGE>
such statement. Any statement or document so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN, WITHOUT
CHANGE UPON REQUEST, A COPY OF ANY AND ALL OF THE DOCUMENTS DESCRIBED
ABOVE OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS. WRITTEN REQUESTS SHOULD BE
MAILED TO KEYSTONE FINANCIAL, INC., ONE KEYSTONE PLAZA, FRONT AND MARKET
STREETS, P.O. BOX 3660, HARRISBURG, PA, 17105-3660, ATTENTION: BEN G.
ROOKE, SECRETARY. TELEPHONE REQUESTS SHOULD BE DIRECTED TO (717) 231-
5701.
KEYSTONE FINANCIAL, INC.
The Guarantor is a bank holding company incorporated under the laws of
Pennsylvania with its principal executive offices at One Keystone Plaza,
Front and Market Streets, P.O. Box 3660, Harrisburg, Pennsylvania 17105-
3660 (telephone: 717-233-1555).
In terms of assets, the Guarantor is the fifth largest bank holding
company headquartered in Pennsylvania. Its banking subsidiaries are
American Trust Bank, N.A., Cumberland, Maryland ("American Trust Bank");
Frankford Bank, N.A., Horsham, Pennsylvania ("Frankford Bank"); Keystone
National Bank, Lancaster, Pennsylvania ("Keystone Bank"); Mid-State Bank
and Trust Company, Altoona, Pennsylvania ("Mid-State Bank"); Northern
Central Bank, Williamsport, Pennsylvania ("Northern Central Bank"); and
Pennsylvania National Bank and Trust Company, Pottsville, Pennsylvania
("Pennsylvania National Bank"). The Guarantor also has several non-bank
subsidiaries and divisions providing specialized services, including
Keystone Financial Mortgage Company, Lancaster, Pennsylvania; Martindale
Andres & Co. (an asset management firm), West Conshohocken, Pennsylvania;
and Keystone Financial Dealer Center, Williamsport, Pennsylvania.
The Guarantor's subsidiary banks provide a wide range of financial
products and services through a combined total of 145 community offices
located in central and southeastern Pennsylvania, western Maryland and
northeastern West Virginia. The Guarantor's subsidiary banks operate
under the "supercommunity" banking philosophy, functioning as local
community banks with a personalized service approach to customers while
at the same time taking advantage of the size of the Guarantor's
organization to provide a broad product line and gain operating and
management efficiencies through centralized banking operations. In
addition to traditional banking services provided by its community banks,
the Guarantor's non-bank subsidiaries deliver an array of services to
both the Guarantor and its customers, including brokerage, investment,
mortgage banking, leasing, and credit life and accident and health
insurance.
The Guarantor's common stock is traded in the over-the-counter market
under the symbol "KSTN" and is listed in the NASDAQ National Market
System.
At December 31, 1996, the Guarantor reported total assets of $5.231
billion, deposits of $4.097 billion, and net loans and leases of $3.509
billion. The Guarantor reported net income of $69,475,000, or $1.83 per
share for the year ended December 31, 1996. See "Keystone Financial,
Inc. Selected Historical Consolidated Financial Information" and
"Incorporation of Certain Documents by Reference."
On November 26, 1996, the Guarantor announced that it would acquire
First Financial Corporation of Western Maryland ("FFWM"), Cumberland,
Maryland (the "FFWM Merger"). FFWM, a thrift holding company with one
depositary institution subsidiary, First Federal Savings Bank of Western
Maryland, has approximately $361 million in assets and operates ten
community offices in Allegany, Garrett and Washington Counties, Maryland.
FFWM had net income of $1.2 million during the six months ended December
31, 1996, which produced an annualized return on average assets of .72%
and a return on average equity of 5.97%. Under terms of the acquisition
agreement, each shareholder of FFWM will
3
<PAGE>
receive common stock, at a fixed exchange rate of 1.29 shares of the
Guarantor for each FFWM share, or an equivalent amount of cash. The
stock issuance will amount to 55% to 60% of the total consideration.
Based on the $26.50 per share closing bid price of the Guarantor on
November 25, 1996, the value per share of FFWM approximates $34.19 and
aggregates $74 million. FFWM's banking operations will be combined with
those of American Trust Bank, the Guarantor's member bank currently
providing financial services to these markets. The acquisition agreement
was approved by FFWM shareholders on May 8, 1997. Completion of the
acquisition, which will be accounted for as a purchase business
combination, is expected during the first half of 1997.
On December 20, 1996 the Guarantor announced that it would acquire
Financial Trust Corp ("FTC"), Carlisle, Pennsylvania (the "FTC Merger").
FTC, a bank holding company with four member banks and approximately $1.2
billion in assets, operates 48 community offices in seven counties in
Pennsylvania and Maryland. FTC's banking subsidiaries include:
Financial Trust Company, Carlisle, Pennsylvania; Chambersburg Trust
Company, Chambersburg, Pennsylvania; First National Bank and Trust
Company, Waynesboro, Pennsylvania; and Washington County National Bank,
Williamsport, Maryland. For the year ended December 31, 1996, FTC
reported net income of $20.0 million, or $2.35 per share, which produced
a return on average assets of 1.7% and a return on average equity of
14.01%. Under the terms of the agreement, each share of FTC will be
converted into 1.65 shares of the Guarantor, pursuant to a fixed exchange
ratio. Based on the $26.50 per share closing bid price of the Guarantor
on December 19, 1996, the value per share of FTC approximates $43.73 and
aggregates $373 million. The agreement was approved by FTC shareholders
on May 7, 1997 and by the Guarantor's shareholders on May 8, 1997.
Completion of the merger, which will be accounted for as a pooling of
interests, is expected during the first half of 1997.
KEYSTONE FINANCIAL MID-ATLANTIC FUNDING CORP.
The Issuer, a wholly-owned subsidiary of the Guarantor incorporated
under the laws of Pennsylvania on March 26, 1997, functions primarily as
a financing entity for the Guarantor and its subsidiaries and affiliates
through the issuance of debt fully and unconditionally guaranteed by the
Guarantor. Financial data for the Issuer and the Guarantor are combined
for financial reporting purposes due to the limited function of the
Issuer and the unconditional guarantees of all of the Issuer's
obligations by the Guarantor. The principal office of the Issuer is
located at One Keystone Plaza, Front and Market Streets, P.O. Box 3660,
Harrisburg, PA 17105-3660 (telephone: (717) 233-1555).
CERTAIN LEGAL AND REGULATORY CONSIDERATIONS
The Issuer and the Guarantor are legal entities separate and distinct
from the Guarantor's bank subsidiaries, although the principal source of
the Guarantor's cash revenues are payments of dividends from such
subsidiaries. There are various legal limitations on the extent to which
the Guarantor's bank subsidiaries can finance or otherwise supply funds
to the Issuer, the Guarantor and certain of its other affiliates.
Provisions of federal banking law restrict the amount of dividends that
can be paid to the Guarantor by its national bank subsidiaries, while
state banking regulations limit the amount of dividends that can be paid
to the Guarantor by its state chartered bank subsidiaries. Under
applicable federal law, no dividends may be paid in an amount greater
than "undivided profits then on hand," after deduction therefrom of
certain loan losses. In addition, for each of the Guarantor's national
bank subsidiaries, prior approval of the Office of the Comptroller of the
Currency (the "Comptroller") is required if dividends declared by such
subsidiary in any calendar year will exceed its net profits (as defined)
for that year, combined with its retained net profits for the preceding
two calendar years, less any required transfers to surplus or a fund for
the retirement of preferred stock. Under applicable state law, dividends
may be declared only after any required transfer of net earnings to
surplus has been made. Dividends may be paid only out of
4
<PAGE>
accumulated net earnings, which are the accumulated and undistributed net
profits recorded on the books of an institution for the last complete
calendar or fiscal year. Based on these regulations, the Guarantor's
subsidiary banks, without regulatory approval, had approximately $145
million available for dividends at December 31, 1996.
In addition, the Comptroller, in the case of the Guarantor's national
bank subsidiaries, and the Federal Deposit Insurance Corporation
("FDIC"), in the case of the Guarantor's state bank subsidiaries, has
authority to prohibit payment of a dividend if such payment constitutes,
what, in its opinion, is an unsafe or unsound practice. The ability of
the Guarantor and its subsidiary banks to pay dividends may be affected
by bank regulatory requirements and agreements and minimum capital
requirements. The rights of the Guarantor, its shareholders and its
creditors to participate in any distribution of the assets or earnings of
its subsidiaries is further subject to the prior claims of creditors of
the respective subsidiaries.
According to Federal Reserve Board policy, the Guarantor is expected to
act as a source of financial strength to each subsidiary bank and to
commit resources to support each subsidiary bank in circumstances in
which it might not do so absent such policy. In addition, any capital
loans by the Guarantor to any subsidiary bank would be subordinated in
right of payment to deposits and certain other indebtedness of each
subsidiary bank.
In addition, the Guarantor's subsidiary banks are subject to certain
restrictions imposed by Federal law on any extension of credit to, and
certain other transactions with, the Guarantor, the Issuer and certain
other non-bank subsidiaries, on investments in stock or other securities
thereof and on the taking of such securities as collateral for loans.
Among other things, the aggregate of such loans made by each of the
Guarantor's subsidiary banks to the Guarantor or to any single non-bank
subsidiary generally may not exceed 10% of the sum of such bank's capital
and surplus, as defined, and all such loans by each of the Guarantor's
bank subsidiaries are limited to 20% of such bank's capital and surplus.
Such loans must be secured by collateral with a value between 100% and
130% of the loan amount, depending on the type of collateral.
The Financial Institution Reform, Recovery, and Enforcement Act
("FIRREA") enacted in August 1989 provides among other things for cross-
guarantees of the liabilities of insured depository institutions pursuant
to which any bank or savings association subsidiary of a holding company
may be required to reimburse the FDIC for any loss or anticipated loss to
the FDIC that arises from a default of any of such holding company's
other subsidiary banks or savings associations or assistance provided to
such an institution in danger of default. The Guarantor's banking
subsidiaries are subject to such cross-guarantee.
USE OF PROCEEDS
Unless otherwise provided in the applicable Pricing Supplement, the net
proceeds from the sale of the Debt Securities will be used by the Issuer
for general corporate purposes, including extensions of credit to the
Guarantor and its subsidiaries and affiliates, including the Guarantor's
banking subsidiaries. The Guarantor, including its banking subsidiaries,
will use the proceeds for general corporate purposes, including to
finance its acquisition of FFWM and possibly other acquisitions, and
repayment at maturity of commercial paper or other existing debt. The
precise amounts and timing of the application of proceeds will depend
upon funding requirements of the Guarantor and its subsidiaries and
affiliates and the amount of Debt Securities offered from time to time
pursuant to this Prospectus. If the Guarantor elects at the time of
issuance of Debt Securities to make different or more specific use of
proceeds other than as set forth herein, such use will be described in
the applicable Pricing Supplement.
In view of its anticipated requirements, the Issuer and the Guarantor
expect to engage, on a recurring basis, in additional private or public
financings of a character and amount to be determined as the need arises.
The Guarantor is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions both on an assisted and unassisted basis.
5
<PAGE>
Acquisitions that may be under consideration at any time include, without
limitation, acquisitions of banking organizations and thrift or savings-
type associations or their assets or liabilities, acquisitions of other
financial service companies or their assets or liabilities or acquisition
of other business or businesses closely related to banking or their
assets or liabilities.
6
<PAGE>
KEYSTONE FINANCIAL, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following unaudited selected historical consolidated financial
information for each of the five years in the period ended December 31,
1996, is derived from financial statements previously filed with the
Commission and incorporated by reference in this Prospectus. The
unaudited selected historical consolidated financial information is
qualified in its entirety by and should be read in conjunction with those
consolidated financial statements and related footnotes thereto.
The Issuer is a wholly-owned subsidiary of the Guarantor and has no
independent operations. The Issuer functions primarily as a financing
entity for the Guarantor and its subsidiaries and affiliates through the
issuance of debt fully and unconditionally guaranteed by the Guarantor.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, SHARES OUTSTANDING
AND RATIOS)
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Interest income......................................... $ 384,521 $ 363,931 $ 313,202 $ 307,755 $ 330,645
Interest expense........................................ 174,758 166,579 124,784 125,245 152,718
----------- ----------- ----------- ----------- -----------
Net interest income..................................... 209,763 197,352 188,418 182,510 177,927
Provision for credit losses............................. 9,858 7,859 9,484 7,940 16,053
Noninterest income...................................... 62,673 50,321 44,629 45,819 39,276
Noninterest expense..................................... 162,559 150,634 151,723 148,003 138,840
Income tax expense...................................... 30,544 27,866 20,481 21,037 16,568
----------- ----------- ----------- ----------- -----------
Net income.............................................. $ 69,475 $ 61,314 $ 51,359 $ 51,349 $ 45,742
----------- ----------- ----------- ----------- -----------
Pre-tax security gains, included in above............... $ 556 $ 1,317 $ 834 $ 1,669 $ 1,750
----------- ----------- ----------- ----------- -----------
PER SHARE (1):
Net income.............................................. $ 1.83 $ 1.73 $ 1.46 $ 1.47 $ 1.33
Cash dividends declared................................. .98 .93 .86 .79 .73
Dividend payout ratio (%)............................... 53.55 53.28 59.22 54.01 55.27
Average shares outstanding.............................. 38,045,585 35,462,358 35,093,138 34,956,927 34,475,862
BALANCES AT PERIOD END:
Loans and leases........................................ $ 3,553,662 $ 3,365,716 $ 3,193,405 $ 2,775,198 $ 2,785,335
Allowances for credit losses............................ 45,016 44,377 42,440 40,181 38,940
Total assets............................................ 5,231,268 5,074,785 4,706,000 4,419,726 4,311,779
Deposits................................................ 4,097,111 4,061,888 3,827,983 3,582,688 3,655,261
Long-term debt.......................................... 2,154 4,048 6,054 5,990 5,144
Shareholders' equity.................................... 507,307 480,694 407,774 412,880 378,314
Book value per share (1)................................ 13.38 12.69 11.64 11.77 10.86
SELECTED RATIOS (%):
Return on average assets................................ 1.37 1.29 1.16 1.19 1.08
Return on average equity................................ 14.11 14.06 12.71 12.98 12.58
Interest rate spread.................................... 3.75 3.77 4.04 4.07 4.02
Net interest margin..................................... 4.49 4.49 4.63 4.63 4.67
Equity to assets, average............................... 9.74 9.16 9.09 9.13 8.62
Loans to deposits at period end......................... 86.74 82.86 83.42 77.46 76.20
Allowance for credit losses to loans at period end...... 1.27 1.32 1.33 1.45 1.40
Nonperforming assets to loans and ORE................... .75 .78 .95 1.32 1.66
Loans 90 days past due.................................. .50 .44 .24 .14 .22
Total risk elements to loans and ORE at period end (2).. 1.25 1.22 1.19 1.46 1.88
RISK-ADJUSTED CAPITAL RATIOS (%):
Leverage ratio.......................................... 9.64 9.28 8.84 9.18 8.66
"Tier 1" capital ratio.................................. 13.54 13.65 12.96 14.05 13.06
"Total" capital ratio................................... 14.77 14.83 14.21 15.30 14.26
RATIO OF EARNINGS TO FIXED CHARGES:
Excluding interest on deposits.......................... 5.19x 4.81x 5.62x 6.90x 8.39x
Including interest on deposits.......................... 1.57x 1.53x 1.57x 1.57x 1.40x
</TABLE>
- ----------
(1) The Guarantor's per share amounts have been restated to reflect a 3-for-2
stock split, in the form of a 50% stock dividend, in 1996.
(2) Total risk elements include nonperforming assets and loans past due 90 days
or more.
7
<PAGE>
KEYSTONE FINANCIAL, INC. AND FINANCIAL TRUST CORP
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
DECEMBER 31, 1996
(UNAUDITED)
The FTC Merger will be accounted for by the Guarantor under the pooling
of interests method of accounting, which views the FTC Merger as a
uniting of the separate ownership interests of the Guarantor and FTC
through an exchange of shares. As such, the pro forma financial
information which follows represents the combined historical financial
data of the Guarantor and FTC, subject only to certain adjustments
described in the notes to the data presented. Certain reclassifications
have been made to conform FTC's presentation with the Guarantor's
presentation. There is no impact on net income from these
reclassifications. Intercompany transactions between the Guarantor and
FTC are immaterial and, accordingly, have not been eliminated.
The FFWM Merger will be accounted for by the Guarantor under the
purchase method of accounting. Pro forma financial information
concerning the FFWM Merger is not included herein. The addition of FFWM
would not have materially affected the pro forma combined financial
information as presented.
The pro forma financial information is unaudited and is not necessarily
indicative of the financial condition or the results of operations of the
Guarantor as they would have been had the FTC Merger been effective
during the periods presented, or as they may be in the future. The pro
forma financial information should be read in conjunction with the
historical financial statements of the Guarantor, including the notes
thereto, incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
The following unaudited pro forma combined condensed statement of
condition combines in condensed form the consolidated statement of
condition of the Guarantor and the consolidated balance sheet of FTC as
of December 31, 1996 with certain pro forma adjustments described in the
notes below. This statement should be read in conjunction with the
historical financial statements of the Guarantor, including the notes
thereto; the notes to this pro forma combined condensed statement of
condition; and the pro forma combined condensed statements of income,
including the notes thereto.
8
<PAGE>
<TABLE>
<CAPTION>
COMBINED
GUARANTOR
GUARANTOR FTC PRO FORMA AND FTC
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- --------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks............................... $ 167,403 $ 39,569 $ 206,972
Federal funds sold and other.......................... 78,354 3,059 81,413
Investment securities available for sale.............. 856,380 353,714 1,210,094
Investment securities held to maturity................ 379,958 -- 379,958
Assets held for resale................................ 51,225 -- 51,225
Loans and leases...................................... 3,553,662 782,808 4,336,470
Allowance for credit losses........................... (45,016) (11,240) (56,256)
---------- ---------- ----------
Net loans............................................. 3,508,646 771,568 4,280,214
Premises and equipment................................ 74,407 23,525 97,932
Other assets.......................................... 114,895 27,876 142,771
---------- ---------- ----------
TOTAL ASSETS.......................................... $5,231,268 $1,219,311 $6,450,579
---------- ---------- ----------
LIABILITIES:
Noninterest-bearing deposits.......................... $ 511,931 $ 113,605 $ 625,536
Interest-bearing deposits............................. 3,585,180 849,005 4,434,185
---------- ---------- ----------
Total deposits........................................ 4,097,111 962,610 5,059,721
Fed Funds purchased & security repurchase agreements.. 299,895 68,991 368,886
Other short-term borrowings........................... 26,175 2,903 29,078
---------- ---------- ----------
Total short-term borrowings........................... 326,070 71,894 397,964
FHLB borrowings....................................... 205,929 18,274 224,203
Long-term debt........................................ 2,154 419 2,573
Other liabilities..................................... 92,697 13,015 105,712
---------- ---------- ----------
TOTAL LIABILITIES..................................... 4,723,961 1,066,212 5,790,173
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock....................................... -- -- --
Common stock.......................................... 76,456 42,703 (14,519)(1) 104,640
Surplus............................................... 73,201 51,493 14,519 (1) 139,213
Retained earnings..................................... 368,172 53,846 422,018
Deferred KSOP benefit expense......................... (1,249) __ (1,249)
Treasury stock........................................ (8,186) (226) (8,412)
Net unrealized securities gains (losses), net of tax.. (1,087) 5,283 4,196
---------- ---------- ----------- ----------
TOTAL SHAREHOLDERS' EQUITY............................ 507,307 153,099 -- 660,406
---------- ---------- ----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY.............. $5,231,268 $1,219,311 -- $6,450,579
---------- ---------- ----------- ----------
</TABLE>
- ----------
(1) To transfer the common stock of FTC to surplus and reflect the issuance of
1.65 shares of Common Stock of the Guarantor for each outstanding share of
FTC Common Stock.
9
<PAGE>
KEYSTONE FINANCIAL, INC. AND FINANCIAL TRUST CORP
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
The FTC Merger will be accounted for as a pooling of interests.
Accordingly, the following unaudited pro forma combined condensed
statements of income result from the combination of historical
consolidated condensed statements of income of the Guarantor and FTC for
each period presented. These statements should be read in conjunction
with the historical financial statements of the Guarantor, including the
notes thereto; the notes to these pro forma combined condensed statements
of income; and the pro forma combined condensed statement of condition,
including the notes thereto. The pro forma combined results are not
necessarily indicative of the results that would have been obtained had
the FTC Merger been effective during the periods presented or of the
combined results of future operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(in thousands except per share
amounts and shares outstanding)
<S> <C> <C> <C>
INTEREST INCOME:
Loans and fees on loans................................ $ 370,364 $ 353,025 $ 296,492
Investment securities.................................. 92,700 83,062 84.494
Other.................................................. 10,356 10,699 5,908
----------- ----------- -----------
473,420 446,786 386,894
INTEREST EXPENSE:
Deposits............................................... 186,257 176,571 137,103
Short-term borrowings.................................. 14,506 12,910 8,418
FHLB borrowings........................................ 10,175 10,827 6,446
Long-term debt......................................... 363 467 496
----------- ----------- -----------
211,301 200,775 152,463
----------- ----------- -----------
NET INTEREST INCOME.................................... 262,119 246,011 234,431
Provision for credit losses............................ 10,713 8,568 10,324
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES.. 251,406 237,443 224,107
Other Income........................................... 71,525 58,137 51,921
Other expense.......................................... 196,245 182,130 182,333
----------- ----------- -----------
INCOME BEFORE INCOME TAXES............................. 126,686 113,450 93,695
Applicable income tax expense.......................... 37,180 34,001 25,907
----------- ----------- -----------
NET INCOME............................................. $ 89,506 $ 79,449 $ 67,788
----------- ----------- -----------
AVERAGE NUMBER OF SHARES OUTSTANDING (1)............... 52,118,819 49,557,082 49,188,960
----------- ----------- -----------
EARNINGS PER SHARE..................................... $1.72 $1.60 $1.38
----------- ----------- -----------
</TABLE>
- ----------
(1) The average number of shares outstanding reflects the Guarantor's historical
shares outstanding, adjusted for the 1996 three-for-two stock split, plus
the historical shares outstanding of FTC, adjusted for the 1996 10% stock
dividend, multiplied by the FTC Merger exchange ratio of 1.65.
10
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either Senior Debt Securities or
Subordinated Debt Securities of the Issuer which will be unconditionally
guaranteed as to payment of principal, premium, if any, and interest, if
any, by the Guarantor. The Senior Debt Securities will be issued under
an indenture dated as of May 1, 1997 (the "Senior Indenture"), between
the Issuer, the Guarantor and Bankers Trust Company, as senior trustee
(the "Senior Trustee"). The Subordinated Debt Securities will be issued
under an indenture dated as of May 1, 1997 (the "Subordinated
Indenture"), between the Issuer, the Guarantor and Bankers Trust Company,
as subordinated trustee (the "Subordinated Trustee"). The Senior
Indenture and Subordinated Indenture are collectively referred to herein
as the "Indentures." The Senior Trustee and the Subordinated Trustee are
referred to herein individually or collectively as the "Trustee." A copy
of each of the Indentures has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
The Trustee shall not be responsible for the acts, obligations,
liabilities or responsibilities of any successor trustee. The following
summaries of certain provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Indentures, including the
definitions therein of certain terms. Wherever particular sections or
defined terms of the Indentures are referred to, it is intended that such
sections or definitions shall be incorporated herein by reference. The
following summaries set forth certain general terms and provisions of the
Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus
Supplement, and the extent, if any, to which such general provisions may
apply to the Debt Securities so offered, will be described in the
Prospectus Supplement relating to such Debt Securities. Unless otherwise
indicated, section references contained herein refer to both the Senior
Indenture and the Subordinated Indenture.
Because the Guarantor is a holding company, its rights and the rights
of its creditors, including the Holders of the Debt Securities offered
hereby, to participate in the assets of any subsidiary upon the latter's
bankruptcy, conservatorship, receivership, liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors (including, in the case of any bank subsidiary, its depositors)
except to the extent that the Guarantor may itself be a creditor with
recognized claims against the subsidiary. In addition, there are certain
regulatory and other limitations on the payments of dividends and on
loans and other transfers of funds to the Guarantor by the Guarantor's
subsidiary banks. See "Certain Legal and Regulatory Considerations."
GENERAL
The Debt Securities to be offered by this Prospectus are limited to the
amounts described on the cover of this Prospectus. The Indentures,
however, do not limit the aggregate principal amount of Debt Securities
which may be issued thereunder and provide that Debt Securities may be
issued from time to time in one or more series. The Debt Securities will
be unsecured obligations of the Issuer. Neither the Indentures nor the
Debt Securities will limit or otherwise restrict the amount of other
indebtedness which may be incurred or other securities which may be
issued by the Issuer, the Guarantor or any of their affiliates. The
Senior Debt Securities will rank pari passu with all other unsecured
unsubordinated indebtedness of the Issuer and the Senior Guarantees will
rank pari passu with all other unsecured and unsubordinated obligations
of the Guarantor. The indebtedness represented by the Subordinated Debt
Securities and the related Guarantees will be subordinated as described
below under "Certain Terms Relating to Subordinated Debt Securities" and
"Guarantees."
Reference is made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the following
terms, where applicable, of the Debt Securities in respect of which this
Prospectus is being delivered: (1) the title of the Debt Securities; (2)
the limit, if any, on the aggregate principal amount or initial public
offering price of the Debt Securities; (3) the priority of payment of
such Debt Securities; (4) the price or prices (which may be expressed as
a percentage of the aggregate
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principal amount thereof) at which the Debt Securities will be issued;
(5) the date or dates on which the Debt Securities will mature; (6) the
rate or rates (which may be fixed or variable) per annum at which the
Debt Securities will bear interest, if any, and the method of determining
the same; (7) the date from which such interest, if any, on the Debt
Securities will accrue, the date or dates on which such interest, if any,
will be payable, the dates on which payment of such interest, if any,
will commence and the Regular Record Dates for such Interest Payment
Dates, if any; (8) the extent to which any of the Debt Securities will be
issuable in temporary or permanent global form and, if so, the identity
of the depositary for such global Debt Securities, or the manner in which
any interest payable on a temporary or permanent global Debt Security
will be paid; (9) the dates, if any, on which, and the price or prices at
which, the Debt Securities will, pursuant to any mandatory sinking fund
provisions, or may, pursuant to any optional sinking fund or to any
purchase fund provisions, be redeemed by the Issuer, and the other
detailed terms and provisions of such sinking and/or purchase funds; (10)
the date, if any, after which, and the price or prices at which, the Debt
Securities may, pursuant to any optional redemption provisions, be
redeemed at the option of the Issuer or the Holder thereof and the other
detailed terms and provisions of such optional redemption; (11) the
denomination or denominations in which such Debt Securities are
authorized to be issued; (12) whether any of the Debt Securities will be
issued in bearer form and, if so, any limitations on issuance of such
bearer Debt Securities (including exchange for registered Debt Securities
of the same series); (13) information with respect to book-entry
procedures; (14) whether any of the Debt Securities will be issued as
Original Issue Discount Securities; (15) each office or agency where,
subject to the terms of the applicable Indenture, such Debt Securities
may be presented for registration of transfer or exchange; (16) any other
terms of the series (which will not be inconsistent with the provisions
of the applicable Indenture); (17) the currencies or currency units in
which such Debt Securities are issued and in which the principal of,
interest on and additional amounts, if any, in respect of such Debt
Securities will be payable; (18) whether the amount of payments of
principal of or interest on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency
unit or units or composite currency or currencies) and the manner in
which such amounts shall be determined; (19) whether the Issuer or a
Holder may elect payment of the principal of or interest on such Debt
Securities in a currency, currencies, currency unit or units or composite
currency or currencies other than that in which such Debt Securities are
denominated or stated to be payable, the period or periods within which,
and the terms and conditions upon which, such election may be made, and
the time and manner of determining the exchange rate between the coin or
currency, currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are denominated or stated to be
payable and the coin or currency, currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are to be
so payable; (20) if other than the Trustee, the identity of the Security
Registrar and/or Paying Agent and the designation of the initial Exchange
Rate Agent; (21) if applicable, the defeasance of certain obligations by
the Issuer pertaining to Debt Securities of the series; (22) the Person
to whom any interest on any Registered Security of the series shall be
payable, if other than the Person in whose name that Debt Security (or
one or more predecessor Debt Securities) is registered at the close of
business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Security of the
series shall be payable, if otherwise than upon presentation and
surrender of the coupons appertaining thereto as they severally mature,
and the extent to which, or the manner in which, any interest payable on
a temporary global Debt Security on an Interest Payment Date will be paid
if other than in the manner provided in the related Indenture; (23) if
such Debt Securities are to be issued upon the exercise of warrants, the
time, manner and place for the Debt Securities to be authenticated and
delivered; (24) whether and under what circumstances the Issuer will pay
additional amounts as contemplated by Section 1104 of the related
Indenture (the term "interest," as used in this Prospectus, shall include
such additional amounts) on such Debt Securities to any Holder who is not
a United States person (including any modification to the definition of
such term as contained in the Indenture as originally executed) in
respect of any tax, assessment or governmental charge and, if so, whether
the Issuer will have the option to redeem such Debt Securities rather
than pay such additional amounts (and the terms of any such option); (25)
any other terms of such Debt Securities. Neither Indenture limits the
aggregate principal amount of Debt Securities that may be issued
thereunder or of any particular series of such Debt Securities and both
Indentures provide that, in addition to the Debt Securities, additional
Debt Securities may be issued
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thereunder from time to time in one or more series (Section 301). All
Debt Securities issued under each Indenture will rank equally and ratably
with any additional Debt Securities issued under such Indenture.
Debt Securities may be issued as Original Issue Discount Securities
(bearing no interest or interest at a rate which at the time of issuance
is below market rates) to be sold at a substantial discount below their
face amount. In the event of an acceleration of the maturity of any
Original Issue Discount Security, the amount payable to the Holder of
such Original Issue Discount Security upon such acceleration will be
determined in accordance with the applicable Prospectus Supplement, the
terms of such security and the applicable Indenture, but will be an
amount less than the amount payable at the maturity of the principal of
such Original Issue Discount Security.
Special federal income tax and other considerations relating thereto
will be described in the applicable Prospectus Supplement.
The provisions of the Indentures described below under "Restrictive
Covenants" are the only provisions which would provide protection to
Holders in the event of a highly leveraged transaction involving the
Issuer.
ACCELERATION OF MATURITY
If any Event of Default with respect to Debt Securities of the Issuer
of any series at the time Outstanding shall occur and be continuing, then
and in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may
declare to be due and payable immediately by a notice in writing to the
Issuer and the Guarantor (and to the Trustee if given by Holders) the
principal amount or, if the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series, of all Debt Securities of that
series. However, at any time after such a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of Outstanding Debt Securities
of that series may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, except, in the case of Senior Debt
Securities, the non-payment of acceleration of principal, of that series
have been cured or waived as provided in the Indentures (Section 602).
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a
portion of the principal amount of such Original Issue Discount
Securities upon the occurrence of an Event of Default and the
continuation thereof.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement,
each series of Debt Securities will be issued in registered form only,
without coupons. The Indentures, however, provide that the Issuer may
also issue Debt Securities in bearer form only, or in both registered and
bearer form. Debt Securities issued in bearer form shall have interest
coupons attached, unless issued as zero coupon securities. Debt
Securities in bearer form shall not be offered, sold, resold or delivered
in connection with their original issuance in the United States or to any
United States person (as defined below) other than offices located
outside the United States of certain United States financial
institutions. As used herein, "United States person" means any citizen
or resident of the United States, any corporation, partnership or other
entity created or organized in or under the laws of the United States, or
any estate or trust, the income of which is subject to United States
federal income taxation regardless of its source, and "United States"
means the United States of America (including the states thereof and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction. Purchasers of Debt Securities in bearer form
will be subject to certification procedures and may be affected by
certain limitations under United States tax laws. Such procedures and
limitations will be described in the Prospectus Supplement relating to
the offering of the Debt Securities in bearer form.
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Unless otherwise indicated in the applicable Prospectus Supplement,
Debt Securities will be issued in denominations of $100,000 and integral
multiples of $1,000 in excess thereof. No service charge will be made
for any transfer or exchange of the Debt Securities, but the Issuer may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Presently, the
Issuer is not aware of any taxes or other governmental charges that would
be payable in connection with any transfer or exchange of a Debt
Security. However, such taxes or charges may be imposed in the future.
Unless otherwise described in the Prospectus Supplement relating thereto,
the principal, premium, if any, and interest, if any, of or on the Debt
Securities will be payable, and transfer of the Debt Securities will be
registrable, at the office of Bankers Trust Company, as Paying Agent and
Security Registrar under the Indenture, in New York, New York, provided
that payments of interest may be made at the option of the Issuer by
check mailed to the address appearing in the Security Register of the
person in whose name such Registered Security is registered at the close
of business on the Regular Record Date (Sections 305 and 307).
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal of, premium, if any, and interest, if any, on Debt
Securities in bearer form will be made payable, subject to any applicable
laws and regulations, at such office outside the United States as
specified in the Prospectus Supplement and as the Issuer may designate
from time to time, at the option of the Holder, by check or by transfer
to an account maintained by the payee with a bank located outside the
United States. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of interest and certain additional amounts on Debt
Securities in bearer form will be made only against surrender of the
coupon relating to such Interest Payment Date. No payment with respect
to any Debt Security in bearer form will be made at any office or agency
of the Issuer in the United States or by check mailed to any address in
the United States or by transfer to an account maintained with a bank
located in the United States.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more global securities ("Global Securities") that will
be deposited with, or on behalf of, a depository (the "Depository")
identified in the Prospectus Supplement relating to such series. Global
Securities may be issued in either registered or bearer form and in
either temporary or permanent form. Unless and until it is exchanged in
whole or in part for individual certificates evidencing Debt Securities
in definitive form represented thereby, a Global Security may not be
transferred except as a whole by the Depository for such Global Security
to a nominee of such Depository or by a nominee of such Depository to
such Depository or another nominee of such Depository or by such
Depository or any such nominee to a successor of such Depository or a
nominee of such successor.
The specific terms of the depositary arrangement with respect to a
series of Debt Securities and certain limitations and restrictions
relating to a series of Bearer Securities, will be described in the
Prospectus Supplement relating to such series.
RESTRICTIVE COVENANTS
The Senior Indenture contains a covenant by the Guarantor limiting its
ability to dispose of the Voting Stock of the Issuer or any Major
Constituent Bank. A "Major Constituent Bank" is defined to mean any
Banking Subsidiary of the Guarantor whose Consolidated Banking Assets
constitute 20% or more of the Guarantor's Consolidated Banking Assets.
Currently, Frankford Bank, Mid-State Bank, Northern Central Bank and
Pennsylvania National Bank each qualify as a Major Constituent Bank.
Such covenant provides that, subject to certain exceptions, so long as
any of the Senior Debt Securities are outstanding, the Guarantor: (a)
will not, nor will it permit any Subsidiary to, 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 the Major Constituent Banks or the Issuer, nor will the
Guarantor permit the Major Constituent Banks or the Issuer to issue any
shares of, or securities convertible into, or options, warrants or rights
to subscribe for or purchase shares of, Voting Stock of the Major
Constituent Banks or
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the Issuer, unless the Guarantor will own, directly or indirectly, at
least 80% of the issued and outstanding Voting Stock of such Major
Constituent Bank or the Issuer, as the case may be, after giving effect
to such transaction; or (b) will not permit the Issuer or a Major
Constituent Bank to either (i) merge or consolidate with or into any
corporation (other than the Guarantor), unless at least 80% of the
surviving corporation's Voting Stock is, or upon consummation of the
merger or consolidation will be, owned, directly or indirectly, by the
Guarantor and the Consolidated Banking Assets of the Guarantor are at
least equal to what they were prior to such transaction or (ii) lease,
sell or transfer all or substantially all of its properties or assets to
any corporation or other person (other than the Guarantor), unless 80% of
the Voting Stock of such corporation or other person is owned, or will be
owned upon such lease, sale or transfer, directly or indirectly, by the
Guarantor (Section 1107).
MODIFICATION AND WAIVER
Each Indenture provides that modifications and amendments may be made
by the Issuer, the Guarantor and the Senior Trustee or the Subordinated
Trustee, as applicable, with the consent of the Holders of a majority in
principal amount of the Outstanding Debt Securities of each series
affected thereby; 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 installment of principal of or interest on, any Debt
Security, (b) reduce the principal amount of, or the premium (if any) or
interest (if any) on, or additional amounts, if any, in respect of, any
Debt Security, (c) change the place or currency of payment of principal
of, or premium (if any) or interest (if any) on, any Debt Security, (d)
impair the right to institute suit for the enforcement of any payment on
or with respect to any Debt Security, (e) reduce the above-stated
percentage of Outstanding Debt Securities of any series the consent of
the Holders of which is required to modify or amend the related
Indenture, (f) reduce the percentage in principal amount of Outstanding
Debt Securities of any series the consent of the Holders of which is
required for waiver of compliance with certain provisions of the related
Indenture or for waiver of certain defaults, (g) modify (with certain
exceptions) any provision of the Indentures relating to modification and
amendment of such Indenture or waiver of compliance with conditions and
defaults thereunder, (h) modify or affect in any manner adverse to a
Holder the terms and conditions of the Guarantees, (i) with respect to
the Subordinated Indenture, alter in any respect the provisions regarding
subordination of the Debt Securities issued thereunder, or (j) reduce the
principal amount of Original Issue Discount Securities which could be
declared due and payable upon acceleration of maturity thereof (Section
1002).
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned,
compliance by the Issuer or the Guarantor, as the case may be, with
certain restrictive provisions of the Indentures (Section 1110). The
Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive any past default under the applicable
Indenture with respect to that series, except a default in the payment of
the principal of (or premium, if any) or interest, if any, on any Debt
Security of that series or in respect of a provision which under the
applicable Indenture cannot be modified or amended without the consent of
the Holder of each Outstanding Debt Security of that series affected
(Section 613).
Modification and amendment of either of the Indentures may be made by
the Issuer, the Guarantor and the Trustee without the consent of any
Holder for any of the following purposes: (i) to evidence the succession
of another corporation to the Issuer or the Guarantor; (ii) to add to the
covenants of the Issuer for the benefit of the Holders of all or any
series of Debt Securities; (iii) to add Events of Default; (iv) to add or
change any provisions of either of the Indentures to facilitate the
issuance of Bearer Securities; (v) to add to, delete from or revise the
conditions, limitations and restrictions on the authorized amount, terms
or purposes of issue, authentication and delivery of Securities; (vi) to
establish the form or terms of Debt Securities of any series and any
related coupons; (vii) to provide for the acceptance of appointment by a
successor Trustee; (viii) to cure any ambiguity, defect or inconsistency
in the Indenture, provided such action does not adversely affect the
interests of Holders of Debt Securities of any series or any related
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coupons in any material respect; (ix) to modify, eliminate or add to the
provisions of either of the Indentures to such extent as is necessary to
effect qualification under the Trust Indenture Act of 1939, as amended,
or (x) to effect the assumption by the Guarantor or a Subsidiary thereof
(as defined in the applicable Indenture) Issuer of the obligations under
either of such Indentures (Section 1001).
Consents of Holders for modifications and amendments to the Indenture
must be solicited by the Issuer and the Guarantor, and waivers by Holders
of compliance with provisions under the Indenture must be obtained in
accordance with, the terms of the applicable Indenture (Section 104).
Any such modifications, amendments or waivers will be binding upon all
future Holders of Debt Securities. To the extent that consents are
properly obtained and all requirements for any changes, amendments or
waivers are otherwise satisfied, there are no provisions in either
Indenture which allow remedies to Holders who do not consent to changes
or amendments to, or waivers of past defaults under, the applicable
Indenture.
OUTSTANDING DEBT SECURITIES
In determining whether the Holders of the requisite principal amount of
Outstanding Debt Securities have given any request, demand,
authorization, direction, notice, consent or waiver under each Indenture,
(i) the portion of the principal amount of an Original Issue Discount
Security that shall be deemed to be Outstanding for such purposes shall
be that portion of the principal amount thereof that could be declared to
be due and payable pursuant to the terms of such Original Issue Discount
Security as of the date of such determination, and (ii) the principal
amount of a Debt Security denominated in a foreign currency or currencies
shall be the U.S. dollar equivalent, determined on the settlement date
therefor, of the principal amount of such Debt Security (Section 101).
ADDITIONAL PROVISIONS
The Indentures provide that the Senior Trustee or the Subordinated
Trustee, as the case may be, will be under no obligation, subject to the
duty of such Trustee during a default thereunder to act with the required
standard of care, to exercise any of its rights or powers under the
related Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered such Trustee reasonable indemnity
(Section 701). Subject to such provisions for indemnification of the
related Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of any series will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the related Trustee, or exercising any trust or power
conferred on such Trustee, with respect to the Debt Securities of that
series (Section 612).
No holder of any Debt Security of any series will have the right to
institute any proceeding with respect to the Indenture under which such
Holder's Debt Securities were issued for any remedy thereunder, unless:
(a) such Holder shall have previously given to the Trustee written notice
of a continuing Event of Default with respect to the Debt Securities of
that series; (b) the Holders of no less than 25% in principal amount of
the Outstanding Senior Debt Securities or Subordinated Debt Securities,
as the case may be, of that series shall have made written request, and
offered reasonable indemnity, to the related Trustee to institute such
proceeding as Trustee; (c) the related Trustee shall not have received
from the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities or Subordinated Debt Securities, as the case may
be, of that series a direction inconsistent with such request and (d) the
related Trustee shall have failed to institute such proceeding within 60
days after its receipt of such notice, request and offer of indemnity
(Section 607).
However, the Holder of any Debt Security will have an absolute and
unconditional right to receive payment of the principal of (and premium,
if any) and interest, if any, on such Debt Security on or after the due
dates expressed in such Debt Security and to institute suit for the
enforcement of any such payment (Section 608).
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The Issuer and the Guarantor are required to furnish to the Senior
Trustee or the Subordinated Trustee, as applicable, annually a statement
as to performance or fulfillment of certain of their obligations under
the applicable Indenture and as to any default in such performance or
fulfillment (Sections 1105 and 1106).
Each of the Issuer and the Guarantor may consolidate with, merge into,
or transfer substantially all of its properties to, any other corporation
provided that the successor corporation assumes all of its obligations of
the Issuer or the Guarantor under the Debt Securities and the Guarantees,
as the case may be, and provided that certain other conditions are met
(Sections 901, 902, 903 and 904). In addition, the Guarantor may, by
supplemental indenture, assume all of the obligations of the Issuer under
either Indenture to pay principal of (and premium, if any) and interest
on and additional amounts in respect of Debt Securities issued thereunder
and to perform every covenant of such Indenture on the part of the Issuer
to be performed (Section 905).
CERTAIN TERMS RELATING TO SENIOR DEBT SECURITIES
The Senior Debt Securities will be direct, unsecured obligations of the
Issuer and will rank pari passu with all outstanding and future senior
indebtedness of the Issuer.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Indenture with
respect to Debt Securities of any series issued thereunder: (a) failure
to pay principal of or premium, if any, on any Senior Debt Security of
that series when due; (b) failure to pay any interest, if any, or any
additional amounts, if any, on any Senior Debt Security of that series
when due, and continuance of such default for 30 days; (c) failure to
deposit any sinking fund payment, when due, in respect of any Senior Debt
Security of that series; (d) failure to perform any other covenant of the
Issuer or the Guarantor in such Indenture and the related Guarantees,
(other than a covenant included in the Indenture solely for the benefit
of a series of Senior Debt Securities other than that series), continued
for 60 days after written notice as provided in the Indenture; (e)
acceleration of indebtedness in principal amount in excess of $5,000,000
for money borrowed by the Issuer, the Guarantor or any Major Constituent
Bank under the terms of the instrument under which such indebtedness is
issued or secured, if such acceleration is not annulled, or such
indebtedness is not discharged, within 30 days after written notice as
provided in the Indenture; (f) certain events in bankruptcy, insolvency
or reorganization of the Issuer, the Guarantor or any Major Constituent
Bank; and (g) any other Event of Default provided with respect to Senior
Debt Securities of that series (Senior Indenture, Section 601).
CONCERNING THE TRUSTEE
The Issuer and the Guarantor have, from time to time, engaged in
transactions with the Trustee in the ordinary course of its business.
CERTAIN TERMS RELATING TO SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities will be direct, unsecured obligations
of the Issuer and will rank in priority of payment with outstanding and
future indebtedness of the Issuer as set forth below.
SUBORDINATION
During the continuance beyond any applicable grace period of any
default with respect to Senior Issuer Indebtedness, no payment of
principal of and interest on the Subordinated Debt Securities shall be
made by the Issuer until payment in full of all principal of and premium
and interest on such Senior Issuer
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Indebtedness. In addition, upon any distribution of assets of the
Issuer, upon any dissolution, winding up, liquidation or reorganization,
the payment of the principal of and interest on the Subordinated Debt
Securities is to be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full
of principal, premium and interest on all Senior Issuer Indebtedness. By
reason of such subordination, in the event of the dissolution of the
Issuer, holders of Senior Issuer Indebtedness may receive more, ratably,
and holders of the Subordinated Debt Securities may receive less,
ratably, then the other creditors of the Issuer. Such subordination will
not prevent the occurrence of any Event of Default under the Subordinated
Indenture (Subordinated Indenture, Article Sixteen).
For purposes of the preceding paragraph, the term "Senior Issuer
Indebtedness" means any indebtedness or other obligation of the Issuer,
whether outstanding at the date of execution of the Indentures or
thereafter incurred, except indebtedness or obligations expressly
subordinated in right of payment to the Subordinated Debt Securities or
ranking on a parity with the Subordinated Debt Securities (Subordinated
Indenture, Section 101). As of the date hereof, the Issuer had no Senior
Issuer Indebtedness outstanding.
EVENT OF DEFAULT
An Event of Default will be defined under the Subordinated Indenture
with respect to Subordinated Debt Securities of any series issued
thereunder as certain events in bankruptcy, insolvency or reorganization
of the Guarantor or any Major Constituent Bank (Subordinated Indenture,
Section 601).
THE SUBORDINATED INDENTURE DOES NOT PROVIDE FOR ANY RIGHT OF
ACCELERATION OF THE PAYMENT OF THE PRINCIPAL OF A SERIES OF SUBORDINATED
DEBT SECURITIES UPON A BANKRUPTCY, INSOLVENCY OR REORGANIZATION OF THE
ISSUER ALONE OR A DEFAULT IN THE PAYMENT OF PRINCIPAL OR INTEREST OR A
DEFAULT IN THE PERFORMANCE OF ANY COVENANT OR AGREEMENT IN THE
SUBORDINATED DEBT SECURITIES OF A PARTICULAR SERIES OR IN THE
SUBORDINATED INDENTURE. In the event of a default in the payment of
interest or principal, the Subordinated Trustee may, subject to certain
limitations and conditions, seek to enforce payment of such interest or
principal through appropriate judicial proceedings against the Issuer or
the Guarantor (Subordinated Indenture, Section 603).
GUARANTEES
The Senior Debt Securities will be fully and unconditionally guaranteed
by the Guarantor as to payment of principal, premium, if any, and
interest, if any, when and as the same shall become due and payable,
whether at maturity or upon redemption, repayment or otherwise. The
Senior Guarantees will rank pari passu with all other unsecured and
unsubordinated obligations of the Guarantor.
The Subordinated Debt Securities will be fully and unconditionally
guaranteed by the Guarantor, on a subordinated basis, as to payment of
principal, premium, if any, and interest, if any, when and as the same
shall become due and payable, whether at maturity or upon redemption,
repayment or otherwise. The Subordinated Guarantees will be unsecured and
will be subordinated to all outstanding and future Senior Guarantor
Indebtedness to the same extent that Subordinated Debt Securities issued
by the Issuer are subordinated to all outstanding and future Senior
Issuer Indebtedness.
For purposes of the preceding paragraph, the term "Senior Guarantor
Indebtedness" will be defined to mean any indebtedness or other
obligation of the Guarantor, whether outstanding at the date of execution
of the Indentures or thereafter incurred, except indebtedness or
obligations expressly subordinated in right of payment to the
Subordinated Guarantees or ranking on a parity with the Subordinated
Guarantees (Subordinated Indenture, Section 101). As of March 31, 1997,
the Guarantor had approximately $1,125,000 principal amount of Senior
Guarantor Indebtedness outstanding, excluding trade payables, guarantees
and other contingent obligations of the Guarantor.
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The obligations of the Guarantor under the Guarantees will be full
and unconditional regardless of the enforceability of the applicable Debt
Securities or the related Indenture and will not be discharged until all
obligations contained in such Debt Securities and the related Indenture
are satisfied. Holders of the Debt Securities may proceed directly
against the Guarantor in the event of a default under the applicable Debt
Securities without first proceeding against the Issuer.
CERTAIN TAX CONSIDERATIONS
The Issuer will be required to withhold the Pennsylvania Corporate
Loans Tax from interest payments on Debt Securities held by or for those
subject to such tax, principally individuals and partnerships resident in
Pennsylvania and resident trustees of Pennsylvania trusts. The tax, at
the current rate of four mills on each dollar of nominal value ($4.00 per
$1,000), will be withheld, at any time when it is applicable, from any
interest payment to taxable holders at the annual rate of $4.00 per
$1,000 principal amount of the Debt Securities. The Debt Securities will
be exempt, under current law, from personal property taxes imposed by
political subdivisions in Pennsylvania.
See "Certain United States Federal Income Tax Considerations" in the
accompanying Prospectus Supplement for additional information concerning
certain tax considerations relating to specific series of Debt
Securities. Holders of Debt Securities should consult their tax advisors
as to the applicability to the Debt Securities and interest, if any,
payable thereon of Federal, state and local taxes.
PLAN OF DISTRIBUTION
The Issuer may sell Debt Securities to or through underwriters and also
may sell Debt Securities directly to other purchasers or through agents.
Such underwriters may include Goldman, Sachs & Co., Bear, Stearns & Co.
Inc. and Keefe, Bruyette & Woods, Inc. or a group of underwriters
represented by firms including Goldman, Sachs & Co., Bear, Stearns & Co.
Inc. and Keefe, Bruyette & Woods, Inc. Goldman, Sachs & Co., Bear,
Stearns & Co. Inc. and Keefe, Bruyette & Woods, Inc. may also act as
agents.
The distribution of the Debt Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may
receive compensation from the Issuer or from purchasers of Debt
Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Debt Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents.
Underwriters, dealers and agents that participate in the distribution of
Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them from the Issuer and any profit on the resale
of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent
will be identified, and any such compensation received from the Issuer
will be described, in the Prospectus Supplement.
Under agreements which may be entered into by the Issuer and the
Guarantor, underwriters and agents who participate in the distribution of
Debt Securities may be entitled to indemnification by the Issuer and the
Guarantor against certain liabilities, including liabilities under the
Securities Act.
If so indicated in the Prospectus Supplement, the Issuer will authorize
underwriters or other persons acting as the Issuer's agents to solicit
offers by certain institutions to purchase Debt Securities from the
Issuer pursuant to contracts providing for payment and delivery on a
future date. Institutions with
19
<PAGE>
which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions
must be approved by the Issuer. The obligations of any purchaser under
any such contract will be subject to the condition that the purchase of
the Debt Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in
respect of the validity or performance of such contracts.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities and the related Guarantees and
other legal matters will be passed upon for the Issuer and the Guarantor
by Reed Smith Shaw & McClay, Pittsburgh, Pennsylvania. The validity of
the Debt Securities and the related Guarantees will be passed upon for
the underwriters or agents by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Guarantor incorporated by
reference in the Guarantor's Annual Report on Form 10-K for the year
ended December 31, 1996 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein in reliance upon such
report, given upon the authority of such firm as experts in auditing and
accounting.
20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRICING SUPPLEMENT, THE
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PRICING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PRICING
SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PRICING SUPPLEMENT OR THE PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE
GUARANTOR SINCE THE DATE OF THIS PRICING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
-----------
TABLE OF CONTENTS
PRICING SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes....................................................... P-2
Recent Developments........................................................ P-2
Use of Proceeds............................................................ P-2
Underwriting............................................................... P-2
PROSPECTUS SUPPLEMENT
Risk Factors............................................................... S-2
Description of Notes....................................................... S-4
Special Provisions Relating to Foreign Currency Notes...................... S-20
Certain United States Federal Income Tax Considerations.................... S-22
Supplemental Plan of Distribution.......................................... S-30
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents By Reference............................ 2
Keystone Financial, Inc. .................................................. 3
Keystone Financial Mid-Atlantic Funding Corp. ............................. 4
Certain Legal and Regulatory Considerations................................ 4
Use of Proceeds............................................................ 5
Selected Historical Consolidated Financial Information..................... 7
Pro Forma Combined Condensed Statement of Condition........................ 8
Pro Forma Combined Condensed Statements of Income.......................... 10
Description of Debt Securities............................................. 11
Certain Terms Relating to Senior Debt Securities........................... 17
Certain Terms Relating to Subordinated Debt Securities..................... 17
Guarantees................................................................. 18
Certain Tax Considerations................................................. 19
Plan of Distribution....................................................... 19
Validity of the Debt Securities............................................ 20
Experts.................................................................... 20
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
KEYSTONE FINANCIAL
MID-ATLANTIC FUNDING CORP.
% SENIOR
MEDIUM-TERM NOTES
DUE
UNCONDITIONALLY GUARANTEED AS TO
PRINCIPAL, PREMIUM, IF ANY,
AND INTEREST BY
KEYSTONE FINANCIAL, INC.
-----------
PRICING SUPPLEMENT
-----------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KEEFE, BRUYETTE & WOODS, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated amounts of expenses
that will be incurred in connection with the distribution of the
securities offered hereby:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $121,212.12
Accounting fees and expenses 20,000.00
Legal fees and expenses 150,000.00
Trustee's fees and expenses 6,000.00
Printing and engraving expenses 30,000.00
Rating Agency fees 67,500.00
Miscellaneous expenses 2,000.00
-----------
Total $396,712.12
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. Pennsylvania Business Corporation Law. Sections 1741 and 1742
of the Pennsylvania Business Corporation Law (the "BCL") provide that a
business corporation shall have the power to indemnify any person who was
or is a party, or is threatened to be made a party, to any proceeding,
whether civil, criminal, administrative or investigative, by reason of
the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding, if
such person acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation, and,
with respect to any criminal proceeding, has no reasonable cause to
believe his conduct was unlawful. In the case of an action by or in the
right of the corporation, such indemnification is limited to expenses
(including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action,
except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person has been adjudged to be liable to
the corporation unless, and only to the extent that, a court determines
upon application that, despite the adjudication of liability but in view
of all the circumstances, such person is fairly and reasonably entitled
to indemnity for the expenses that the court deems proper.
BCL Section 1744 provides that, unless ordered by a court, any
indemnification referred to above shall be made by the corporation only
as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the indemnitee has
met the applicable standard of conduct. Such determination shall be
made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
(3) by the shareholders.
II-1
<PAGE>
Notwithstanding the above, BCL Section 1743 provides that to the
extent that a director, officer, employee or agent of a business
corporation is successful on the merits or otherwise in defense of any
proceeding referred to above, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
BCL Section 1745 provides that expenses (including attorneys' fees)
incurred by an officer, director, employee or agent of a business
corporation in defending any proceeding may be paid by the corporation in
advance of the final disposition of the proceeding upon receipt of an
undertaking to repay the amount advanced if it is ultimately determined
that the indemnitee is not entitled to be indemnified by the corporation.
BCL Section 1746 provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, the foregoing provisions
is not exclusive of any other rights to which a person seeking
indemnification may be entitled under any bylaw, agreement, vote of
shareholders or directors or otherwise, and that indemnification may be
granted under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise for any action taken or any failure to take any
action whether or not the corporation would have the power to indemnify
the person under any other provision of law and whether or not the
indemnified liability arises or arose from any action by or in the right
of the corporation, provided, however, that no indemnification may be
made in any case 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.
BCL Section 1747 permits a Pennsylvania business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against any
liability asserted against such person and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify the person against such
liability under the provisions described above.
2. Indemnification Article and By-Law. Section 8.01 of the
Guarantor's By-Laws (the "Guarantor's Indemnification By-Law") was
adopted by the shareholders at their Annual Meeting held on May 28, 1987
and became effective on that date. Under the Guarantor's Indemnification
By-Law, except as prohibited by law, every director and officer of the
Guarantor is entitled as of right to be indemnified by the Guarantor
against all expenses and liabilities incurred in connection with any
actual or threatened claim or proceeding, whether civil, criminal,
administrative, investigative or other, whether brought by or in the
right of the Guarantor or otherwise, in which the director or officer may
be involved in any manner, by reason of his being or having been a
director or officer of the Guarantor or by reason of the fact that his is
or was serving at the request of the Guarantor as a director, officer,
employee, fiduciary or other representative of another corporation or
other entity. In an action brought by a director or officer against the
Guarantor, the director or officer is only entitled to indemnification
for expenses in certain circumstances. Each director and officer is also
entitled as of right to have his expenses in defending an action paid in
advance by the Guarantor prior to final disposition of the action,
subject to any obligation which may be imposed to reimburse the Guarantor
in certain events. The Guarantor's Indemnification By-Law establishes a
procedure whereby a director or officer may bring an action against the
Guarantor if a written claim for indemnification or advancement of
expenses is not paid by the Guarantor in full within thirty days after
the claim has been presented. The director or officer is also entitled
to advancement of expenses in this proceeding. The only defense to an
action to recover a claim for indemnification is that the indemnitee's
conduct was such that under Pennsylvania law the Guarantor is prohibited
from indemnifying the indemnitee. The only defense to an action to
recover payment of expenses in advance is failure by the indemnitee to
make an undertaking to reimburse the Guarantor if such an undertaking is
required.
The Guarantor's Indemnification By-Law applies to every action,
other than actions filed prior to January 27, 1987, except that it does
not apply to the extent that Pennsylvania law does not permit its
application to any breach or failure of performance of duty by a director
or officer occurring prior to January 27, 1987. Any
II-2
<PAGE>
amendment or repeal of the Guarantor's Indemnification By-Law will
operate prospectively only and will not affect any action taken, or
failure to act, by a director or officer prior to the adoption of such
amendment or repeal.
Article 7 of the Issuer's Articles of Incorporation became effective
as of March 26, 1997. Section 2.12 of the Issuer's By-Laws were adopted
by the Issuer's Board of Directors and sole shareholder, and became
effective, on March 26, 1997 (the "Issuer's Indemnification Provisions").
Under the Issuer's Indemnification Provisions, except as prohibited by
law, every director and officer of the Issuer is entitled as of right to
be indemnified by the Issuer against all expenses and liabilities
incurred in connection with any actual or threatened claim or proceeding,
whether civil, criminal, administrative, investigative or other, whether
brought by or in the right of the Issuer or otherwise, in which the
director or officer may be involved in any manner, by reason of his being
or having been a director or officer of the Issuer or by reason of the
fact that he is or was serving at the request of the Issuer as a
director, officer, employee, fiduciary or other representative of another
corporation or other entity. In an action brought by a director or
officer against the Issuer, the director or officer is only entitled to
indemnification for expenses in certain circumstances. Each director and
officer is also entitled as of right to have his expenses in defending an
action paid in advance by the Issuer prior to final disposition of the
action, subject to any obligation which may be imposed to reimburse the
Issuer in certain events. The Issuer's Indemnification Provisions
establish a procedure whereby a director or officer may bring an action
against the Issuer if a written claim for indemnification or advancement
of expenses is not paid by the Issuer in full within thirty days after
the claim has been presented. The director or officer is also entitled
to advancement of expenses in this proceeding. The only defense to an
action to recover a claim for indemnification is that the indemnitee's
conduct was such that under Pennsylvania law the Issuer is prohibited
from indemnifying the indemnitee. The only defense to an action to
recover payment of expenses in advance is failure by the indemnitee to
make an undertaking to reimburse the Issuer if such an undertaking is
required.
The Issuer's Indemnification Provisions apply to every action. Any
amendment or repeal of the Issuer's Indemnification Provisions will
operate prospectively only and will not affect any action taken, or
failure to act, by a director or officer prior to the adoption of such
amendment or repeal.
3. Director and Officer Liability Insurance. The Guarantor and the
Issuer maintain director and officer liability insurance covering their
directors and officers with respect to liability which such directors and
officers may incur in connection with their serving as such, which
liability could include liability under the Securities Act of 1933.
Under the insurance, the Guarantor and the Issuer are entitled to
reimbursement for amounts as to which the directors and officers are
indemnified under the Guarantor's Indemnification By-Law and the Issuer's
Indemnification Provisions, respectively. The insurance may also provide
certain additional coverage for the directors and officers against
certain liability even though such liability is not subject to
indemnification under the Guarantor's Indemnification By-Law and the
Issuer's Indemnification Provisions, respectively.
4. Indemnification Agreements. At their Annual Meeting held on May
28, 1987, the shareholders also approved a proposed form of
Indemnification Agreement to be entered into between the Guarantor and
each of its present and future directors and such other officers,
employees and agents of the Guarantor and its subsidiaries as shall be
designated from time to time by the Board of Directors.
The Guarantor's form of agreement provides essentially the same
rights to indemnification against liabilities and expenses as are
provided in the Guarantor's Indemnification By-Law. In addition, the
Guarantor's form of agreement requires the Guarantor to either maintain
the liability insurance coverage currently in effect for the benefit of
the contractee or to hold the contractee harmless to the full extent of
such coverage.
Further, the Guarantor's form of agreement provides that if the full
indemnification claimed by the contractee may not be paid by the
Guarantor because prohibited by law and the Guarantor is jointly liable
with the contractee as to the matter for which indemnification was sought
(or would be so liable if the Guarantor were joined in such matter), the
contractee has a right to contribution from the Guarantor for the amount
of any expenses and
II-3
<PAGE>
liabilities incurred by the contractee as to such matter based on the
relative benefits received by the Guarantor and the contractee from the
transaction from which the liability arose and the relative fault of the
Guarantor (including the Guarantor's other directors, officers, employees
or agents) and the contractee in connection with the events which
resulted in such expenses or liability, as well as any other relevant
equitable considerations.
Under the Guarantor's form of agreement, a contractee is entitled to
the rights to indemnification for expenses and liability, advancement of
expenses and contribution provided by the agreement notwithstanding any
amendment or repeal of the Guarantor's Indemnification By-Law. In
addition, although a change in law restricting indemnification rights
would automatically restrict the indemnification rights provided under
the Guarantor's Indemnification By-Law, the form of agreement provides
that a change in law restricting indemnification rights will not affect
the rights of a contractee under the agreement unless the law so
requires.
The Issuer has no indemnification agreements.
See Item 17 herein for the undertaking with respect to
indemnification.
ITEM 16. EXHIBITS
1.* Form of Distribution Agreement
4.1* Form of Senior Indenture
4.2* Form of Subordinated Indenture
4.3* Form of Senior Fixed Rate Note
4.4* Form of Senior Floating Rate Note
4.5* Form of Subordinated Fixed Rate Note
4.6* Form of Subordinated Floating Rate Note
5. Opinion of Reed Smith Shaw & McClay
12.* Computation of Ratio of Earnings to Fixed Charges
23.1* Consent of Ernst & Young LLP
23.3 Consent of Reed Smith Shaw & McClay (contained in Exhibit 5)
24.1 Power of Attorney for Keystone Financial Mid-Atlantic Funding
Corp.
24.2 Power of Attorney for Keystone Financial, Inc.
25.* Form T-1 Statement of Eligibility of Trustee
_______________________
*Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
1. That for purposes of determining any liability under the
Securities Act of 1933, each filing of the Guarantor's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this
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.
2. (a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement, (b) that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment 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
II-4
<PAGE>
initial bona fide offering thereof, and (c) to remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
3. That insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers
or controlling persons of the registrants pursuant to the foregoing
provisions, or otherwise, the registrants have been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 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 registrants
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person of the
registrants in connection with the securities being registered, the
registrants will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Keystone
Financial Mid-Atlantic Funding Corp. 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 Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Harrisburg, Pennsylvania on the 12th day of
May, 1997.
KEYSTONE FINANCIAL
MID-ATLANTIC FUNDING CORP.
By: /s/ Mark L. Pulaski
-----------------------------
Mark L. Pulaski
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed below by
the following persons in the capacities indicated on the 12th day of May,
1997:
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE
<S> <C>
/s/ Mark L. Pulaski President and Chief Financial
- ----------------------------------- Officer
Mark L. Pulaski
Treasurer and Principal
* Accounting
- ----------------------------------- Officer
Donald F. Holt
* Director
- -----------------------------------
Carl L. Campbell
* Director
- -----------------------------------
George H. Groves
/s/ Mark L. Pulaski Director
- -----------------------------------
Mark L. Pulaski
* Director
- -----------------------------------
Ben G. Rooke
*By:
/s/ Mark L. Pulaski
- -----------------------------------
Mark L. Pulaski
(Attorney-in-fact)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Keystone
Financial, Inc. 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 Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Harrisburg, Pennsylvania on the 12th day of May, 1997.
KEYSTONE FINANCIAL, INC.
By: *
------------------------
Carl L. Campbell
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed below by
the following persons in the capacities indicated on the 12th day of May,
1997:
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE
<S> <C>
*
President, Chief Executive Officer
- ----------------------------------- and Director
Carl L. Campbell
Senior Executive Vice President,
/s/ Mark L. Pulaski Chief Administrative Officer and
- ----------------------------------- Chief Financial Officer
Mark L. Pulaski
* Senior Vice President, Controller
- ----------------------------------- and Principal Accounting Officer
Donald F. Holt
* Director
- -----------------------------------
A. Joseph Antanavage
* Director
- -----------------------------------
June B. Barry
* Director
- -----------------------------------
J. Glenn Beall, Jr.
* Director
- -----------------------------------
Paul I. Detwiler, Jr.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
*
Director
- -----------------------------------
Donald Devorris
* Director
- -----------------------------------
Richard W. DeWald
* Director
- -----------------------------------
Gerald E. Field
* Director
- -----------------------------------
Walter W. Grant
* Director
- -----------------------------------
Philip C. Herr II
* Director
- -----------------------------------
Uzal H. Martz, Jr.
* Director
- -----------------------------------
Max A. Messenger
Director
- -----------------------------------
William L. Miller
* Director
- -----------------------------------
Don A. Rosini
* Director
- -----------------------------------
F. Dale Schoeneman
* Director
- -----------------------------------
Ronald C. Unterberger
Director
- -----------------------------------
G. William Ward
* By:
/s/ Mark L. Pulaski
- -----------------------------------
Mark L. Pulaski
(Attorney-in-fact)
</TABLE>
<PAGE>
EXHIBIT INDEX
1.* Form of Distribution Agreement
4.1* Form of Senior Indenture
4.2* Form of Subordinated Indenture
4.3* Form of Senior Fixed Rate Note
4.4* Form of Senior Floating Rate Note
4.5* Form of Subordinated Fixed Rate Note
4.6* Form of Subordinated Floating Rate Note
5. Opinion of Reed Smith Shaw & McClay
12.* Computation of Ratio of Earnings to Fixed Charges
23.1* Consent of Ernst & Young LLP
23.3 Consent of Reed Smith Shaw & McClay (contained in Exhibit 5)
24.1 Power of Attorney for Keystone Financial Mid-Atlantic Funding
Corp.
24.2 Power of Attorney for Keystone Financial, Inc.
25.* Form T-1 Statement of Eligibility of Trustee
_______________________
*Previously filed.
<PAGE>
EXHIBIT 5
[LETTERHEAD APPEARS HERE]
Reed Smith Shaw & McClay
435 SIXTH AVENUE
PITTSBURGH, PENNSYLVANIA 15219-1886
412-288-3131
FAX 412-288-3063
May 12, 1997
Keystone Financial, Inc.
One Keystone Plaza
Front and Market Streets
P.O. Box 3660
Harrisburg, PA 17105-3660
RE: Keystone Financial Mid-Atlantic Funding
Corp. and Keystone Financial, Inc.
Registration Statement on Form S-3 re
Senior and Subordinated Medium Term
Notes
Gentlemen:
We are acting as counsel to Keystone Financial Mid-Atlantic Funding
Corp. (the "Issuer") and Keystone Financial, Inc. (the "Guarantor") in
connection with the Registration Statement on Form S-3 (the "Registration
Statement") to be filed by the Issuer and the Guarantor with the Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, $400,000,000 aggregate principal amount of debt securities to
be issued from time to time by the Issuer (the "Debt Securities") and guaranteed
as to payment of principal, premium, if any, and interest, if any, by the
Guarantor (the "Guarantees"). The Debt Securities will constitute either senior
indebtedness of the Issuer (the "Senior Debt Securities") or subordinated
indebtedness of the Issuer (the "Subordinated Debt Securities"). The Senior Debt
Securities and related Guarantees will be issued under a proposed Senior
Indenture dated as of May 1, 1997 (the "Senior Indenture"), among the Issuer,
the Guarantor and Bankers Trust Company, as Trustee. The Subordinated Debt
Securities and related Guarantees will be issued under a proposed Subordinated
Indenture dated as of May 1, 1997 (the "Subordinated Indenture"), among the
Issuer, the Guarantor and Bankers Trust Company, as Trustee. This opinion is
being furnished to you for the purpose of being filed as an Exhibit to the
Registration Statement.
In connection with this opinion we have examined, among other
things:
(1) the Registration Statement and the prospectus included therein
and the exhibits thereto;
(2) a copy certified to our satisfaction of the Articles of
Incorporation and by-laws of the Issuer as in effect on the date
hereof;
(3) a copy certified to our satisfaction of the Restated Articles of
Incorporation and by-laws of the Guarantor as in effect on the
date hereof;
1
<PAGE>
[LETTERHEAD APPEARS HERE]
Keystone Financial, Inc. -2- May 12, 1997
(4) copies certified to our satisfaction of resolutions adopted by
the Board of Directors of the Issuer on March 26, 1997,
including resolutions authorizing the issuance and sale of Debt
Securities:
(5) copies certified to our satisfaction of resolutions adopted by
the Board of Directors of the Guarantor on March 27, 1997,
including resolutions authorizing the Guarantees;
(6) the form of Senior Indenture;
(7) the form of Subordinated Indenture; and
(8) such other documents, corporate proceedings, statutes and
decisions as we considered necessary to enable us to furnish
this opinion.
We have assumed for the purposes of this opinion that:
(1) the Senior Indenture will be executed and delivered by
authorized officers of each of the parties thereto and will be
in substantially the form heretofore furnished to us;
(2) the Subordinated Indenture will be executed and delivered by
authorized officers of each of the parties thereto and will be
in substantially the form heretofore furnished to us; and
(3) the genuiness of all signatures, the authenticity of all
documents submitted as originals and the conformity to original
documents of all documents submitted as certified or other
copies.
Based upon the foregoing, we are pleased to advise you that, in
our opinion:
(1) The Debt Securities, when (i) the terms thereof have been duly
authorized and such instruments have been duly executed and
authenticated pursuant to the Senior Indenture or the
Subordinated Indenture, as the case may be, and (ii) issued,
sold and delivered against payment therefor, will constitute
valid and legally binding obligations of the Issuer; and
(2) The Guarantees, when endorsed on duly executed, authenticated
and issued Debt Securities and duly executed by the Guarantor,
will constitute valid and legally binding obligations of the
Guarantor.
2
<PAGE>
Keystone Financial, Inc. -3- May 12, 1997
The opinions set forth herein are qualified to the extent that the
obligations of the Issuer and the Guarantor may be limited by bankruptcy,
receivership, moratorium, insolvency, reorganization or other laws of general
applicability including those generally applicable to financial institutions
relating to or affecting the enforcement of creditors' rights and by general
principles of equity.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Validity of
the Debt Securities" in the Prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ Reed Smith Shaw & McClay
REED SMITH SHAW & McCLAY
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
WHEREAS, KEYSTONE FINANCIAL MID-ATLANTIC FUNDING CORP., a Pennsylvania
corporation (the "Company"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"1933 Act"), a Registration Statement on Form S-3 (the "Registration
Statement"), including a prospectus and exhibits thereto, with any amendment or
amendments (including post-effective amendments) and any supplement or
supplements thereto, as prescribed by the Commission pursuant to the 1933 Act
and the rules and regulations of the Commission promulgated thereunder, in
connection with the registration of certain debt securities of the Company; and
WHEREAS, each of the undersigned is an Officer or Director, or both, of
the Company as indicated below each signature;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
Mark L. Pulaski and A. James Durica his/her true and lawful attorney-in-fact
and agent of, with full power to act for him/her and in his/her name, place
and stead, in any and all capacities (including without limitation in any
capacity on behalf of the Company), to execute the Registration Statement,
including a prospectus and exhibits thereto, and any and all amendments
(including post-effective amendments) thereto and any supplement or supplements
thereto, as said attorney-in-fact shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Said attorney-in-fact
shall have full power and authority to do and perform in the name and on behalf
of each of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises as fully and to all intents
and purposes as each of the undersigned might or could do in person, each of the
undersigned hereby ratifying and confirming the acts that said attorney-in-fact
or his/her substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney this 14th day of April, 1997.
<PAGE>
SIGNATURE PAGE
NAME AND SIGNATURE TITLE
/s/ Mark L. Pulaski President and Chief Financial Officer
- ---------------------
Mark L. Pulaski
/s/ Donald F. Holt Treasurer and Principal Accounting Officer
- ---------------------
Donald F. Holt
/s/ Carl L. Campbell Director
- ---------------------
Carl L. Campbell
/s/ George H. Groves Director
- ---------------------
George H. Groves
/s/ Mark L. Pulaski Director
- ---------------------
Mark L. Pulaski
/s/ Ben G. Rooke Director
- ---------------------
Ben G. Rooke
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
-----------------
WHEREAS, Keystone Financial, Inc., a Pennsylvania corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain debt securities of the Company; and
WHEREAS, each of the undersigned is an Officer or Director, or both, of
the Company as indicated below each signature;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
Mark L. Pulaski and A. James Durica his/her true and lawful attorney-in-fact
and agent of, with full power to act for him/her and in his/her name, place and
stead, in any and all capacities (including without limitation in any capacity
on behalf of the Company), to execute the Registration Statement, including a
prospectus and exhibits thereto, and any and all amendments (including post-
effective amendments) thereto and any supplement or supplements thereto, as said
attorney-in-fact shall deem necessary or appropriate, together with all
documents necessary or incidental in connection therewith, to file the same or
cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Said attorney-in-fact
shall have full power and authority to do and perform in the name and on behalf
of each of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises as fully and to all intents
and purposes as each of the undersigned might or could do in person, each of the
undersigned hereby ratifying and confirming the acts that said attorney-in-fact
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney this 27th day of March, 1997.
<PAGE>
SIGNATURE PAGE
NAME AND SIGNATURE TITLE
/s/ Carl L. Campbell President, Chief Executive Officer
- ----------------------- and Director
Carl L. Campbell
Senior Executive Vice President,
/s/ Mark L. Pulaski Chief Administrative Officer and
- ----------------------- Chief Financial Officer
Mark L. Pulaski
/s/ Donald F. Holt Senior Vice President, Controller
- ----------------------- and Principal Accounting Officer
Donald F. Holt
/s/ A. Joseph Antanavage Director
- -----------------------
A. Joseph Antanavage
/s/ June B. Barry Director
- -----------------------
June B. Barry
/s/ J. Glenn Beall, Jr. Director
- -----------------------
J. Glenn Beall, Jr.
/s/ Paul I. Detwiler, Jr. Director
- -----------------------
Paul I. Detwiler, Jr.
/s/ Donald Devorris Director
- -----------------------
Donald Devorris
/s/ Richard W. DeWald Director
- -----------------------
Richard W. DeWald
/s/ Gerald E. Field Director
- -----------------------
Gerald E. Field
<PAGE>
NAME AND SIGNATURE TITLE
/s/ Walter W. Grant Director
- -----------------------------------
Walter W. Grant
/s/ Philip C. Herr II Director
- -----------------------------------
Philip C. Herr II
/s/ Uzal H. Martz, Jr. Director
- -----------------------------------
Uzal H. Martz, Jr.
/s/ Max A. Messenger Director
- -----------------------------------
Max A. Messenger
Director
- -----------------------------------
William L. Miller
/s/ Don A. Rosini Director
- -----------------------------------
Don A. Rosini
/s/ F. Dale Schoeneman Director
- -----------------------------------
F. Dale Schoeneman
/s/ Ronald C. Unterberger Director
- -----------------------------------
Ronald C. Unterberger
Director
- -----------------------------------
G. William Ward
