<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1997
REGISTRATION NO. 333-32679
REGISTRATION NO. 333-32679-01
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
<TABLE>
<S> <C>
LAKELAND FINANCIAL CORPORATION LAKELAND CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
35-1559596 35-2021126
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
202 EAST CENTER STREET, WARSAW, INDIANA 46581 (219) 267-6144
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S AND CO-REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
-----------------------------------------
R. DOUGLAS GRANT
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
LAKELAND FINANCIAL CORPORATION
202 EAST CENTER STREET
WARSAW, INDIANA 46581
(219) 267-6144
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-----------------------------------------
WITH COPIES TO:
THOMAS C. ERB, ESQ. DENIS P. MCCUSKER, ESQ.
LEWIS, RICE & FINGERSH, L.C. BRYAN CAVE LLP
500 NORTH BROADWAY, SUITE 2000 211 NORTH BROADWAY, SUITE 3600
ST. LOUIS, MISSOURI 63102 ST. LOUIS, MISSOURI 63102-2750
(314) 444-7600 (314) 259-2000
--------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of 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. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
=================================================================================================================================
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Securities of Lakeland
Capital Trust<F1>................ 2,000,000<F1> $10.00 $20,000,000.00<F1> $6,061.00<F2>
- ---------------------------------------------------------------------------------------------------------------------------------
Subordinated Debentures of Lakeland
Financial Corporation<F3>........ <F3><F4>
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantee of Lakeland Financial
Corporation, with respect to
Preferred Securities<F4>......... <F4>
=================================================================================================================================
<FN>
<F1>Includes 200,000 Preferred Securities which may be sold by Lakeland Capital
Trust to cover over-allotments.
<F2>The registration fee is calculated in accordance with Rule 457(n) under the
Securities Act of 1933, as amended. Filing fee previously submitted.
<F3>The Subordinated Debentures will be purchased by Lakeland Capital Trust
with the proceeds of the sale of the Preferred Securities. Such securities
may later be distributed for no additional consideration to the holders of
the Preferred Securities of Lakeland Capital Trust upon its dissolution and
the distribution of its assets.
<F4>This Registration Statement is deemed to cover the Subordinated Debentures
of Lakeland Financial Corporation, the rights of holders of Subordinated
Debentures of Lakeland Financial Corporation under the Indenture, and the
rights of holders of the Preferred Securities under the Trust Agreement,
the Guarantee and the Expense Agreement entered into by Lakeland Financial
Corporation. No separate consideration will be received for the Guarantee.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 2
*******************************************************************************
*INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
*REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE *
*SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY *
*OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT *
*BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR *
*THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE *
*SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE *
*UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF *
*ANY SUCH STATE. *
*******************************************************************************
SUBJECT TO COMPLETION, DATED AUGUST 11, 1997
PROSPECTUS
1,800,000 PREFERRED SECURITIES
LAKELAND CAPITAL TRUST [LOGO]
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
LAKELAND FINANCIAL CORPORATION
-------------------
$18,000,000 % SUBORDINATED DEBENTURES OF
LAKELAND FINANCIAL CORPORATION
-------------------
The % Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of Lakeland Capital Trust, a statutory business trust created
under the laws of the State of Delaware ("Lakeland Trust"). Lakeland
Financial Corporation, an Indiana corporation (the "Company"), will own all
the common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") representing undivided
beneficial interests in the assets of Lakeland Trust.
(continued on next page)
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the symbol
"LKFNP."
--------------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------------------------
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS OR DEPOSIT ACCOUNTS,
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NON-BANKING
AFFILIATE OF THE COMPANY (EXCEPT TO THE EXTENT THAT PREFERRED
SECURITIES ARE GUARANTEED BY THE COMPANY AS DESCRIBED HEREIN),
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
--------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
=========================================================================================================
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION<F1> LAKELAND TRUST<F2>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.................. $10.00 <F2> $10.00
- ---------------------------------------------------------------------------------------------------------
Total<F3>............................... $18,000,000 <F2> $18,000,000
=========================================================================================================
<FN>
<F1>Lakeland Trust and the Company have each agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
<F2>In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, the Company has
agreed to pay the Underwriter as compensation for its arranging the
investment therein of such proceeds $ per Preferred Security, or $ in the
aggregate ($ if the over-allotment option is exercised in full). See
"Underwriting." The Company has also agreed to pay the expenses of the
offering estimated to be $ .
<F3>Lakeland Trust has granted the Underwriter an option exercisable within 30
days from the date of this Prospectus to purchase up to 200,000 additional
Preferred Securities on the same terms and conditions set forth above to
cover over-allotments, if any. If all such additional Preferred Securities
are purchased, the total Price to Public and Proceeds to Lakeland Trust
will be $20,000,000.
</TABLE>
-----------------------------------------
The Preferred Securities are offered by the Underwriter subject to receipt
and acceptance by it, prior sale and the Underwriter's right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Preferred Securities will be made
on or about , 1997.
STIFEL, NICOLAUS & COMPANY
INCORPORATED
, 1997
<PAGE> 3
(continued from previous page)
State Street Bank and Trust Company is the Property Trustee (as defined
herein) of Lakeland Trust. Lakeland Trust exists for the purpose of issuing the
Preferred Securities and investing the proceeds thereof in an equivalent amount
of % Subordinated Debentures (the "Subordinated Debentures") of the
Company. The Subordinated Debentures will mature on September 30, 2027, which
date may be (i) shortened to a date not earlier than September 30, 2002, or
(ii) extended to a date not later than September 30, 2036, in each case if
certain conditions are met (including, in the case of shortening the Stated
Maturity (as defined herein), the Company having received prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") to
do so if then required under applicable capital guidelines or policies of the
Federal Reserve). The Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of the Preferred Securities--Subordination of Common
Securities."
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions (the "Distributions") from Lakeland Trust, at
the annual rate of % of the liquidation amount of $10 per Preferred
Security (the "Liquidation Amount"), accruing from the date of original
issuance and payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing September 30, 1997. The Company
has the right, so long as no Debenture Event of Default (as defined herein) has
occurred and is continuing, to defer payment of interest on the Subordinated
Debentures at any time or from time to time for a period not to exceed 20
consecutive calendar quarters with respect to each deferral period (each, an
"Extended Interest Payment Period"); provided that no Extended Interest
Payment Period may extend beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any such Extended Interest Payment Period
and the payment of all amounts then due, the Company may elect to begin a new
Extended Interest Payment Period subject to the requirements set forth herein.
If interest payments on the Subordinated Debentures are so deferred,
Distributions on the Preferred Securities will also be deferred, and the
Company will not be permitted, subject to certain exceptions described herein,
to declare or pay any cash distributions with respect to its capital stock or
debt securities that rank pari passu with or junior to the Subordinated
Debentures. WHILE THE COMPANY INTENDS TO TAKE THE POSITION THAT THE
SUBORDINATED DEBENTURES WILL NOT BE DEEMED TO BE ISSUED WITH ORIGINAL ISSUE
DISCOUNT ("OID"), DURING AN EXTENDED INTEREST PAYMENT PERIOD, INTEREST ON THE
SUBORDINATED DEBENTURES WILL CONTINUE TO ACCRUE (AND THE AMOUNT OF
DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED SECURITIES ARE ENTITLED WILL
ACCUMULATE) AT THE RATE OF % PER ANNUM, COMPOUNDED QUARTERLY, AND HOLDERS
OF THE PREFERRED SECURITIES WILL BE REQUIRED TO INCLUDE INTEREST INCOME AS OID
IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES IN ADVANCE
OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT TO SUCH DEFERRED INTEREST
PAYMENTS. A HOLDER OF PREFERRED SECURITIES WHO DISPOSES OF ITS PREFERRED
SECURITIES BETWEEN RECORD DATES FOR PAYMENTS OF DISTRIBUTIONS (AND CONSEQUENTLY
DOES NOT RECEIVE A DISTRIBUTION FROM LAKELAND TRUST FOR THE PERIOD PRIOR TO
SUCH DISPOSITION) WILL NEVERTHELESS BE REQUIRED TO INCLUDE ACCRUED BUT UNPAID
INTEREST OR OID, IF ANY, ON THE SUBORDINATED DEBENTURES THROUGH THE DATE OF
DISPOSITION IN INCOME AS ORDINARY INCOME AND TO ADD THE AMOUNT OF ANY ACCRUED
OID TO ITS ADJUSTED TAX BASIS IN ITS PRO RATA SHARE OF THE UNDERLYING
SUBORDINATED DEBENTURES DEEMED DISPOSED OF. See "Description of the
Subordinated Debentures--Option to Extend Interest Payment Period," "Certain
Federal Income Tax Consequences--Potential Extension of Interest Payment Period
and Original Issue Discount" and "--Disposition of Preferred Securities."
The Company and Lakeland Trust believe that, taken together, the
obligations of the Company under the Guarantee, the Trust Agreement, the
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein) provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of all of the obligations of
Lakeland Trust under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Subordinated Debentures and the Guarantee--Full and
Unconditional Guarantee." The Guarantee of the Company guarantees the payment
of Distributions and payments on liquidation or redemption of the Preferred
Securities, but only in each case to the extent of funds held by Lakeland
Trust, as described herein. See "Description of the Guarantee--General." If
the Company does not make interest payments on the Subordinated Debentures held
by Lakeland Trust, Lakeland Trust will have insufficient funds to pay
Distributions on the Preferred Securities. The Guarantee does not cover
payments of Distributions when Lakeland Trust does not have sufficient funds to
pay such Distributions. In such event, a holder of Preferred Securities may
institute a legal proceeding directly against the Company pursuant to the terms
of the Indenture to enforce payments of amounts equal to such Distributions to
such holder. See "Description of the Subordinated Debentures--Enforcement of
Certain Rights by Holders of the Preferred Securities." The obligations of the
Company under the Guarantee and the Preferred Securities are subordinate and
junior in right of payment to all Senior Debt, Subordinated Debt and Additional
Senior Obligations
(continued on next page)
<PAGE> 4
(continued from previous page)
(each as defined herein) of the Company. The Subordinated Debentures are
unsecured obligations of the Company and are subordinated to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company.
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Subordinated Debentures at maturity or their
earlier redemption. Subject to Federal Reserve approval, if then required under
applicable capital guidelines or policies of the Federal Reserve, the
Subordinated Debentures are redeemable prior to maturity at the option of the
Company (i) on or after September 30, 2002, in whole at any time or in part
from time to time, or (ii) at any time, in whole (but not in part), within 180
days following the occurrence of a Tax Event, a Capital Treatment Event or an
Investment Company Event (each as defined herein), in each case at a redemption
price equal to the accrued and unpaid interest on the Subordinated Debentures
so redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof. See "Description of the Preferred Securities--Redemption."
The Company has the right at any time to dissolve, wind-up or terminate
Lakeland Trust subject to the Company having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines
or policies of the Federal Reserve. In the event of the voluntary or
involuntary dissolution, winding up or termination of Lakeland Trust, after
satisfaction of liabilities to creditors of Lakeland Trust as required by
applicable law, the holders of Preferred Securities will be entitled to receive
a Liquidation Amount of $10 per Preferred Security, plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
Subordinated Debenture having an aggregate principal amount equal to the
Liquidation Amount of such Preferred Securities (and carrying with it
accumulated interest in an amount equal to the accumulated and unpaid
Distributions then due on such Preferred Securities), subject to certain
exceptions. See "Description of the Preferred Securities--Redemption" and
"--Liquidation Distribution Upon Termination."
--------------------------------
The Company will provide Quarterly Reports containing unaudited financial
statements to the holders of Preferred Securities if such reports are furnished
to the holders of the Company's common stock, and Annual Reports containing
financial statements audited by the Company's independent auditors. The Company
will also furnish Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q free of charge to holders of Preferred Securities who so request in
writing addressed to the Secretary of the Company.
--------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE OVERALLOTMENT, STABILIZING
TRANSACTIONS, THE PURCHASE OF PREFERRED SECURITIES TO COVER SHORT POSITIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF SUCH ACTIVITIES, SEE
"UNDERWRITING." SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 5
[MAP]
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere (or incorporated by reference) in this
Prospectus. Unless otherwise indicated, the information in this Prospectus
assumes that the Underwriter's over-allotment option will not be exercised.
Prospective investors should carefully consider the information set forth under
the heading "Risk Factors."
THE COMPANY
GENERAL
Lakeland Financial Corporation ("the Company") is a one-bank holding
company that operates through Lake City Bank (the "Bank"), with its
headquarters in Warsaw, Indiana. The Bank is a community bank, with 33 branches
in nine counties in north central Indiana, primarily in non-metropolitan areas.
The Company's stockholders' equity increased by 91% between January 1, 1992 and
June 30, 1997, and net income grew at a compounded annual rate of 21.9% during
the same period. At June 30, 1997, the Company had assets of $687.5 million, net
loans of $407.2 million, deposits of $526.0 million and total stockholders'
equity of $45.3 million.
The Bank's goal is to have the look and feel of a local community bank, but
have the technical sophistication to develop and maintain commercial customers
whose needs can be accommodated under the Bank's lending limit policy, which
currently is $4.5 million.
The principal executive office of the Company is located at 202 East Center
Street, Warsaw, Indiana 46581 and its telephone number is (219) 267-6144.
<TABLE>
FINANCIAL SUMMARY
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income........................ $ 4,027 $ 3,218 $ 6,444 $ 5,645 $ 5,126 $ 4,235 $ 3,359
Stockholders' equity.............. 45,339 39,009 42,043 36,754 29,889 27,912 23,750
Return on average assets.......... 1.22% 1.06% 1.07% 1.05% 1.10% 1.11% 0.97%
Return on average equity.......... 18.53% 16.88% 16.50% 17.06% 17.73% 16.51% 15.08%
</TABLE>
BUSINESS OBJECTIVES AND STRATEGY
The Company's primary objectives are to continue growth in earnings and
stockholders' equity, return on assets and return on equity. Strategies to
accomplish these objectives include:
* INCREASING ITS MARKET SHARE AND EXPANDING ITS MARKET AREA THROUGH
EXPANSION AND ACQUISITIONS
Since 1992 the Company has added 13 branches, of which 3 were
acquisitions and 10 were started de novo. The Company recently announced
the execution of definitive agreements to purchase seven branch offices in
seven north central Indiana communities, and expects that a portion of the
proceeds from this offering will be used to fund costs of those
transactions. See ``--Recent Developments,'' and ``Use of Proceeds.'' The
Company estimates that its deposit market share in the nine counties which
comprise its primary market area was 9.5% at the end of 1996, and believes
that it can increase this market share through additional bank
acquisitions, branch purchases and de novo establishment of branches.
Management also intends to explore opportunities to expand the
Company's geographic market area into contiguous counties in north central
and north east Indiana, while continuing its focus on non-metropolitan
areas.
* UTILIZING TECHNOLOGY TO OFFER MORE SERVICES TO CUSTOMERS
The Company has introduced ``home banking'' which allows retail
customers to conduct banking transactions 24 hours a day through
touch-tone telephones, and has also opened a ``call center'' with
expanded hours
2
<PAGE> 7
allowing customers to conduct business by telephone. The Company's optical
storage and communications systems allow the branch locations immediate
access to centrally stored customer information when needed, including
images of all processed checks. The Company intends to continue to
introduce proven technologies to serve its customers better, without
incurring the expense and risk of independently developing new banking
technology.
* EFFICIENT MANAGEMENT OF STAFF AND OPERATIONS
The Company will continue to devote substantial efforts to efficient
and effective management of staff and operations, and to standardize and
centralize operations where appropriate. The Company recognizes that,
while individualized customer service will always be at the local level,
centralization and careful management of back office and administrative
operations is required in order to benefit from economies of scale as the
Company continues to grow and expand.
* CONTINUING EMPHASIS ON INDIVIDUALIZED CUSTOMER SERVICE
The Company will continue to seek and train employees who are highly
skilled, knowledgeable and motivated to properly serve its customers.
* CONTINUING GROWTH OF THE LOAN PORTFOLIO WHILE MAINTAINING ASSET QUALITY
As the Company continues to establish itself as a leading commercial
lender in its markets, it intends to maintain the lending standards,
centralized loan review and administration systems which have allowed it
to maintain its average annual ratio of net loan losses to average loans
at 0.12% for the five-year period from 1992 through 1996, which
management of the Company believes is low relative to the loan loss
experience of other similarly situated lending institutions.
RECENT DEVELOPMENTS
On July 28, 1997, the Bank entered into an agreement to purchase selected
assets and assume all of the deposits of the branch office of NBD Bank, N.A.
located in Huntington, Indiana (the "Proposed NBD Branch Purchase"). On July
31, 1997, the Bank entered into an agreement to purchase selected assets and
assume all of the deposits of the six branch offices of KeyCorp located in the
north central Indiana communities of Columbia City, Kendallville, Ligonier,
Logansport, Medaryville and Rochester (the "Proposed KeyCorp Branch Purchases",
and together with the Proposed NBD Branch Purchase, the "Proposed Branch
Purchases"). The Proposed Branch Purchases will include approximately $24
million of loans and $95 million of deposits. Consummation of the Proposed
Branch Purchases is subject to receipt of regulatory approvals and satisfaction
of certain other conditions, including an increase in the Company's Tier 1
capital (which would be provided through the issuance of the Preferred
Securities). Neither of the Proposed Branch Purchases is conditioned upon the
consummation of the other. The Company expects to complete the Proposed Branch
Purchases in the fourth quarter of 1997. See "Use of Proceeds,"
"Capitalization", and "Pro Forma Condensed Consolidated Balance Sheet."
OWNERSHIP
As of July 18, 1997, the directors and executive officers of the Company
and their immediate families owned approximately 4.9% of the Company's common
stock and the Lakeland Financial Corporation 401(k) Plan owned approximately
11.1% of the Company's outstanding common stock.
3
<PAGE> 8
LAKELAND TRUST
Lakeland Trust is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement, dated as of July 24, 1997, executed by the
Company, as depositor, and the trustees of Lakeland Trust (the "Trustees"),
and (ii) a certificate of trust filed with the Delaware Secretary of State on
July 24, 1997. The initial trust agreement will be amended and restated in its
entirety (as so amended and restated, the "Trust Agreement") substantially in
the form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The Trust Agreement will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). Upon issuance of the Preferred Securities, the purchasers thereof will
own all of the Preferred Securities. The Company will acquire all of the Common
Securities which will represent an aggregate liquidation amount equal to at
least 3% of the total capital of Lakeland Trust. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and during the continuance of an
Event of Default (as defined herein) under the Trust Agreement resulting from a
Debenture Event of Default, the rights of the Company as holder of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Preferred Securities. See "Description of the Preferred
Securities--Subordination of Common Securities." Lakeland Trust exists for the
exclusive purposes of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of Lakeland Trust, (ii) investing the gross
proceeds of the Trust Securities in the Subordinated Debentures issued by the
Company, and (iii) engaging in only those other activities necessary,
advisable, or incidental thereto. The Subordinated Debentures and payments
thereunder will be the only assets of Lakeland Trust and payments under the
Subordinated Debentures will be the only revenue of Lakeland Trust. Lakeland
Trust has a term of 55 years, but may terminate earlier as provided in the
Trust Agreement. The principal executive office of Lakeland Trust is 202 East
Center Street, Warsaw, Indiana 46581, and its telephone number is (219)
267-6144.
The number of Trustees will, pursuant to the Trust Agreement, initially be
five. Three of the Trustees (the "Administrative Trustees") will be persons
who are employees or officers of, or who are affiliated with, the Company. The
fourth trustee will be a financial institution that is unaffiliated with the
Company, which trustee will serve as institutional trustee under the Trust
Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). State Street
Bank and Trust Company, a trust company chartered and organized under the laws
of the Commonwealth of Massachusetts, will be the Property Trustee until
removed or replaced by the holder of the Common Securities. For purposes of
compliance with the provisions of the Trust Indenture Act, State Street Bank
and Trust Company will also act as trustee (the "Guarantee Trustee") under
the Guarantee and as Debenture Trustee (as defined herein) under the Indenture.
The fifth trustee will be an entity that maintains its principal place of
business in the State of Delaware (the "Delaware Trustee"). Wilmington Trust
Company, a Delaware chartered trust company, will act as Delaware Trustee.
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and in such capacity will have
the power to exercise all rights, powers and privileges under the Indenture.
The Property Trustee will also maintain exclusive control of a segregated
non-interest-bearing bank account (the "Property Account") to hold all
payments made in respect of the Subordinated Debentures for the benefit of the
holders of the Trust Securities. The Property Trustee will make payments of
Distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities. The Company, as the holder of all the Common Securities,
will have the right to appoint, remove or replace any Trustee and to increase
or decrease the number of Trustees. The Company will pay all fees and expenses
related to Lakeland Trust and the offering of the Trust Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the Trust
Agreement, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
4
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Securities Offered............ 1,800,000 Preferred Securities having a Liquidation Amount of $10 per
Preferred Security. The Preferred Securities represent preferred
undivided beneficial interests in the assets of Lakeland Trust, which
will consist solely of the Subordinated Debentures and payments
thereunder. Lakeland Trust has granted the Underwriter an option,
exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 200,000 Preferred Securities at the
initial offering price, solely to cover over-allotments, if any.
Distributions................. The Distributions payable on each Preferred Security will be fixed at
a rate per annum of % of the Liquidation Amount of $10 per Preferred
Security, will be cumulative, will accrue from , 1997, the date
of issuance of the Preferred Securities, and will be payable quarterly
in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing September 30, 1997. See "Description of the
Preferred Securities--Distributions--Payment of Distributions."
Option to Extend Interest
Payment Period.............. The Company has the right, at any time, so long as no Debenture Event
of Default has occurred and is continuing, to defer payments of
interest on the Subordinated Debentures for a period not exceeding 20
consecutive calendar quarters; provided, that no Extended Interest
Payment Period may extend beyond the Stated Maturity of the
Subordinated Debentures. As a consequence of the extension by the
Company of the interest payment period, quarterly Distributions on the
Preferred Securities will be deferred (though such Distributions would
continue to accrue with interest thereon compounded quarterly, since
interest will continue to accrue and compound on the Subordinated
Debentures) during any such Extended Interest Payment Period. During
an Extended Interest Payment Period, the Company will be prohibited,
subject to certain exceptions described herein, from declaring or
paying any cash distributions with respect to its capital stock or
debt securities that rank pari passu with or junior to the
Subordinated Debentures. Upon the termination of any Extended Interest
Payment Period and the payment of all amounts then due, the Company
may commence a new Extended Interest Payment Period, subject to the
foregoing requirements. See "Description of the Preferred Securities--
Distributions--Extension Period" and "Description of the
Subordinated Debentures--Option to Extend Interest Payment Period."
Should an Extended Interest Payment Period occur, holders of Preferred
Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in
advance of receipt of the cash distributions with respect to such
deferred interest payments. See "Certain Federal Income Tax
Consequences--Potential Extension of Interest Payment Period and
Original Issue Discount."
Early Redemption.............. The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Subordinated Debentures at maturity
or their earlier redemption. Subject to Federal Reserve approval, if
then required under applicable capital guidelines or policies of the
Federal Reserve, the Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or after September 30,
2002, in whole at any time or in part from time to time, or (ii) at
any time, in whole (but not in part), within 180 days following the
occurrence of a Tax Event, a Capital
5
<PAGE> 10
Treatment Event or an Investment Company Event, in each case at the
redemption price equal to 100% of the principal amount of the Subordi-
nated Debentures, together with any accrued but unpaid interest to the
date fixed for redemption. See "Description of the Subordinated
Debentures--
Redemption."
Distribution of Subordinated
Debentures.................. The Company has the right at any time to terminate Lakeland Trust and
cause the Subordinated Debentures to be distributed to holders of
Preferred Securities in liquidation of Lakeland Trust, subject to the
Company having received prior approval of the Federal Reserve to do so
if then required under applicable capital guidelines or policies of
the Federal Reserve. See "Description of the Preferred
Securities--Redemption" and "Description of the Preferred
Securities--Liquidation Distribution Upon Termination."
Guarantee..................... The Company has guaranteed the payment of Distributions and payments
on liquidation or redemption of the Preferred Securities, but only in
each case to the extent of funds held by Lakeland Trust, as described
herein. The Company and Lakeland Trust believe that, taken together,
the obligations of the Company under the Guarantee, the Trust
Agreement, the Subordinated Debentures, the Indenture and the Expense
Agreement provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of all of the
obligations of Lakeland Trust under the Preferred Securities. The
obligations of the Company under the Guarantee and the Preferred
Securities are subordinate and junior in right of payment to all
Senior Debt, Subordinated Debt and Additional Senior Obligations of
the Company. If the Company does not make principal or interest
payments on the Subordinated Debentures, Lakeland Trust will not have
sufficient funds to make distributions on the Preferred Securities; in
which event, the Guarantee will not apply to such Distributions until
Lakeland Trust has sufficient funds available therefor. See
"Description of the Guarantee."
Voting Rights................. The holders of the Preferred Securities will have no voting rights
except in limited circumstances. See "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement."
Use of Proceeds............... The proceeds from the sale of the Preferred Securities offered hereby
will be used by Lakeland Trust to purchase the Subordinated Debentures
issued by the Company. The Company intends to use approximately $12.25 million
of the net proceeds from the sale of the Subordinated Debentures to fund the Proposed
Branch Purchases. The Company intends to use the remaining net proceeds from
the sale of the Subordinated Debentures for general corporate purposes
including, without limitation, the making of investments in or possibly
acquiring businesses which enhance the Company's long-term growth or
improve or expand the Company's products, services or markets, the funding
of investments in or extensions of credit to the Company's subsidiary and
the repurchase of common stock. Pending their application for any or all of such
purposes, the net proceeds may be invested in investment grade financial
instruments. See "--The Company--Recent Developments" and "Use of Proceeds."
Nasdaq National Market
Symbol...................... Application has been made to have the Preferred Securities approved
for quotation on The Nasdaq Stock Market's National Market under the
symbol "LKFNP."
</TABLE>
6
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL DATA
The consolidated financial data below summarizes historical consolidated
financial information of the Company for the periods indicated and should be
read in conjunction with the financial statements and other information
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, which is incorporated by reference in this Prospectus. The
unaudited consolidated financial data below for the interim periods indicated
has been derived from, and should be read in conjunction with, the Company's
Quarterly Report on Form 10-Q for the six-month period ended June 30, 1997,
which is incorporated by reference in this Prospectus. See "Available
Information" and "Incorporation of Certain Documents by Reference." All
adjustments considered necessary for a fair presentation have, in the opinion
of management, been included in the unaudited interim data. Interim results for
the six months ended June 30, 1997 are not necessarily indicative of results
which may be expected for future periods, including the year ending December
31, 1997.
<TABLE>
<CAPTION>
JUNE 30,
(UNAUDITED) YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED RESULTS OF OPERATIONS:
Interest income................ $ 25,580 $ 22,201 $ 45,941 $ 41,944 $ 33,556 $ 27,463 $ 27,500
Interest expense............... 13,246 11,449 23,737 21,642 14,887 12,022 13,622
-------- -------- -------- -------- -------- -------- --------
Net interest income............ 12,334 10,752 22,204 20,302 18,669 15,441 13,878
Provision for loan losses...... 120 60 120 120 795 790 1,340
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses.... 12,214 10,692 22,084 20,182 17,874 14,651 12,538
Noninterest income............. 3,485 2,831 5,799 4,771 4,368 3,808 3,415
Noninterest expense............ 9,481 8,497 17,935 16,244 14,092 12,378 10,832
-------- -------- -------- -------- -------- -------- --------
Income before income tax
expense...................... 6,218 5,026 9,948 8,709 8,150 6,081 5,121
Income tax expense............. 2,191 1,808 3,504 3,064 3,024 2,171 1,762
-------- -------- -------- -------- -------- -------- --------
Net income before cumulative
effect of accounting
change....................... 4,027 3,218 6,444 5,645 5,126 3,910 3,359
Cumulative effect of accounting
change....................... -- -- -- -- -- 325 --
-------- -------- -------- -------- -------- -------- --------
Net income..................... $ 4,027 $ 3,218 $ 6,444 $ 5,645 $ 5,126 $ 4,235 $ 3,359
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:<F1>
Net income:
Earnings per common
share.................... $ 1.39 $ 1.11 $ 2.22 $ 1.96 $ 1.78 $ 1.47 $ 1.17
Cash dividends declared.... 0.30 0.22 0.46 0.37 0.30 0.25 0.21
Book value................. 15.60 13.47 14.51 12.78 10.39 9.70 8.26
Dividend payout ratio...... 21.58% 19.82% 20.72% 18.88% 16.85% 17.01% 17.95%
SELECTED BALANCE SHEET DATA:
Assets......................... $687,515 $613,827 $656,551 $568,579 $496,963 $449,954 $362,497
Securities<F2>................. 212,371 203,510 207,116 196,008 169,752 160,703 101,952
Loans and leases............... 412,483 349,516 382,265 327,617 287,956 260,185 234,202
Allowance for loan and lease
losses....................... 5,301 5,365 5,306 5,472 4,866 4,010 3,095
Deposits....................... 525,998 468,283 496,553 431,934 396,740 370,032 284,308
Long term debt................. 25,383 19,432 23,531 17,432 17,432 9,300 8,000
Stockholders' equity........... 45,339 39,009 42,043 36,754 29,889 27,912 23,750
PERFORMANCE RATIOS:
Return on average equity....... 18.53% 16.88% 16.50% 17.06% 17.73% 16.51% 15.08%
Return on average assets....... 1.22% 1.11% 1.07% 1.05% 1.10% 1.11% 0.97%
Net interest margin (fully
taxable equivalent).......... 4.11% 4.10% 4.10% 4.22% 4.43% 4.50% 4.43%
ASSET QUALITY RATIOS:
Allowance for loan losses to
loans........................ 1.29% 1.53% 1.39% 1.67% 1.69% 1.54% 1.32%
Non-performing loans to total
loans........................ 0.61% 0.55% 0.49% 0.66% 0.53% 0.25% 0.13%
Net loan losses to average
loans........................ 0.06% 0.10% 0.08% 0.08% (0.02%) 0.05% 0.40%
CAPITAL RATIOS:
Average equity to average
assets....................... 6.47% 6.49% 6.46% 6.18% 6.19% 6.71% 6.41%
Tier 1 risk-based capital
ratio........................ 10.01% 10.09% 9.94% 10.13% 10.07% 9.75% 9.30%
Total risk-based capital
ratio........................ 11.19% 11.34% 11.19% 11.38% 11.33% 11.00% 10.53%
Leverage ratio................. 6.51% 6.29% 6.29% 6.31% 6.27% 5.99% 6.38%
RATIO OF EARNINGS TO FIXED
CHARGES:<F3>
Including interest on
deposits..................... 1.47x 1.44x 1.42x 1.40x 1.55x 1.53x 1.38x
Excluding interest on
deposits..................... 2.96x 3.08x 2.87x 2.82x 3.93x 4.33x 3.79x
<FN>
- ----------
<F1>Per share data has been adjusted to give retroactive effect to a 2-for-1
stock split April 30, 1996.
<F2>Includes market value adjustment on available-for-sale securities.
<F3>Earnings consist of income before income tax plus interest expense. Fixed
charges consist of interest expense, amortization of debt issuance costs
and the interest component of rent expense. The Company does not currently
have any preferred stock outstanding.
</TABLE>
7
<PAGE> 12
RISK FACTORS
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors before purchasing the Preferred Securities offered
hereby. Prospective investors should note, in particular, that this Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
that actual results could differ materially from those contemplated by such
statements. Prospective investors should also refer to the factors discussed
under "Forward Looking Statements" set forth in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, which is incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
These considerations are not intended to represent a complete list of the
general or specific risks that may affect the Preferred Securities, the
Subordinated Debentures, the Company or Lakeland Trust. It should be recognized
that other risks may be significant, now or in the future, and the risks set
forth below may affect the Preferred Securities, the Subordinated Debentures,
the Company or Lakeland Trust to a greater extent than indicated.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit
of the holders of Preferred Securities and under the Subordinated Debentures
are unsecured and rank subordinate and junior in right of payment to all Senior
Debt, Subordinated Debt and Additional Senior Obligations of the Company. At
June 30, 1997, the Company had no Senior Debt, Subordinated Debt or
Additional Senior Obligations outstanding. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of the Bank upon the Bank's liquidation or reorganization or otherwise (and
thus the ability of holders of the Preferred Securities to benefit indirectly
from such distribution) is subject to the prior claims of creditors of the
Bank, except to the extent that the Company may itself be recognized as a
creditor of the Bank. At June 30, 1997, the Bank had long-term debt of
approximately $25.4 million. The Subordinated Debentures, therefore, will be
effectively subordinated to all existing and future liabilities of the Bank
and holders of Subordinated Debentures and Preferred Securities should look
only to the assets of the Company for payments on the Subordinated Debentures.
Neither the Indenture, the Guarantee nor the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt,
Subordinated Debt and Additional Senior Obligations, that may be incurred by
the Company. See "Description of the Guarantee--Status of the Guarantee" and
"Description of the Subordinated Debentures--Subordination."
The ability of Lakeland Trust to pay amounts due on the Preferred Securities
is solely dependent upon the Company making payments on the Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
The Company has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive calendar quarters with respect to each
Extended Interest Payment Period; provided that no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Subordinated Debentures. As
a consequence of any such deferral, quarterly Distributions on the Preferred
Securities by Lakeland Trust will be deferred (and the amount of Distributions
to which holders of the Preferred Securities are entitled will accumulate
additional Distributions thereon at the rate of % per annum, compounded
quarterly from the relevant payment date for such Distributions) during any
such Extended Interest Payment Period. During any such Extended Interest
Payment Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (other than (a) dividends
or distributions in common stock of the Company, any declaration of a non-cash
dividend in connection with the implementation of a shareholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, and (b) purchases of common
stock of the Company related to the rights under any of the Company's benefit
plans for its directors, officers or employees), (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Subordinated Debentures (provided that this restriction will not prohibit
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the
8
<PAGE> 13
Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extended Interest Payment Period, the Company may
further defer the payment of interest; provided that no Extended Interest
Payment Period may exceed 20 consecutive calendar quarters or extend beyond the
Stated Maturity of the Subordinated Debentures. Upon the termination of any
Extended Interest Payment Period and the payment of all interest then accrued
and unpaid (together with interest thereon at the annual rate of % compounded
quarterly, to the extent permitted by applicable law), the Company may elect to
begin a new Extended Interest Payment Period, subject to the above
requirements. Subject to the foregoing, there is no limitation on the number of
times that the Company may elect to begin an Extended Interest Payment Period.
See "Description of the Preferred Securities--Distributions--Extension
Period" and "Description of the Subordinated Debentures--Option to Extend
Interest Payment Period."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. Should an Extended Interest Payment Period occur,
however, each holder of Preferred Securities will be required to accrue and
recognize income (in the form of OID) in respect of its pro rata share of the
interest accruing on the Subordinated Debentures held by Lakeland Trust for
federal income tax purposes. A holder of Preferred Securities must, as a
result, include such income in gross income for United States federal income
tax purposes in advance of the receipt of cash, and will not receive the cash
related to such income from Lakeland Trust if the holder disposes of the
Preferred Securities prior to the record date for the payment of the related
Distributions. See "Certain Federal Income Tax Consequences--Potential
Extension of Interest Payment Period and Original Issue Discount."
Should the Company elect to exercise its right to defer payments of
interest on the Subordinated Debentures in the future, the market price of the
Preferred Securities is likely to be adversely affected. A holder that disposes
of its Preferred Securities during an Extended Interest Payment Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Preferred Securities. As a result of the existence of the
Company's right to defer interest payments, the market price of the Preferred
Securities may be more volatile than the market prices of other securities on
which original issue discount accrues that are not subject to such optional
deferrals.
TAX EVENT, CAPITAL TREATMENT EVENT OR INVESTMENT COMPANY EVENT; REDEMPTION
The Company has the right to redeem the Subordinated Debentures in whole
(but not in part) within 180 days following the occurrence of a Tax Event, a
Capital Treatment Event or an Investment Company Event (whether occurring
before or after September 30, 2002), and, therefore, cause a mandatory
redemption of the Preferred Securities. The exercise of such right is subject
to the Company having received prior approval of the Federal Reserve to do so
if then required under applicable capital guidelines or policies of the Federal
Reserve.
"Tax Event" means the receipt by Lakeland Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) Lakeland Trust is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Subordinated Debentures, (ii) interest
payable by the Company on the Subordinated Debentures is not, or, within 90
days of such opinion, will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes, or (iii) Lakeland Trust
is, or will be within 90 days of the date of the opinion, subject to more than
a de minimis amount of other taxes, duties or other governmental charges. The
Company must request and receive an opinion with regard to such matters within
a reasonable period of time after it becomes aware of the possible occurrence
of any of the events described in clauses (i) through (iii) above.
"Capital Treatment Event" means the receipt by Lakeland Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such proposed change,
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than
9
<PAGE> 14
an insubstantial risk of impairment of the Company's ability to treat the
aggregate Liquidation Amount of the Preferred Securities (or any substantial
portion thereof) as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
"Investment Company Event" means the receipt by Lakeland Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, Lakeland Trust is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), which change becomes effective on or after the date of original
issuance of the Preferred Securities.
SHORTENING OR EXTENSION OF STATED MATURITY OF SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the maturity of the
Subordinated Debentures to a date not earlier than September 30, 2002. The
exercise of such right is subject to the Company having received prior approval
of the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve. The Company also has the right to extend the
maturity of the Subordinated Debentures (whether or not Lakeland Trust is
terminated and the Subordinated Debentures are distributed to holders of the
Preferred Securities) to a date no later than September 30, 2036, a date
approximately 39 years after the initial issuance of the Preferred Securities.
Such right may only be exercised, however, if at the time such election is made
and at the time of such extension (i) the Company is not in bankruptcy,
otherwise insolvent or in liquidation, (ii) the Company is not in default in
the payment of any interest or principal on the Subordinated Debentures, and
(iii) Lakeland Trust is not in arrears on payments of Distributions on the
Preferred Securities and no deferred Distributions are accumulated. See
"Description of the Subordinated Debentures--General."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the
extent not paid by Lakeland Trust, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that Lakeland
Trust has funds available therefor at such time, (ii) the Redemption Price (as
defined herein) with respect to any Preferred Securities called for redemption,
to the extent that Lakeland Trust has funds available therefor at such time,
and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of Lakeland Trust (other than in connection with the distribution
of Subordinated Debentures to the holders of Preferred Securities or a
redemption of all of the Preferred Securities), the lesser of (a) the amount of
the Liquidation Distribution (as defined herein), to the extent Lakeland Trust
has funds available therefor at such time, and (b) the amount of assets of
Lakeland Trust remaining available for distribution to holders of the Preferred
Securities in liquidation of Lakeland Trust. The holders of not less than a
majority in Liquidation Amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Guarantee. Any holder of the Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against Lakeland Trust,
the Guarantee Trustee or any other Person (as defined in the Guarantee). If the
Company were to default on its obligation to pay amounts payable under the
Subordinated Debentures, Lakeland Trust would lack funds for the payment of
Distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and, in such event, holders of Preferred Securities would not be
able to rely upon the Guarantee for such amounts. In the event, however, that a
Debenture Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest on or principal of
the Subordinated Debentures on the payment date on which such payment is due
and payable, then a holder of Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Preferred
Securities of such holder (a "Direct Action"). The exercise by the Company of
its right, as described herein, to defer the payment of interest on the
Subordinated Debentures does not constitute a Debenture Event of Default. In
connection with such Direct Action, the Company will have a right of set-off
under the Indenture to the extent of any payment made by the Company to such
holder of Preferred Securities in the Direct Action. Except as described
herein, holders of Preferred Securities will not be able to exercise directly
any other remedy available to the holders of the Subordinated Debentures or
10
<PAGE> 15
assert directly any other rights in respect of the Subordinated Debentures. See
"Description of the Subordinated Debentures--Enforcement of Certain Rights by
Holders of Preferred Securities," "Description of the Subordinated
Debentures--Debenture Events of Default" and "Description of the Guarantee."
The Trust Agreement provides that each holder of Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
NO VOTING RIGHTS EXCEPT IN LIMITED CIRCUMSTANCES
Holders of Preferred Securities will have no voting rights except in
limited circumstances relating only to the modification of the Preferred
Securities and the exercise of the rights of Lakeland Trust as holder of the
Subordinated Debentures and the Guarantee. Holders of Preferred Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee or
the Delaware Trustee, as such voting rights are vested exclusively in the
holder of the Common Securities (except upon the occurrence of certain events
described herein). The Property Trustee, the Administrative Trustees and the
Company may amend the Trust Agreement without the consent of holders of
Preferred Securities to ensure that Lakeland Trust will be classified for
United States federal income tax purposes as a grantor trust even if such
action adversely affects the interests of such holders. See "Description of
the Preferred Securities--Voting Rights; Amendment of Trust Agreement" and
"Description of the Preferred Securities
- --Removal of Lakeland Trust Trustees."
PROPOSED TAX LEGISLATION
Certain legislative proposals were made in 1996 and 1997 which, if enacted,
could have adversely affected the ability of the Company to deduct interest
paid on the Subordinated Debentures. These proposals were not, however,
incorporated into the legislation enacted on August 5, 1997 as the Taxpayer
Relief Act of 1997. Nevertheless, there can be no assurance that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Subordinated
Debentures. Consequently, there can be no assurance that a Tax Event will not
occur. A Tax Event would permit the Company, upon approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve, to cause a redemption of the Preferred Securities before, as
well as after, September 30, 2002. See "Description of the Subordinated
Debentures--Redemption" and "Description of the Preferred
Securities--Redemption--Tax Event Redemption, Capital Treatment Event
Redemption or Investment Company Event Redemption" and "Certain Federal Income
Tax Consequences--Effect of Proposed Changes in Tax Laws."
REDEMPTION; EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
The Company has the right at any time to dissolve, wind-up or terminate
Lakeland Trust and cause the Subordinated Debentures to be distributed to the
holders of the Preferred Securities in exchange therefor in liquidation of
Lakeland Trust. The exercise of such right is subject to the Company having
received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. The Company
will have the right, in certain circumstances, to redeem the Subordinated
Debentures in whole or in part, in lieu of a distribution of the Subordinated
Debentures by Lakeland Trust, in which event Lakeland Trust will redeem the
Trust Securities on a pro rata basis to the same extent as the Subordinated
Debentures are redeemed by the Company. Any such distribution or redemption
prior to the Stated Maturity will be subject to prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve. See "Description of the Preferred Securities--Redemption--Tax
Event Redemption, Capital Treatment Event Redemption or Investment Company
Event Redemption."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of Lakeland Trust would not be a
taxable event to holders of the Preferred Securities. If, however, Lakeland
Trust were to be recharacterized as an association taxable as a corporation
at the time of the dissolution of Lakeland Trust, the distribution of the
Subordinated Debentures may constitute a taxable event to holders of Preferred
Securities. Moreover, upon the occurrence of a Tax Event, a dissolution of
Lakeland Trust in which holders of the Preferred Securities receive cash may be
a taxable event to such holders. See "Certain Federal Income Tax
Consequences--Receipt of Subordinated Debentures or Cash Upon Liquidation of
Lakeland Trust."
11
<PAGE> 16
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities upon a dissolution or liquidation of Lakeland Trust.
The Preferred Securities or the Subordinated Debentures, may, therefore, trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Subordinated Debentures, prospective purchasers of Preferred Securities are
also making an investment decision with regard to the Subordinated Debentures
and should carefully review all the information regarding the Subordinated
Debentures contained herein.
If the Subordinated Debentures are distributed to the holders of Preferred
Securities upon the liquidation of Lakeland Trust, the Company will use its
best efforts to list the Subordinated Debentures on The Nasdaq Stock Market's
National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed.
TRADING PRICE; ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities may trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder of Preferred Securities that disposes of its
Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from Lakeland Trust for the period
prior to such disposition) will nevertheless be required to include accrued but
unpaid interest (or OID) on the Subordinated Debentures through the date of
disposition in income as ordinary income and to add the amount of any accrued
OID to its adjusted tax basis in its pro rata share of the underlying
Subordinated Debentures deemed disposed of. Such holder will recognize a
capital loss to the extent the selling price (which may not fully reflect the
value of accrued but unpaid interest) is less than its adjusted tax basis
(which will include all accrued OID). Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes. See "Certain Federal Income Tax
Consequences--Disposition of Preferred Securities."
There is no current public market for the Preferred Securities. Although
application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market, there can be no
assurance that an active public market will develop for the Preferred
Securities or that, if such market develops, the market price will equal or
exceed the public offering price set forth on the cover page of this
Prospectus. The public offering price for the Preferred Securities has been
determined through negotiations between the Company and the Underwriter. Prices
for the Preferred Securities will be determined in the marketplace and may be
influenced by many factors, including prevailing interest rates, the liquidity
of the market for the Preferred Securities, investor perceptions of the Company
and general industry and economic conditions.
PREFERRED SECURITIES ARE NOT INSURED
The Preferred Securities are not insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
or by any other governmental agency.
USE OF PROCEEDS
Lakeland Trust will use the gross proceeds received from the sale of the
Preferred Securities to purchase Subordinated Debentures from the Company. The
Company intends to use approximately $12.25 million of the net proceeds from
the sale of the Subordinated Debentures to fund the Proposed Branch Purchases.
The Company intends to use the remaining net proceeds from the sale of the
Subordinated Debentures for general corporate purposes including, without
limitation, the making of investments in or possibly acquiring businesses which
enhance the Company's long-term growth or improve or expand the Company's
products, services or markets, the funding of investments in or extensions of
credit to the Company's subsidiaries and the repurchase of common stock.
Pending their application for any or all of such purposes, the net proceeds may
be invested in investment grade financial instruments. See "Prospectus
Summary--The Company--Recent Developments."
12
<PAGE> 17
MARKET FOR THE PREFERRED SECURITIES
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the symbol
"LKFNP." Although Stifel, Nicolaus & Company, Incorporated has informed the
Company that it presently intends to make a market in the Preferred Securities,
there can be no assurance that an active and liquid trading market will develop
or, if developed, that such a market will continue. The offering price and
distribution rate have been determined by negotiations among representatives of
the Company and the Underwriter, and the offering price of the Preferred
Securities may not be indicative of the market price following the offering.
See "Underwriting." Application also has been made to have the Company's
common stock approved for quotation on The Nasdaq Stock Market's National
Market under the symbol "LKFN."
ACCOUNTING TREATMENT
Lakeland Trust will be treated, for financial reporting purposes, as a
subsidiary of the Company and, accordingly, the accounts of Lakeland Trust will
be included in the consolidated financial statements of the Company. The
Preferred Securities will be presented as a separate line item as long-term
debt in the consolidated balance sheet of the Company under the caption
"Guaranteed Preferred Beneficial Interests in Company's Subordinated
Debentures," and appropriate disclosures about the Preferred Securities, the
Guarantee and the Subordinated Debentures will be included in the notes to
consolidated financial statements. The Company will record Distributions
payable on the Preferred Securities as an expense in its consolidated
statements of income for financial reporting purposes.
All reports of the Company filed under the Exchange Act while the Preferred
Securities are outstanding will (a) present the Trust Securities issued by
Lakeland Trust on the balance sheet as long-term debt under a separate
line-item entitled "Guaranteed Preferred Beneficial Interests in Company's
Subordinated Debentures," (b) include in a footnote to the financial statements
disclosure that the sole assets of Lakeland Trust are the Subordinated
Debentures (including the outstanding principal amount, interest rate and
maturity date of such Subordinated Debentures) and payments thereunder, and (c)
include in an audited footnote to the financial statements disclosure that the
Company owns all of the Common Securities of Lakeland Trust, the sole assets of
Lakeland Trust are the Subordinated Debentures, and the back-up obligations, in
the aggregate, constitute a full and unconditional guarantee by the Company of
the obligations of Lakeland Trust under the Preferred Securities.
13
<PAGE> 18
CAPITALIZATION
The following table sets forth (i) the unaudited consolidated
capitalization of the Company at June 30, 1997, (ii) the unaudited
consolidated capitalization of the Company giving effect to the issuance of the
Preferred Securities hereby offered by Lakeland Capital and the receipt by the
Company of the net proceeds from the corresponding sale of the Subordinated
Debentures to Lakeland Capital (the "Offering"), and (iii) the unaudited
consolidated capitalization of the Company giving effect to the Offering
and the Proposed Branch Purchases, as if each such transaction had been
consummated on June 30, 1997, and assuming the Underwriter's over-allotment
option was not exercised.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------------
AS ADJUSTED
FOR OFFERING
AS ADJUSTED AND PROPOSED
ACTUAL FOR OFFERING BRANCH PURCHASES
------- ------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT:
Notes payable................................. $25,383 $25,383 $25,383
Guaranteed preferred beneficial interests in
the Company's Subordinated Debentures....... -- 18,000 18,000
------- ------- -------
Total long-term debt...................... 25,383 43,383 43,383
STOCKHOLDERS' EQUITY:
Common stock, stated value $.50 per share;
10,000,000 shares authorized; 2,906,992
shares issued; 2,902,502 shares outstanding. 1,453 1,453 1,453
Additional paid-in capital.................... 8,537 8,537 8,537
Retained earnings............................. 35,122 35,122 35,122
Cost of common stock in treasury; 4,490
shares...................................... (143) (143) (143)
Unrealized appreciation on available-for-sale
securities.................................. 370 370 370
------- ------- -------
Total stockholders' equity................ 45,339 45,339 45,339
CAPITAL RATIOS:
Stockholders' equity to total assets.......... 6.59% 6.43% 5.66%<F4>
Leverage ratio<F1><F2>........................ 6.51% 8.47% 5.98%<F4>
Risk-based capital ratios<F2><F3>
Tier 1 capital to risk-weighted assets.... 10.01% 12.84% 9.75%<F4>
Total risk-based capital to risk-weighted
assets.................................. 11.19% 13.97% 10.83%<F4>
<FN>
- --------
<F1>The leverage ratio is Tier 1 capital divided by average quarterly assets,
after deducting intangible assets and net deferred tax assets in excess of
regulatory limits.
<F2>The capital ratios are computed including the total estimated net proceeds
from the sale of the Preferred Securities, in a manner consistent with
Federal Reserve calculation guidelines.
<F3>Federal Reserve guidelines for calculation of Tier 1 capital to
risk-weighted assets limits the amount of cumulative preferred stock which
can be included in Tier 1 capital to 25% of total Tier 1 capital.
Approximately $15.044 million of the aggregate amount of the Preferred
Securities offered hereby will be included as Tier 1 capital for the
Company.
<F4>The capital ratios, as adjusted for the Offering and the Proposed Branch
Purchases, reflect the addition of (i) $95 million of assets, (ii)
intangibles created in connection with the acquisitions, and (iii) $23
million of risk-weighted assets.
</TABLE>
14
<PAGE> 19
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following pro forma condensed consolidated balance sheet and
explanatory notes set forth (i) the unaudited condensed consolidated balance
sheet of the Company at June 30, 1997, (ii) pro forma adjustments giving
effect to the Offering, (iii) pro forma adjustments giving effect to the
Proposed Branch Purchases and (iv) resulting pro forma condensed consolidated
balance sheet giving effect to the Offering and the Proposed Branch Purchases,
as if each such transaction had been consummated on June 30, 1997, and
assuming the Underwriter's over-allotment option was not exercised.
<TABLE>
LAKELAND FINANCIAL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<CAPTION>
PRO FORMA
CONSOLIDATED
PRO FORMA AS ADJUSTED FOR
PRO FORMA ADJUSTMENTS OFFERING AND
ADJUSTMENTS FOR PROPOSED PROPOSED BRANCH
ACTUAL FOR OFFERING BRANCH PURCHASES PURCHASES
------ ------------ ---------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents.................... $ 38,397 $17,030<F1> $57,163<F2> $112,590
Securities available-for-sale................ 79,690 79,690
Securities held-to-maturity.................. 132,681 132,681
Loans, net of allowance for loan losses...... 408,108 23,982<F3> 432,090
Premises and equipment....................... 17,604 1,956<F4> 19,560
Other assets and intangibles................. 11,035 970<F1> 12,259<F5> 24,264
-------- ------- ------- --------
TOTAL ASSETS............................. $687,515 $18,000 $95,360 $800,875
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits..................................... $525,998 $ $94,923<F6> $620,921
Short-term borrowings........................ 84,703 437<F6> 85,140
Long-term debt............................... 25,383 18,000<F1> 43,383
Other liabilities............................ 6,092 6,092
-------- ------- ------- --------
TOTAL LIABILITIES........................ 642,176 18,000 95,360 755,536
Stockholders' equity......................... 45,339 45,339
-------- ------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $687,515 $18,000 $95,360 $800,875
======== ======= ======= ========
See Notes to Pro Forma Condensed Consolidated Balance Sheet on the following page.
</TABLE>
15
<PAGE> 20
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The pro forma condensed consolidated balance sheet should be read in
conjunction with the following notes. The amounts shown for the pro forma
adjustments for purchases and assumptions of assets and liabilities have
been derived from information provided by the respective selling parties. These
items are subject to adjustment to reflect the Company's estimate of fair
market value at closing.
The Proposed Branch Purchases are not considered to be acquisitions of a
business since, among other things, approximately 60% of the $95.36 million
in assets received will be in the form of cash and only a relatively small
portion of the assets will be in the form of loans. The future earnings
from the assets acquired will be primarily dependent on the effective use of
the cash and, thus, historical operating results of the branches acquired may
not be indicative of future results. Accordingly, only summarized information
regarding the effect of the acquisitions on the balance sheet is presented.
[FN]
<F1>The Company will incur $18 million in long-term debt in connection with the
Offering. The expenses of the Offering, including the Underwriter's
compensation, are estimated to be $970,000. See ``Use of Proceeds'' and
"Capitalization".
<F2>Represents funds to be received from the respective selling parties for
assumption of net liabilities upon consummation of the Proposed Branch
Purchases.
<F3>Net loans expected to be purchased in the Proposed Branch Purchases are
summarized below as of April 30, 1997 for the Proposed NBD Branch Purchase
and as of May 31, 1997 for the Proposed KeyCorp Branch Purchases.
<TABLE>
<CAPTION>
(IN 000'S)
----------
<S> <C>
Commercial loans........................ $ 3,935
Real estate loans....................... 8,711
Consumer loans.......................... 10,895
Lines of credit......................... 441
-------
Total loans......................... $23,982
=======
</TABLE>
[FN]
<F4>The values of the premises and equipment to be acquired upon consummation of
the Proposed Branch Purchases are based upon appraised values or estimated
values provided by the respective selling parties.
<F5>The intangibles resulting from the Proposed Branch Purchases are expected
to be approximately $12.25 million, subject to adjustment based on the
Company's estimates of the fair market value of assets to be purchased and
the liabilities to be assumed.
<F6>The deposits and repurchase agreements expected to be assumed in the
Proposed Branch Purchases are summarized below as of April 30, 1997 for
the Proposed NBD Branch Purchase and as of May 31, 1997 for the Proposed
KeyCorp Branch Purchases.
<TABLE>
<CAPTION>
(IN 000'S)
----------
<S> <C>
Demand deposit accounts................. $12,255
Savings and transaction accounts........ 26,307
Certificates of deposit................. 56,361
Repurchase agreements................... 437
-------
Total deposits and repurchase
agreements........................ $95,360
=======
</TABLE>
16
<PAGE> 21
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, State Street Bank and Trust Company,
will act as indenture trustee for the Preferred Securities under the Trust
Agreement for purposes of complying with the provisions of the Trust Indenture
Act. The terms of the Preferred Securities will include those stated in the
Trust Agreement and those made part of the Trust Agreement by the Trust
Indenture Act. The following summary of the material terms and provisions of
the Preferred Securities and the Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Agreement, the Trust Act, and the Trust Indenture Act. Wherever
particular defined terms of the Trust Agreement are referred to, but not
defined, herein such defined terms are incorporated herein by reference. The
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of
Lakeland Trust, will issue the Trust Securities. All of the Common Securities
will be owned by the Company. The Preferred Securities will represent preferred
undivided beneficial interests in the assets of Lakeland Trust and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by Lakeland Trust
of any securities other than the Trust Securities or the incurrence of any
indebtedness by Lakeland Trust.
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata based on the Liquidation Amount thereof, with the Common
Securities, except as described under "--Subordination of Common Securities."
Legal title to the Subordinated Debentures will be held by the Property Trustee
in trust for the benefit of the holders of the Trust Securities. The Guarantee
executed by the Company for the benefit of the holders of the Preferred
Securities will be a guarantee on a subordinated basis with respect to the
Preferred Securities, but will not guarantee payment of Distributions or
amounts payable on redemption or liquidation of such Preferred Securities when
Lakeland Trust does not have funds on hand available to make such payments.
State Street Bank and Trust Company, as Guarantee Trustee, will hold the
Guarantee for the benefit of the holders of the Preferred Securities. See
"Description of the Guarantee."
DISTRIBUTIONS
PAYMENT OF DISTRIBUTIONS. Distributions on each Preferred Security will be
payable at the annual rate of % of the stated Liquidation Amount of $10,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, to the holders of the Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). The record date will be the 15th day of
the month in which the relevant Distribution Date occurs. Distributions will
accumulate from , 1997, the date of original issuance. The first
Distribution Date for the Preferred Securities will be September 30, 1997. The
amount of Distributions payable for any period will be computed on the basis of
a 360-day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the Preferred Securities is not a Business Day,
then payment of the Distributions payable on such date will be made on the next
succeeding day that is a Business Day (and without any additional
Distributions, interest or other payment in respect of any such delay) with the
same force and effect as if made on the date such payment was originally
payable. "Business Day" means any day other than a Saturday or a Sunday, a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
corporate trust office of the Property Trustee or the Debenture Trustee is
closed for business.
EXTENSION PERIOD. The Company has the right under the Indenture, so long as
no Debenture Event of Default has occurred and is continuing, to defer the
payment of interest on the Subordinated Debentures at any time, or from time to
time (each, an "Extended Interest Payment Period"), which, if exercised,
would defer quarterly Distributions on the Preferred Securities during any such
Extended Interest Payment Period. Distributions to which holders of the
Preferred Securities are entitled will accumulate additional Distributions
thereon at the rate per annum of % thereof, compounded quarterly from the
relevant Distribution Date. "Distributions," as used herein, includes any
17
<PAGE> 22
such additional Distributions. The right to defer the payment of interest on
the Subordinated Debentures is limited, however, to a period, in each instance,
not exceeding 20 consecutive calendar quarters and no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Subordinated Debentures.
During any such Extended Interest Payment Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) dividends or distributions in common stock of the
Company, and declaration of a non-cash dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (b) purchases of common stock of the Company related to
the rights under any of the Company's benefit plans for its directors, officers
or employees), (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Subordinated Debentures (provided
that this restriction will not prohibit payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Subordinated Debentures or any
of the Preferred Securities. Prior to the termination of any such Extended
Interest Payment Period, the Company may further defer the payment of interest;
provided that such Extended Interest Payment Period may not exceed 20
consecutive calendar quarters or extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any such Extended Interest
Payment Period and the payment of all amounts then due, the Company may elect
to begin a new Extended Interest Payment Period, subject to the above
requirements. Subject to the foregoing, there is no limitation on the number of
times that the Company may elect to begin an Extended Interest Payment Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
SOURCE OF DISTRIBUTIONS. The funds of Lakeland Trust available for
distribution to holders of its Preferred Securities will be limited to payments
under the Subordinated Debentures in which Lakeland Trust will invest the
proceeds from the issuance and sale of its Trust Securities. See "Description
of the Subordinated Debentures." Distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Subordinated
Debentures in the Property Account for the benefit of the holders of the Trust
Securities. If the Company does not make interest payments on the Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Preferred Securities. The payment of Distributions (if and
to the extent Lakeland Trust has funds legally available for the payment of
such Distributions and cash sufficient to make such payments) is guaranteed by
the Company. See "Description of the Guarantee." Distributions on the
Preferred Securities will be payable to the holders thereof as they appear on
the register of holders of the Preferred Securities on the relevant record
dates, which will be the 15th day of the month in which the relevant
Distribution Date occurs.
REDEMPTION
GENERAL. The Subordinated Debentures will mature on September 30, 2027. The
Company will have the right to redeem the Subordinated Debentures (i) on or
after September 30, 2002, in whole at any time or in part from time to time, or
(ii) at any time, in whole (but not in part), within 180 days following the
occurrence of a Tax Event, a Capital Treatment Event or an Investment Company
Event, in each case subject to receipt of prior approval by the Federal Reserve
if then required under applicable capital guidelines or policies of the Federal
Reserve. The Company is prohibited from purchasing the Subordinated Debentures,
in whole or in part, from the Trust until after September 30, 2002. See
"Description of the Subordinated Debentures--General."
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in part,
of any Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption will be applied by the Property Trustee to redeem a Like Amount (as
defined herein) of the Trust Securities, upon not less than 30 nor more than 60
days notice, at a redemption price (the "Redemption Price") equal to the
aggregate Liquidation Amount of such Trust Securities plus accumulated but
unpaid Distributions thereon to the date of redemption (the "Redemption
Date"). See "Description of the Subordinated Debentures--Redemption." If
less than all of the Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption will be
allocated to the redemption of the Trust Securities pro rata.
18
<PAGE> 23
DISTRIBUTION OF SUBORDINATED DEBENTURES. Subject to the Company having
received prior approval of the Federal Reserve if so required under applicable
capital guidelines or policies of the Federal Reserve, the Company will have
the right at any time to dissolve, wind-up or terminate Lakeland Trust and,
after satisfaction of the liabilities of creditors of Lakeland Trust as
provided by applicable law, cause the Subordinated Debentures to be distributed
to the holders of Trust Securities in liquidation of Lakeland Trust. See
"--Liquidation Distribution Upon Termination."
TAX EVENT REDEMPTION, CAPITAL TREATMENT EVENT REDEMPTION OR INVESTMENT
COMPANY EVENT REDEMPTION. If a Tax Event, a Capital Treatment Event or an
Investment Company Event in respect of the Trust Securities occurs and is
continuing, the Company has the right to redeem the Subordinated Debentures in
whole (but not in part) and thereby cause a mandatory redemption of such Trust
Securities in whole (but not in part) at the Redemption Price within 180 days
following the occurrence of such Tax Event, Capital Treatment Event or
Investment Company Event. In the event a Tax Event, a Capital Treatment Event
or an Investment Company Event has occurred with respect to the Trust
Securities and the Company does not elect to redeem the Subordinated Debentures
and thereby cause a mandatory redemption of such Trust Securities or to
liquidate Lakeland Trust and cause the Subordinated Debentures to be
distributed to holders of such Trust Securities in liquidation of Lakeland
Trust as described below under "--Liquidation Distribution Upon Termination,"
such Preferred Securities will remain outstanding and an Additional Payment (as
defined herein) may be payable on the Subordinated Debentures.
"Additional Payment" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by Lakeland Trust
on the outstanding Trust Securities will not be reduced as a result of any
additional taxes, duties and other governmental charges to which Lakeland Trust
has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, which will be used to pay the Redemption Price
of such Trust Securities, and (ii) with respect to a distribution of
Subordinated Debentures to holders of Trust Securities in connection with a
dissolution or liquidation of Lakeland Trust, Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Subordinated Debentures are distributed. Each Subordinated
Debenture distributed pursuant to clause (ii) above will carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Subordinated Debentures.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
After the liquidation date fixed for any distribution of Subordinated
Debentures for Preferred Securities (i) such Preferred Securities will no
longer be deemed to be outstanding, and (ii) any certificates representing
Preferred Securities will be deemed to represent the Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Preferred
Securities, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on the Preferred Securities, until such
certificates are presented to the Administrative Trustees or their agent for
transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution and liquidation of Lakeland Trust
were to occur. The Preferred Securities that an investor may purchase, or the
Subordinated Debentures that an investor may receive on dissolution and
liquidation of Lakeland Trust, may, therefore, trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Subordinated Debentures. Redemptions of the Preferred
Securities will be made and the Redemption Price will be payable on each
Redemption Date only to the extent that Lakeland Trust has funds on hand
available for the payment of such Redemption Price. See "--Subordination of
Common Securities."
If Lakeland Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit
19
<PAGE> 24
irrevocably with the paying agent for the Preferred Securities funds sufficient
to pay the aggregate Redemption Price and will give the paying agent for the
Preferred Securities irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Preferred
Securities called for redemption will be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption will have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any additional Distribution, interest or other
payment in respect of any such delay) with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
Preferred Securities called for redemption is improperly withheld or refused
and not paid either by Lakeland Trust, or by the Company pursuant to the
Guarantee, Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the Redemption Date originally established by
Lakeland Trust for such Preferred Securities to the date such Redemption Price
is actually paid, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price. See
"Description of the Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and further provided that the Company has not and is
not continuing its right to defer interest payments, the Company or its
subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Subordinated Debentures to holders of Preferred Securities will
be made to the applicable recordholders thereof as they appear on the register
for the Preferred Securities on the relevant record date, which date will be
the date 15 calendar days prior to the Redemption Date or liquidation date, as
applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, then the aggregate Liquidation Amount of such Trust Securities to be
redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $10 or an integral
multiple of $10 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $10. The Property Trustee will
promptly notify the registrar for the Preferred Securities in writing of the
Preferred Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the Liquidation Amount thereof to
be redeemed. For all purposes of the Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities will relate to the portion of the aggregate Liquidation Amount of
Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the redemption price on the Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Subordinated Debentures
or portions thereof (and Distributions will cease to accrue on the related
Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, will be made pro rata based on
the Liquidation Amount of the Preferred Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default has occurred and is continuing, no payment of any
Distribution on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, will be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the
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outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all of the outstanding Preferred Securities
then called for redemption, shall have been made or provided for, and all funds
available to the Property Trustee will first be applied to the payment in full
in cash of all Distributions on, or Redemption Price of, the Preferred
Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company, as holder of the Common
Securities, and only the holders of the Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
The Company will have the right at any time to dissolve, wind-up or
terminate Lakeland Trust and cause the Subordinated Debentures to be
distributed to the holders of the Preferred Securities. Such right is subject,
however, to the Company having received prior approval of the Federal Reserve
if then required under applicable capital guidelines or policies of the Federal
Reserve.
Pursuant to the Trust Agreement, Lakeland Trust will automatically
terminate upon expiration of its term and will terminate earlier on the first
to occur of (i) certain events of bankruptcy, dissolution or liquidation of the
Company, (ii) the distribution of a Like Amount of the Subordinated Debentures
to the holders of its Trust Securities, if the Company, as depositor, has given
written direction to the Property Trustee to terminate Lakeland Trust (which
direction is optional and wholly within the discretion of the Company, as
depositor), (iii) redemption of all of the Preferred Securities as described
under "--Redemption--Mandatory Redemption," and (iv) the entry of an order
for the dissolution of Lakeland Trust by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, Lakeland Trust will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of Lakeland Trust as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Subordinated Debentures, unless such distribution is determined by the Property
Trustee not to be practicable, in which event such holders will be entitled to
receive out of the assets of Lakeland Trust available for distribution to
holders, after satisfaction of liabilities to creditors of Lakeland Trust as
provided by applicable law, an amount equal to, in the case of holders of
Preferred Securities, the aggregate of the Liquidation Amount plus accrued and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid
only in part because Lakeland Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by Lakeland Trust on the Preferred Securities will be paid on a pro rata basis.
The Company, as the holder of the Common Securities, will be entitled to
receive distributions upon any such liquidation pro rata with the holders of
the Preferred Securities, except that, if a Debenture Event of Default has
occurred and is continuing, the Preferred Securities will have a priority over
the Common Securities. See "--Subordination of Common Securities."
Under current United States federal income tax law and interpretations and
assuming, as expected, that Lakeland Trust is treated as a grantor trust, a
distribution of the Subordinated Debentures should not be a taxable event to
holders of the Preferred Securities. Should there be a change in law, a change
in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences--Receipt of Subordinated
Debentures or Cash Upon Liquidation of Lakeland Trust." If the Company elects
neither to redeem the Subordinated Debentures prior to maturity nor to
liquidate Lakeland Trust and distribute the Subordinated Debentures to holders
of the Preferred Securities, the Preferred Securities will remain outstanding
until the repayment of the Subordinated Debentures.
If the Company elects to liquidate Lakeland Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of Lakeland Trust, the Company will continue to have
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the right to shorten or extend the maturity of such Subordinated Debentures,
subject to certain conditions. See "Description of the Subordinated
Debentures--General."
LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred
Securities in the event of any liquidation of Lakeland Trust is $10 per
Preferred Security plus accrued and unpaid Distributions thereon to the date of
payment, which may be in the form of a distribution of such amount in
Subordinated Debentures, subject to certain exceptions. See "--Liquidation
Distribution Upon Termination."
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
Trust Agreement (an "Event of Default") with respect to the Preferred
Securities (whatever the reason for such Event of Default and whether voluntary
or involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description
of the Subordinated Debentures--Debenture Events of Default"); or
(ii) default by Lakeland Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default by Lakeland Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in the Trust Agreement (other than
a covenant or warranty a default in the performance of which or the breach
of which is dealt with in clauses (ii) or (iii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the Trustee(s) by the holders of at
least 25% in aggregate Liquidation Amount of the outstanding Preferred
Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such Event of
Default has been cured or waived. The Company, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of Lakeland Trust. See "--Liquidation Distribution Upon
Termination." The existence of an Event of Default does not entitle the
holders of Preferred Securities to accelerate the maturity thereof.
REMOVAL OF LAKELAND TRUST TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding Preferred Securities. In no
event, however, will the holders of the Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee will be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
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CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust Property (as defined
in the Trust Agreement) may at the time be located, the Company, as the holder
of the Common Securities, will have power to appoint one or more Persons (as
defined in the Trust Agreement) either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such Trust Property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in such Person or
Persons in such capacity any property, title, right or power deemed necessary
or desirable, subject to the provisions of the Trust Agreement. In case a
Debenture Event of Default has occurred and is continuing, the Property Trustee
alone will have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee is a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Trustee, will be the successor of such Trustee under the Trust Agreement,
provided such Person is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF LAKELAND TRUST
Lakeland Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described below. Lakeland
Trust may, at the request of the Company, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either
(a) expressly assumes all of the obligations of Lakeland Trust with respect to
the Preferred Securities, or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee in its capacity as the holder of the
Subordinated Debentures, (iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed (including, if applicable, The Nasdaq Stock Market's
National Market), if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, (v) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Company has received an opinion from independent counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither Lakeland Trust nor such successor entity will be required to register
as an "investment company" under the Investment Company Act, and (vi) the
Company owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, Lakeland Trust will not, except with the consent of holders of
100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other Person or
permit any other Person to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause Lakeland Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
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VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by the Trust
Act and the Trust Agreement, the holders of the Preferred Securities will have
no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) with respect to acceptance of
appointment by a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement), (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as is necessary to ensure that Lakeland Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that Lakeland Trust will not
be required to register as an "investment company" under the Investment
Company Act, or (iv) to reduce or increase the Liquidation Amount per Trust
Security and simultaneously to increase or decrease the number of Trust
Securities issued and outstanding solely for the purpose of maintaining the
eligibility of the Preferred Securities for listing or quotation on any
national securities exchange or other organization on which the Preferred
Securities are then listed or quoted (including, if applicable, The Nasdaq
Stock Market's National Market); provided, however, that in the case of clause
(ii), such action may not adversely affect in any material respect the
interests of any holder of Trust Securities and that, in the case of clause
(iv), the aggregate Liquidation Amount of the Trust Securities outstanding,
upon completion of any such reduction, must be the same as the aggregate
Liquidation Amount of the Trust Securities outstanding immediately prior to any
such reduction, and any amendments of such Trust Agreement will become
effective when notice thereof is given to the holders of Trust Securities (or,
in the case of an amendment pursuant to clause (iv), as of the date specified
in the notice). The Trust Agreement may be amended by the Trustees and the
Company with (i) the consent of holders representing not less than a majority
in the aggregate Liquidation Amount of the outstanding Trust Securities, and
(ii) receipt by the Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the status of Lakeland Trust as a grantor
trust for United States federal income tax purposes or its exemption from
status as an "investment company" under the Investment Company Act.
Notwithstanding anything in this paragraph to the contrary, without the consent
of each holder of Trust Securities, the Trust Agreement may not be amended to
(a) change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the Trust Securities as of a specified date, or (b) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
The Trustees will not, so long as any Subordinated Debentures are held by
the Property Trustee, (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to the
Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures will be due and payable, or (iv)
consent to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, where such consent is required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture requires the consent of each holder of
Subordinated Debentures affected thereby, no such consent will be given by the
Property Trustee without the prior consent of each holder of the Preferred
Securities. The Trustees may not revoke any action previously authorized or
approved by a vote of the holders of the Preferred Securities except by
subsequent vote of the holders of the Preferred Securities. The Property
Trustee will notify each holder of Preferred Securities of any notice of
default with respect to the Subordinated Debentures. In addition to obtaining
the foregoing approvals of the holders of the Preferred Securities, prior to
taking any of the foregoing actions, the Trustees must obtain an opinion of
counsel experienced in such matters to the effect that Lakeland Trust will not
be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written
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consent of such holders is to be taken, to be given to each holder of record of
Preferred Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for Lakeland Trust to redeem and cancel its Preferred Securities in accordance
with the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trustees or any
affiliate of the Company or any Trustee will, for purposes of such vote or
consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENT
Payments in respect of the Preferred Securities will be made by check
mailed to the address of the holder entitled thereto as such address will
appear on the register of holders of the Preferred Securities. The paying agent
for the Preferred Securities will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. In the event that the Property Trustee
no longer is the paying agent for the Preferred Securities, the Administrative
Trustees will appoint a successor (which must be a bank or trust company
acceptable to the Administrative Trustees and the Company) to act as paying
agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for
the Preferred Securities. Registration of transfers of Preferred Securities
will be effected without charge by or on behalf of Lakeland Trust, but upon
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. Lakeland Trust will not be required
to register or cause to be registered the transfer of Preferred Securities
after such Preferred Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee will take such action as is directed by the Company and if not so
directed, will take such action as it deems advisable and in the best interests
of the holders of the Trust Securities and will have no liability except for
its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate Lakeland Trust in such a way that Lakeland Trust will
not be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. The Company and the Administrative
Trustees are authorized, in this connection, to take any action, not
inconsistent with applicable law, the certificate of trust of Lakeland Trust or
the Trust Agreement, that the Company and the Administrative Trustees determine
in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
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DESCRIPTION OF THE SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, Lakeland Trust
will invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Subordinated Debentures issued by the
Company. The Subordinated Debentures will be issued as unsecured debt under the
Indenture, to be dated as of , 1997 (the "Indenture"), between the
Company and State Street Bank and Trust Company as trustee (the "Debenture
Trustee"). The Indenture will be qualified as an indenture under the Trust
Indenture Act. The following summary of the material terms and provisions of
the Subordinated Debentures and the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture and to the Trust Indenture Act. Wherever particular defined terms of
the Indenture are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Subordinated Debentures will be limited in aggregate principal amount
to approximately $18,556,710 (or up to $20,618,560 if the option described
under the heading "Underwriting" is exercised by the Underwriter), such
amount being the sum of the aggregate stated Liquidation Amount of the Trust
Securities. The Subordinated Debentures will bear interest at the annual rate
of % of the principal amount thereof, payable quarterly in arrears on March
31, June 30, September 30, and December 31 of each year (each, an "Interest
Payment Date") beginning September 30, 1997, to the Person (as defined in the
Indenture) in whose name each Subordinated Debenture is registered, subject to
certain exceptions, at the close of business on the fifteenth day of the last
month of the calendar quarter. It is anticipated that, until the liquidation,
if any, of Lakeland Trust, the Subordinated Debentures will be held in the name
of the Property Trustee in trust for the benefit of the holders of the
Preferred Securities. The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Subordinated Debentures is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) with the same force and
effect as if made on the date such payment was originally due and payable.
Accrued interest that is not paid on the applicable Interest Payment Date will
bear additional interest on the amount thereof (to the extent permitted by law)
at the rate per annum of % thereof, compounded quarterly. The term
"interest," as used herein, includes quarterly interest payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date
and Additional Payment, as applicable.
The Subordinated Debentures will mature on September 30, 2027 (such date,
as it may be shortened or extended as hereinafter described, the "Stated
Maturity"). Such date may be shortened at any time by the Company to any date
not earlier than September 30, 2002, subject to the Company having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Such date may also be extended
at any time at the election of the Company but in no event to a date later than
September 30, 2036, provided that at the time such election is made and at the
time of extension (i) the Company is not in bankruptcy, otherwise insolvent or
in liquidation, (ii) the Company is not in default in the payment of any
interest or principal on the Subordinated Debentures, and (iii) Lakeland Trust
is not in arrears on payments of Distributions on the Preferred Securities and
no deferred Distributions are accumulated. In the event that the Company elects
to shorten or extend the Stated Maturity of the Subordinated Debentures, it
will give notice thereof to the Debenture Trustee, Lakeland Trust and to the
holders of the Subordinated Debentures no more than 180 days and no less than
90 days prior to the effectiveness thereof. The Company will not have the right
to purchase the Subordinated Debentures, in whole or in part, from Lakeland
Trust until after September 30, 2002, unless a Tax Event, a Capital Treatment
Event or an Investment Company Event has occurred and is continuing.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations of the Company. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of the Bank, upon the Bank's liquidation or reorganization or otherwise (and
thus the ability of holders of the Subordinated Debentures to benefit
indirectly from such distribution), is subject to the prior claims of creditors
of the Bank, except to the extent that the Company may itself be recognized as
a creditor of the Bank. The Subordinated Debentures will, therefore, be
effectively subordinated to all existing and future liabilities of the Bank,
and holders of Subordinated Debentures should look only to the assets of the
Company for payments on the Subordinated Debentures. The Indenture does not
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<PAGE> 31
limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Debt, Subordinated Debt and Additional Senior
Obligations, whether under the Indenture or any existing indenture or other
indenture that the Company may enter into in the future or otherwise. See
"--Subordination."
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture at any time during the term
of the Subordinated Debentures, so long as no Debenture Event of Default has
occurred and is continuing, to defer the payment of interest at any time, or
from time to time (each, an "Extended Interest Payment Period"). The right to
defer the payment of interest on the Subordinated Debentures is limited,
however, to a period, in each instance, not exceeding 20 consecutive calendar
quarters and no Extended Interest Payment Period may extend beyond the Stated
Maturity of the Subordinated Debentures. At the end of each Extended Interest
Payment Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of %, compounded
quarterly, to the extent permitted by applicable law). During an Extended
Interest Payment Period, interest will continue to accrue and holders of
Subordinated Debentures (or the holders of Preferred Securities if such
securities are then outstanding) will be required to accrue and recognize
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences--Potential Extension of Interest Payment Period and
Original Issue Discount."
During any such Extended Interest Payment Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) dividends or distributions in common stock of the
Company, any declaration of a non-cash dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (b) purchases of common stock of the Company related to
the rights under any of the Company's benefit plans for its directors, officers
or employees), (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Subordinated Debentures or make
any guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Subordinated Debentures (other than payments under
the Guarantee), or (iii) redeem, purchase or acquire less than all of the
Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extended Interest Payment Period, the Company may
further defer the payment of interest; provided that no Extended Interest
Payment Period may exceed 20 consecutive calendar quarters or extend beyond the
Stated Maturity of the Subordinated Debentures. Upon the termination of any
such Extended Interest Payment Period and the payment of all amounts then due
on any Interest Payment Date, the Company may elect to begin a new Extended
Interest Payment Period subject to the above requirements. No interest will be
due and payable during an Extended Interest Payment Period, except at the end
thereof. The Company has no present intention of exercising its rights to defer
payments of interest on the Subordinated Debentures. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of such Extended Interest Payment Period at least two Business
Days prior to the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities would have been payable except for the
election to begin such Extended Interest Payment Period, or (ii) the date
Lakeland Trust is required to give notice of the record date, or the date such
Distributions are payable, to The Nasdaq Stock Market's National Market (or
other applicable self-regulatory organization) or to holders of the Preferred
Securities, but in any event at least one Business Day before such record date.
Subject to the foregoing, there is no limitation on the number of times that
the Company may elect to begin an Extended Interest Payment Period.
ADDITIONAL SUMS
If Lakeland Trust or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of the occurrence of a
Tax Event, the Company will pay to the recordholders of the Subordinated
Debentures as additional amounts (referred to herein as "Additional Payment")
on the Subordinated Debentures such additional amounts as may be required so
that the net amounts received and retained by Lakeland Trust
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after paying any such additional taxes, duties or other governmental charges
will not be less than the amounts Lakeland Trust would have received had such
additional taxes, duties or other governmental charges not been imposed.
REDEMPTION
The Company will have the right to redeem the Subordinated Debentures prior
to maturity (i) on or after September 30, 2002, in whole at any time or in part
from time to time, or (ii) at any time in whole (but not in part), within 180
days following the occurrence of a Tax Event, a Capital Treatment Event or an
Investment Company Event, in each case at a redemption price equal to the
accrued and unpaid interest on the Subordinated Debentures so redeemed to the
date fixed for redemption, plus 100% of the principal amount thereof. Any such
redemption prior to the Stated Maturity will be subject to prior approval of
the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve.
"Tax Event" means the receipt by Lakeland Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) interest payable by the Company on the Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Company, in whole or in part, for United States federal
income tax purposes, (ii) Lakeland Trust is, or will be within 90 days after
the date of such opinion of counsel, subject to United States federal income
tax with respect to income received or accrued on the Subordinated Debentures,
or (iii) Lakeland Trust is, or will be within 90 days after the date of such
opinion of counsel, subject to more than a de minimis amount of other taxes,
duties, assessments or other governmental charges. The Company must request and
receive an opinion with regard to such matters within a reasonable period of
time after it becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Capital Treatment Event" means the receipt by Lakeland Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such proposed change,
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk of impairment of the Company's ability to treat the
aggregate Liquidation Amount of the Preferred Securities (or any substantial
portion thereof) as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
"Investment Company Event" means the receipt by Lakeland Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, Lakeland Trust is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act, which change becomes effective on or after the date
of original issuance of the Preferred Securities.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures to
be redeemed at its registered address. Unless the Company defaults in payment
of the redemption price for the Subordinated Debentures, on and after the
redemption date interest will cease to accrue on such Subordinated Debentures
or portions thereof called for redemption.
The Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities--Liquidation
Distribution Upon Termination," under certain circumstances involving the
termination of Lakeland Trust, the Subordinated Debentures may be distributed
to the holders of the Preferred Securities in liquidation of Lakeland Trust
after satisfaction of liabilities to creditors of Lakeland Trust as provided by
applicable law. Any such distribution will be subject to receipt of prior
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approval by the Federal Reserve if then required under applicable policies or
guidelines of the Federal Reserve. If the Subordinated Debentures are
distributed to the holders of Preferred Securities upon the liquidation of
Lakeland Trust, the Company will use its best efforts to list the Subordinated
Debentures on The Nasdaq Stock Market's National Market or such stock
exchanges, if any, on which the Preferred Securities are then listed. There can
be no assurance as to the market price of any Subordinated Debentures that may
be distributed to the holders of Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default, (ii)
the Company is in default with respect to its obligations under the Guarantee,
or (iii) the Company has given notice of its election of an Extended Interest
Payment Period as provided in the Indenture with respect to the Subordinated
Debentures and has not rescinded such notice, or such Extended Interest Payment
Period, or any extension thereof, is continuing, the Company will not (1)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) dividends or distributions in common stock of the
Company, any declaration of a non-cash dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (b) purchases of common stock of the Company related to
the rights under any of the Company's benefit plans for its directors, officers
or employees), (2) make any payment of principal, interest or premium, if any,
on or repay or repurchase or redeem any debt securities of the Company that
rank pari passu with or junior in interest to the Subordinated Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu or junior in interest to the Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Subordinated Debentures or any of the Preferred Stock.
SUBORDINATION
The Indenture provides that the Subordinated Debentures issued thereunder
are subordinated and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceedings of the Company, the holders of Senior Debt, Subordinated
Debt and Additional Senior Obligations of the Company will first be entitled to
receive payment in full of principal of (and premium, if any) and interest, if
any, on such Senior Debt, Subordinated Debt and Additional Senior Obligations
of the Company before the holders of Subordinated Debentures will be entitled
to receive or retain any payment in respect of the principal of or interest on
the Subordinated Debentures.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt, Subordinated Debt and Additional
Senior Obligations of the Company outstanding at the time of such acceleration
will first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of the
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt, Subordinated Debt or
Additional Senior Obligations of the Company or an event of default with
respect to any Senior Debt, Subordinated Debt or Additional Senior Obligations
of the Company resulting in the acceleration of the maturity thereof, or if any
judicial proceeding is pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital
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lease obligation of such Person, and (vi) and every obligation of the type
referred to in clauses (i) through (v) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means, with respect to the Company, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debentures
or to other Debt which is pari passu with, or subordinated to, the Subordinated
Debentures; provided, however, that Senior Debt will not be deemed to include
(i) any Debt of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, (the "Bankruptcy Code"), was without recourse to the Company, (ii)
any Debt of the Company to any of its subsidiaries, (iii) any Debt to any
employee of the Company, (iv) any Debt which by its terms is subordinated to
trade accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such Debt by the
holders of the Subordinated Debentures as a result of the subordination
provisions of the Indenture would be greater than they otherwise would have
been as a result of any obligation of such holders to pay amounts over to the
obligees on such trade accounts payable or accrued liabilities arising in the
ordinary course of business as a result of subordination provisions to which
such Debt is subject, and (v) Debt which constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to the Company, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not such claim for post-petition interest is allowed
in such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to
be junior and subordinate to other Debt of the Company (other than the
Subordinated Debentures).
"Additional Senior Obligations" means, with respect to the Company, all
indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; provided, however, that Additional Senior Obligations do not
include claims in respect of Senior Debt or Subordinated Debt or obligations
which, by their terms, are expressly stated to be not superior in right of
payment to the Subordinated Debentures or to rank pari passu in right of
payment with the Subordinated Debentures. "Claim," as used herein, has the
meaning assigned thereto in Section 101(4) of the Bankruptcy Code.
The Indenture places no limitation on the amount of additional Senior Debt,
Subordinated Debt or Additional Senior Obligations that may be incurred by the
Company. The Company expects from time to time to incur indebtedness
constituting Senior Debt, Subordinated Debt and Additional Senior Obligations.
As of June 30, 1997, the Company had no Senior Debt, Subordinated Debt
or Additional Senior Obligations outstanding. Because the Company is a holding
company, the Subordinated Debentures are effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, including
obligations to depositors of the Bank. At June 30, 1997, the Bank had
long-term debt of approximately $25.4 million.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Subordinated Debentures
will be made at the office of the Debenture Trustee in Boston, Massachusetts,
except that, at the option of the Company, payment of any interest may be made
(i) by check mailed to the address of the Person entitled thereto as such
address appears in the register of holders of the Subordinated Debentures, or
(ii) by transfer to an account maintained by the Person entitled thereto as
specified in the register of holders of the Subordinated Debentures, provided
that proper transfer instructions have been received by the regular record
date. Payment of any interest on Subordinated Debentures will be made to the
Person in whose name such Subordinated Debenture is registered at the close of
business on the regular record date for such interest, except in the case of
defaulted interest. The Company may at any time designate additional paying
agents for the Subordinated Debentures or rescind the designation of any paying
agent for the Subordinated Debentures; however, the Company will at all times
be required to maintain a paying agent in each place of payment for the
Subordinated Debentures.
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Any moneys deposited with the Debenture Trustee or any paying agent for the
Subordinated Debentures, or then held by the Company in trust, for the payment
of the principal of or interest on the Subordinated Debentures and remaining
unclaimed for two years after such principal or interest has become due and
payable will be repaid to the Company on May 31 of each year or (if then held
in trust by the Company) will be discharged from such trust and the holder of
such Subordinated Debenture will thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent for
the Subordinated Debentures. Subordinated Debentures may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the registrar in Boston, Massachusetts. The Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts. The Company may at any time
designate additional transfer agents with respect to the Subordinated
Debentures. In the event of any redemption, neither the Company nor the
Debenture Trustee will be required to (i) issue, register the transfer of or
exchange Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of Subordinated
Debentures and ending at the close of business on the day of mailing of the
relevant notice of redemption, or (ii) transfer or exchange any Subordinated
Debentures so selected for redemption, except, in the case of any Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
MODIFICATION OF INDENTURE
The Company and the Debenture Trustee may, from time to time without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The
Indenture contains provisions permitting the Company and the Debenture Trustee,
with the consent of the holders of not less than a majority in principal amount
of the outstanding Subordinated Debentures, to modify the Indenture; provided,
that no such modification may, without the consent of the holder of each
outstanding Subordinated Debenture affected by such proposed modification, (i)
extend the fixed maturity of the Subordinated Debentures, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or (ii) reduce the percentage of principal amount of
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture; provided that so long as any of the
Preferred Securities remain outstanding, no such modification may be made that
requires the consent of the holders of the Subordinated Debentures, and no
termination of the Indenture may occur, and no waiver of any Debenture Event of
Default may be effective, without the prior consent of the holders of at least
a majority of the aggregate Liquidation Amount of the Preferred Securities and
that if the consent of the holder of each Subordinated Debenture is required,
such modification will not be effective until each holder to Trust Securities
has consented thereto.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes an event of default (each, a "Debenture Event of
Default") with respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated
Debentures when due (subject to the deferral of any due date in the case of
an Extended Interest Payment Period); or
(ii) failure to pay any principal of the Subordinated Debentures when
due whether at maturity, upon redemption, or by declaration or otherwise;
or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the Subordinated Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization of the
Company.
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The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee.
The Debenture Trustee, or the holders of not less than 25% in aggregate
outstanding principal amount of the Subordinated Debentures, may declare the
principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Preferred Securities will have such right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures, and any other amounts payable under
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest on or
principal of the Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Preferred Securities may institute
a legal proceeding directly against the Company for enforcement of payment to
such holder of the principal of or interest on such Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such holder (a "Direct Action"). In connection with
such Direct Action, the Company will have a right of set-off under the
Indenture to the extent of any payment made by the Company to such holder of
Preferred Securities in the Direct Action. The Company may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities. If the
right to bring a Direct Action is removed, Lakeland Trust may become subject to
the reporting obligations under the Exchange Act.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debentures unless there has been
an Event of Default under the Trust Agreement. See "Description of the
Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Company may not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to
any Person, and any Person may not consolidate with or merge into the Company
or sell, convey, transfer or otherwise dispose of its properties and assets
substantially as an entirety to the Company, unless (i) in the event the
Company consolidates with or merges into another Person or conveys or transfers
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes by
supplemental indenture the Company's obligations on the Subordinated Debentures
issued under the Indenture, (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time
or both, would become a Debenture Event of Default, has occurred and is
continuing, and (iii) certain other conditions as prescribed in the Indenture
are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to the
Company's obligations to pay certain sums due pursuant to the Indenture and to
provide certain officers' certificates and opinions of counsel described
therein) and the Company will be deemed to have satisfied and discharged the
Indenture when, among other things, all Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation (i) have become due and
payable, or (ii) will become due and payable at their Stated Maturity within
one year or are to be called for
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redemption within one year, and the Company deposits or causes to be deposited
with the Debenture Trustee trust funds, in trust, for the purpose and in an
amount sufficient to pay and discharge the entire indebtedness on the
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal and interest to the date of the deposit or to
the Stated Maturity or redemption date, as the case may be.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of Indiana.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all of the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The Debenture Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
The Company has agreed, pursuant to the Indenture, for so long as Trust
Securities remain outstanding, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of Lakeland Trust (provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Company's ownership of the Common Securities), (ii) not to voluntarily
terminate, wind up or liquidate Lakeland Trust, except upon prior approval of
the Federal Reserve if then so required under applicable capital guidelines or
policies of the Federal Reserve, and (a) in connection with a distribution of
Subordinated Debentures to the holders of the Preferred Securities in
liquidation of Lakeland Trust, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause Lakeland Trust to remain classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes.
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DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by the Company concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Guarantee Trustee, State Street Bank and Trust Company, will
act as indenture trustee under the Guarantee for purposes of complying with the
provisions of the Trust Indenture Act and will hold the Guarantee for the
benefit of the holders of the Preferred Securities. The following summary of
the material terms and provisions of the Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Guarantee and the Trust Indenture Act. Wherever
particular defined terms of the Guarantee are referred to, but not defined
herein, such defined terms are incorporated herein by reference. The form of
the Guarantee has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
GENERAL
The Company will, pursuant to the Guarantee, irrevocably agree to pay in
full on a subordinated basis, to the extent set forth therein, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that
Lakeland Trust may have or assert other than the defense of payment. The
following payments with respect to the Preferred Securities, to the extent not
paid by or on behalf of Lakeland Trust (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accrued and unpaid Distributions required to
be paid on the Preferred Securities, to the extent that Lakeland Trust has
funds available therefor at such time, (ii) the Redemption Price with respect
to any Preferred Securities called for redemption to the extent that Lakeland
Trust has funds available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of Lakeland Trust (other
than in connection with the distribution of Subordinated Debentures to the
holders of Preferred Securities or a redemption of all of the Preferred
Securities), the lesser of (a) the amount of the Liquidation Distribution, to
the extent Lakeland Trust has funds available therefor at such time, and (b)
the amount of assets of Lakeland Trust remaining available for distribution to
holders of Preferred Securities in liquidation of Lakeland Trust. The
obligation of the Company to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of the
Preferred Securities or by causing Lakeland Trust to pay such amounts to such
holders.
The Guarantee will not apply to any payment of Distributions except to the
extent Lakeland Trust has funds available therefor. If the Company does not
make interest payments on the Subordinated Debentures held by Lakeland Trust,
Lakeland Trust will not pay Distributions on the Preferred Securities and will
not have funds legally available therefor.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company in the same
manner as the Subordinated Debentures. The Guarantee does not place a
limitation on the amount of additional Senior Debt, Subordinated Debt or
Additional Senior Obligations that may be incurred by the Company. The Company
expects from time to time to incur additional indebtedness constituting Senior
Debt, Subordinated Debt and Additional Senior Obligations.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other Person). The Guarantee will
not be discharged except by payment of the Guarantee Payments in full to the
extent not paid by Lakeland Trust or upon distribution of the Subordinated
Debentures to the holders of the Preferred Securities. Because the Company is a
holding company, the right of the Company to participate in any distribution of
assets of the Bank upon the Bank's liquidation or reorganization or otherwise
is subject to the prior claims of creditors of the Bank, except to the extent
the Company may itself be recognized as a creditor of the Bank. The Company's
obligations under the Guarantee, therefore, will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, and
claimants should look only to the assets of the Company for payments
thereunder.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will
be required), the Guarantee may not be amended without the prior approval of
the holders of not less than a majority of the aggregate Liquidation Amount of
the outstanding Preferred Securities. See "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in the Guarantee will bind the successors, assigns,
receivers, trustees and representatives of the Company and will inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against Lakeland Trust, the Guarantee
Trustee or any other Person.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or
her own affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of any Preferred Securities, unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (a)
full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of Lakeland Trust, or (c)
distribution of the Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Preferred Securities must
restore payment of any sums paid under such Preferred Securities or the
Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of Indiana.
EXPENSE AGREEMENT
The Company will, pursuant to the Agreement as to Expenses and Liabilities
entered into by it under the Trust Agreement (the "Expense Agreement"),
irrevocably and unconditionally guarantee to each person or entity to whom
Lakeland Trust becomes indebted or liable, the full payment of any costs,
expenses or liabilities of Lakeland Trust, other than obligations of Lakeland
Trust to pay to the holders of the Preferred Securities or other similar
interests in Lakeland Trust of the amounts due such holders pursuant to the
terms of the Preferred Securities or such other similar interests, as the case
may be. Third party creditors of Lakeland Trust may proceed directly against
the Company under the Expense Agreement, regardless of whether such creditors
had notice of the Expense Agreement.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent Lakeland Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee." The Company and Lakeland
Trust believe that, taken together, the obligations of the Company under the
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement, and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment of Distributions
and other amounts due on the Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the obligations of Lakeland Trust under the
Preferred Securities. If and to the extent that the Company does not make
payments on the Subordinated Debentures, Lakeland Trust will not pay
Distributions or other amounts due on the Preferred Securities. The Guarantee
does not cover payment of Distributions when Lakeland Trust does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of Preferred Securities is to institute a legal proceeding directly
against the Company for enforcement of payment of such Distributions to such
holder. The obligations of the Company under the Guarantee are subordinate and
junior in right of payment to all Senior Debt, Subordinated Debt and Additional
Senior Obligations of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Subordinated Debentures will
be equal to the sum of the aggregate stated Liquidation Amount of the Trust
Securities, (ii) the interest rate and interest and other payment dates on the
Subordinated Debentures will match the Distribution rate and Distribution and
other payment dates for the Preferred Securities, (iii) the Company will pay
for all and any costs, expenses and liabilities of Lakeland Trust (except the
obligations of Lakeland Trust to holders of the Preferred Securities), and (iv)
the Trust Agreement further provides that Lakeland Trust will not engage in any
activity that is not consistent with the limited purposes of Lakeland Trust.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, Lakeland
Trust or any other Person. A default or event of default under any Senior Debt,
Subordinated Debt or Additional Senior Obligations of the Company would not
constitute a default or Event of Default. In the event, however, of payment
defaults under, or acceleration of, Senior Debt, Subordinated Debt or
Additional Senior Obligations of the Company, the subordination provisions of
the Indenture provide that no payments may be made in respect of the
Subordinated Debentures until such Senior Debt, Subordinated Debt or Additional
Senior Obligations has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on the Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF LAKELAND TRUST
The Preferred Securities evidence a preferred undivided beneficial interest
in the assets of Lakeland Trust. Lakeland Trust exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in Subordinated
Debentures. A principal difference between the rights of a holder of a
Preferred Security and the rights of a holder of a Subordinated Debenture is
that a holder of a Subordinated Debenture is entitled to receive from the
Company the principal amount of and interest accrued on Subordinated Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions from Lakeland Trust (or from the Company under the Guarantee) if
and to the extent Lakeland Trust has funds available for the payment of such
Distributions.
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RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
Lakeland Trust involving the liquidation of the Subordinated Debentures, the
holders of the Preferred Securities will be entitled to receive, out of assets
held by Lakeland Trust, the Liquidation Distribution in cash. See "Description
of the Preferred Securities--Liquidation Distribution Upon Termination." Upon
any voluntary or involuntary liquidation or bankruptcy of the Company, the
Property Trustee, as holder of the Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Debt, Subordinated Debt and Additional Senior Obligations of the Company
(as set forth in the Indenture), but entitled to receive payment in full of
principal and interest before any stockholders of the Company receive payments
or distributions. Since the Company is the guarantor under the Guarantee and
has agreed to pay for all costs, expenses and liabilities of Lakeland Trust
(other than the obligations of Lakeland Trust to the holders of its Preferred
Securities), the positions of a holder of the Preferred Securities and a holder
of the Subordinated Debentures relative to other creditors and to stockholders
of the Company in the event of liquidation or bankruptcy of the Company are
expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the material United States federal income tax
considerations that may be relevant to the purchasers of Preferred Securities
which has been passed upon by Lewis, Rice & Fingersh, L.C., special counsel to
the Company insofar as it relates to matters of law and legal conclusions. The
conclusions expressed herein are based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), regulations thereunder and
current administrative rulings and court decisions, all of which are subject to
change at any time, with possible retroactive effect. Subsequent changes may
cause tax consequences to vary substantially from the consequences described
below. Furthermore, the authorities on which the following summary is based are
subject to various interpretations, and it is therefore possible that the
United States federal income tax treatment of the purchase, ownership, and
disposition of Preferred Securities may differ from the treatment described
below.
No attempt has been made in the following discussion to comment upon all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and
who acquire Preferred Securities on their original issue at their offering
price and hold Preferred Securities as capital assets. The discussion has only
limited application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position in
a "straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. The following summary also does not address the tax consequences
to persons that have a functional currency other than the United States dollar
or the tax consequences to stockholders, partners or beneficiaries of a holder
of Preferred Securities. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. Accordingly, each prospective investor should consult, and should
rely exclusively on, such investor's own tax advisors in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Preferred Securities.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
The Company intends to take the position that the Subordinated Debentures
will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a
Preferred Security, each holder covenants to treat the Subordinated Debentures
as indebtedness and the Preferred Securities as evidence of an indirect
beneficial ownership interest in the Subordinated Debentures. No assurance can
be given, however, that such position of the Company will not be challenged by
the Internal Revenue Service or, if challenged, that such a challenge will not
be successful. The remainder of this discussion assumes that the Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company.
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CLASSIFICATION OF LAKELAND TRUST
Under current law and assuming full compliance with the terms of the Trust
Agreement and Indenture (and certain other documents described herein),
Lakeland Trust will be classified for United States federal income tax purposes
as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be treated as owning an undivided
beneficial interest in the Subordinated Debentures, and each holder will be
required to include in his gross income any OID accrued with respect to his
allocable share of the Subordinated Debentures whether or not cash is actually
distributed to such holder.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations"), a debt
instrument will be deemed to be issued with OID if there is more than a
"remote" contingency that periodic stated interest payments due on the
instrument will not be timely paid. Because the exercise by the Company of its
option to defer the payment of stated interest on the Subordinated Debentures
would prevent the Company from declaring dividends on any class of equity, the
Company believes that the likelihood of its exercising the option is "remote"
within the meaning of the Regulations. As a result, the Company intends to take
the position that the Subordinated Debentures will not be deemed to be issued
with OID. Accordingly, based on this position, stated interest payments on the
Subordinated Debentures will be includible in the ordinary income of a holder
at the time that such payments are paid or accrued in accordance with the
holder's regular method of accounting. Because the Regulations have not yet
been addressed in any published rulings or other published interpretations
issued by the Internal Revenue Service, it is possible that the Internal
Revenue Service could take a position contrary to the position taken by the
Company.
If the Company were to exercise its option to defer the payment of stated
interest on the Subordinated Debentures, the Subordinated Debentures would be
treated, solely for purposes of the OID rules, as being "re-issued" at such
time with OID. The amount of interest income includible in the taxable income
of a holder of the Subordinated Debentures would be determined on the basis of
a constant yield method over the remaining term of the instrument regardless of
the holder's method of tax accounting and the actual receipt of future payments
of stated interest on the Subordinated Debentures would no longer be separately
reported as taxable income. Consequently, a holder of Preferred Securities
would be required to include OID in ordinary income, on a current basis, over
the period that the instrument is held even though the Company would not be
making any actual cash payments during the Extended Interest Payment Period.
The amount of OID that would accrue, in the aggregate, during the Extended
Interest Payment Period would be approximately equal to the amount of the cash
payment due at the end of such period. Moreover, under the Regulations, if the
option to defer the payment of interest income with respect to the Subordinated
Debentures was determined not to be "remote," the Subordinated Debentures
would be treated as having been originally issued with OID. In such event, all
of a holder's taxable interest income would be accounted for as OID and any OID
included in income would increase the holder's adjusted tax basis in the
Subordinated Debentures and the holder's actual receipt of interest payments
would reduce such basis.
Because income on the Preferred Securities will constitute interest income
for United States federal income tax purposes, corporate holders of Preferred
Securities will not be entitled to claim a dividends received deduction in
respect of such income.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Subordinated Debentures with "market
discount" or "acquisition premium" as such phrases are defined for United
States federal income tax purposes. Such holders are advised to consult their
tax advisors as to the income tax consequences of the acquisition, ownership
and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF LAKELAND TRUST
Under certain circumstances, as described under "Description of the
Preferred Securities--Redemption" and "--Liquidation Distribution Upon
Termination," the Subordinated Debentures may be distributed to holders of
Preferred Securities upon a liquidation of Lakeland Trust. Under current United
States federal income tax law, such a
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distribution would be treated as a nontaxable event to each such holder and
would result in such holder having an adjusted tax basis in the Subordinated
Debentures received in the liquidation equal to such holder's adjusted tax
basis in the Preferred Securities immediately before the distribution. A
holder's holding period in the Subordinated Debentures so received in
liquidation of Lakeland Trust would include the period for which such holder
held the Preferred Securities.
If, however, a Tax Event occurs which results in Lakeland Trust being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Preferred Securities. Under
certain circumstances described herein, the Subordinated Debentures may be
redeemed for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and a holder would recognize
gain or loss as if the holder sold such Preferred Securities for cash. See
"Description of the Preferred Securities--Redemption" and "--Liquidation
Distribution Upon Termination."
DISPOSITION OF PREFERRED SECURITIES
Upon the sale of the Preferred Securities, a holder will recognize a gain
or loss in an amount equal to the difference between his adjusted tax basis in
the Preferred Securities and the amount realized in the sale (except to the
extent of any amount received in respect of accrued but unpaid interest not
previously included in income). A holder's adjusted tax basis in the Preferred
Securities generally will be its initial purchase price increased by OID (if
any) previously includible in the holder's gross income to the date of
disposition and decreased by payments (if any) received on the Preferred
Securities in respect of OID to the date of disposition. Such gain or loss
generally will be a capital gain or loss. As a result of the recently enacted
Taxpayer Relief Act of 1997, the tax rates applicable to capital gains from
the disposition of Preferred Securities generally will vary depending upon
whether, at the time of disposition, the Preferred Securities have been held
for more than twelve months or more than eighteen months.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID if the Subordinated
Debentures are treated as having been issued, or reissued, with OID) with
respect to the underlying Subordinated Debentures. A holder who disposes of his
Preferred Securities between record payment dates will be required to include
in ordinary income any portion of the amount realized that is attributable to
accrued but unpaid interest (or OID, if any) to the extent not previously
included in income on the holder's pro rata share of the underlying
Subordinated Debentures during the taxable year of sale through the date of
disposition. To the extent that the amount realized in the sale is less than
the holder's adjusted tax basis, a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
Certain legislative proposals were made in 1996 and 1997 which, if enacted,
could have adversely affected the ability of the Company to deduct interest
paid on the Subordinated Debentures. These proposals were not, however,
incorporated into the legislation enacted on August 5, 1997 as the Taxpayer
Relief Act of 1997. Nevertheless, there can be no assurance that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Subordinated
Debentures. Consequently, there can be no assurance that a Tax Event will not
occur. A Tax Event would permit the Company, upon approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve, to cause a redemption of the Preferred Securities before, as
well as after, September 30, 2002. See "Description of the Subordinated
Debentures--Redemption" and "Description of the Preferred Securities--
Redemption--Tax Event Redemption, Capital Treatment Event Redemption or
Investment Company Event Redemption."
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of interest paid on the Preferred Securities held of record by
individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the Internal Revenue Service on
Forms 1099, which forms should be mailed to such holders of Preferred
Securities by January 31 following each calendar year. Payments, including
interest, made on, and proceeds from the sale of, the Preferred Securities may
be subject to a "backup" withholding tax (currently at 31%) unless the holder
complies with certain identification and other
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requirements. Any amounts withheld under the
backup withholding rules may be allowed as a credit against the holder's United
States federal income tax liability, provided the required information is
provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED
SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Preferred Securities, subject to the
investing fiduciary's determination that the investment in Preferred Securities
satisfies ERISA's fiduciary standards and other requirements applicable to
investments by the Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified
person" (within the meaning of Section 4975 of the Code) with respect to
certain plans (generally, Plans maintained or sponsored by, or contributed to
by, any such persons with respect to which the Company or an affiliate is a
fiduciary or Plans for which the Company or an affiliate provides services).
The acquisition and ownership of Preferred Securities by a Plan (or by an
individual retirement arrangement or other Plans described in Section
4975(e)(1) of the Code) with respect to which the Company or any of its
affiliates is considered a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable exemption. Any other Plans or other
entities whose assets include Plan assets subject to ERISA or Section 4975 of
the Code proposing to acquire Preferred Securities should consult with their
own counsel.
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UNDERWRITING
Stifel, Nicolaus & Company, Incorporated, the Underwriter, has agreed,
subject to the terms and conditions set forth in the Underwriting Agreement,
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, to purchase 1,800,000 Preferred Securities from
Lakeland Trust. The Underwriter has agreed in the Underwriting Agreement,
subject to the terms and conditions set forth therein, to purchase all the
Preferred Securities offered hereby if any of the Preferred Securities are
purchased.
The Underwriter has advised Lakeland Trust that it proposes initially to
offer the Preferred Securities to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per Preferred Security. The
Underwriter may allow, and such dealers may reallow, a discount not in excess
of $ per Preferred Security to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed. Because the National Association of Securities Dealers, Inc.
("NASD") is expected to view the Preferred Securities as interests in a
direct participation program, the offering of the Preferred Securities is being
made in compliance with the applicable provisions of Rule 2810 of the NASD's
Conduct Rules.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of the Company,
the Underwriting Agreement provides that the Company will pay as compensation
to the Underwriter arranging the investment therein of such proceeds $ per
Preferred Security (or $ in the aggregate) for the accounts of the
Underwriter.
Lakeland Trust has granted the Underwriter an option to purchase up to an
additional 200,000 Preferred Securities at the initial public offering price.
Such option, which expires 30 days from the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent that the Underwriter
exercises its option to purchase additional Preferred Securities, Lakeland
Trust will issue and sell to the Company additional Common Securities in such
aggregate Liquidation Amount as is required for the Company to continue to hold
Common Securities in an aggregate Liquidation Amount equal to at least 3% of
the total capital of Lakeland Trust and the Company will issue and sell to
Lakeland Trust Subordinated Debentures in an aggregate principal amount equal
to the total aggregate Liquidation Amount of the additional Preferred
Securities being purchased pursuant to the option.
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market. The Underwriter has
advised Lakeland Trust that it presently intends to make a market in the
Preferred Securities after the commencement of trading on The Nasdaq Stock
Market's National Market, but no assurances can be made as to the liquidity of
such Preferred Securities or that an active and liquid trading market will
develop or, if developed, that it will continue. The offering price and
distribution rate have been determined by negotiations among representatives of
the Company and the Underwriter, and the offering price of the Preferred
Securities may not be indicative of the market price following the offering.
The Underwriter will have no obligation to make a market in the Preferred
Securities, however, and may cease market-making activities, if commenced, at
any time.
Lakeland Trust and the Company have agreed to indemnify the Underwriter
against, or contribute to payments that the Underwriter may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act.
In order to facilitate the offering of the Preferred Securities, the
Underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the Preferred Securities. Specifically, the Underwriter may
over-allot in connection with the offering, creating a short position in the
Preferred Securities for its own account. In addition, to cover over-allotments
or to stabilize the price of the Preferred Securities, the Underwriter may bid
for, and purchase, the Preferred Securities in the open market. The Underwriter
may reclaim selling concessions allowed to a dealer for distributing the
Preferred Securities in the offering, if the Underwriter repurchases previously
distributed Preferred Securities in transactions to cover short positions in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Preferred Securities above independent
market levels. The Underwriter is not required to engage in these activities,
and may end any of these activities at any time.
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VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of
Lakeland Trust will be passed upon by Richards, Layton & Finger, special
Delaware counsel to the Company and Lakeland Trust. Certain legal matters for
the Company and Lakeland Trust, including the validity of the Guarantee and the
Subordinated Debentures, will be passed upon for the Company and Lakeland Trust
by Lewis, Rice & Fingersh, L.C., St. Louis, Missouri, counsel to the Company
and Lakeland Trust. Certain legal matters will be passed upon for the
Underwriter by Bryan Cave LLP, St. Louis, Missouri. Counsel for the Company,
Lakeland Trust and the Underwriter will rely on the opinion of Richards, Layton
& Finger as to matters of Delaware law. Certain matters relating to United
States federal income tax considerations will be passed upon for the Company by
Lewis, Rice & Fingersh, L.C.
EXPERTS
The audited consolidated financial statements of the Company and its
subsidiaries incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 have been audited by Crowe,
Chizek and Company LLP, independent certified public accountants, as stated in
their report, which report is incorporated herein by reference and has been so
incorporated in reliance on the report having been given upon the authority of
said firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the
Securities and Exchange Commission pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996; and
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997.
All reports and any definitive proxy or information statements filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Preferred Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO TERRY M. WHITE, EXECUTIVE VICE PRESIDENT, SECRETARY AND TREASURER,
LAKELAND FINANCIAL CORPORATION, 202 EAST CENTER STREET, WARSAW, INDIANA 46581.
TELEPHONE REQUESTS MAY BE DIRECTED TO (219) 267-6144.
42
<PAGE> 47
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and Lakeland Trust with the Commission under
the Securities Act, with respect to the Preferred Securities, the Subordinated
Debentures and the Guarantee. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
although it does include a summary of the material terms of the Trust
Agreement, the Indenture and the Guarantee. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company, Lakeland Trust, the Preferred
Securities, the Subordinated Debentures and the Guarantee. Any statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission or
incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified
in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Lakeland Trust is not currently subject to the
information reporting requirements of the Exchange Act and, although Lakeland
Trust will become subject to such requirements upon the effectiveness of the
Registration Statement, it is not expected that Lakeland Trust will be filing
separate reports under the Exchange Act. The Company's reports, proxy
statements and other information can be inspected and copied at the following
public reference facilities maintained by the Commission: 450 Fifth Street,
N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New
York 10048; and the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may also be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, upon payment of prescribed rates. The
Commission maintains in Internet web site that contains reports, proxy and
information statements and other information regarding issuers who file
electronically with the Commission. The address of that site is
http://www.sec.gov.
No separate financial statements of Lakeland Trust have been included
herein. The Company does not consider that such financial statements would be
material to holders of Preferred Securities because (i) all of the voting
securities of Lakeland Trust will be owned by the Company, a reporting company
under the Exchange Act, (ii) Lakeland Trust has no independent operations but
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of Lakeland Trust and investing the proceeds
thereof in Subordinated Debentures issued by the Company, and (iii) the
obligations of the Company described herein to provide certain indemnities in
respect of and be responsible for certain costs, expenses, debts and
liabilities of Lakeland Trust under the Indenture and pursuant to the Trust
Agreement, the guarantee issued by the Company with respect to the Preferred
Securities, the Subordinated Debentures purchased by Lakeland Trust and the
related Indenture, taken together, constitute, in the belief of the Company and
Lakeland Trust, a full and unconditional guarantee of payments due on the
Preferred Securities. See "Description of the Subordinated Debentures" and
"Description of the Guarantee."
43
<PAGE> 48
- ------------------------------------------------------------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 2
Summary Consolidated Financial Data........................................ 7
Risk Factors............................................................... 8
Use of Proceeds............................................................ 13
Market for the Preferred Securities........................................ 13
Accounting Treatment....................................................... 13
Capitalization............................................................. 14
Pro Forma Condensed Consolidated Balance Sheet............................. 15
Description of the Preferred Securities.................................... 17
Description of the Subordinated Debentures................................. 26
Description of the Guarantee............................................... 34
Relationship Among the Preferred Securities, the Subordinated Debentures
and the Guarantee........................................................ 36
Certain Federal Income Tax Consequences.................................... 37
ERISA Considerations....................................................... 40
Underwriting............................................................... 41
Validity of Securities..................................................... 42
Experts.................................................................... 42
Incorporation of Certain Documents by Reference............................ 42
Available Information...................................................... 43
</TABLE>
------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY LAKELAND
FINANCIAL CORPORATION, LAKELAND CAPITAL TRUST OR THE UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF LAKELAND FINANCIAL CORPORATION SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1,800,000 PREFERRED SECURITIES
LAKELAND
CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
[LOGO]
LAKELAND
FINANCIAL CORPORATION
-------------------
$18,000,000
% SUBORDINATED DEBENTURES
OF
LAKELAND
FINANCIAL CORPORATION
-------------------
Prospectus
, 1997
------------------------
STIFEL, NICOLAUS & COMPANY
INCORPORATED
- ------------------------------------------------------------------------------
<PAGE> 49
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14--OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee....................................................... $ 6,061
NASD Filing Fee............................................................ 2,500
Nasdaq Listing Fee......................................................... 15,000
Blue Sky Qualification Fees and Expenses................................... 3,000
Accounting Fees and Expenses............................................... 25,000
Legal Fees and Expenses.................................................... 100,000
Trustees' Fees and Expenses................................................ 20,000
Printing and Engraving Expenses............................................ 35,000
Transfer and Registrar Fees................................................ 5,000
Miscellaneous.............................................................. 38,439
--------
Total.................................................................. $250,000
========
</TABLE>
ITEM 15--INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23-1-37-9 of the Indiana Business Corporation Law (the "Indiana
Law") provides for "mandatory indemnification," unless limited by the
articles of incorporation, by a corporation against reasonable expenses
incurred by a director who is wholly successful, on the merits or otherwise, in
the defense of any proceeding to which the director was a party by reason of
the director being or having been a director of the corporation. Section
23-1-37-10 of the Indiana Law states that a corporation may, in advance of the
final disposition of a proceeding, reimburse reasonable expenses incurred by a
director who is a party to a proceeding if the director furnishes the
corporation with a written affirmation of the director's good faith belief that
the director has met the standard of conduct required by Section 23-1-37-8 of
the Indiana Law, that the director will repay the advance if it is ultimately
determined that he did not meet the standard of conduct required by Section
23-1-37-8 of the Indiana Law, and that those making the decision to reimburse
the director determine that the facts then known would not preclude
indemnification under the Indiana Law.
The Company's Articles of Incorporation and Bylaws extend indemnification
rights to its directors and officers to the fullest extent authorized by the
Indiana Law. In addition, the Articles of Incorporation and Bylaws permit the
Company to maintain insurance to protect itself and any of its directors,
officers or representatives against any liability asserted against such person
and incurred in any such capacity or arising out of such status whether or not
the Company would have the power to indemnify such person under the Indiana
Law.
II-1
<PAGE> 50
ITEM 16--EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
(a) Exhibits
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Subordinated Debenture (included as an exhibit of
Exhibit 4.1).
4.3 Certificate of Trust of Lakeland Capital Trust.
4.4 Trust Agreement of Lakeland Capital Trust.
4.5 Form of Amended and Restated Trust Agreement.
4.6 Form of Preferred Security Certificate (included as an
exhibit to Exhibit 4.5).
4.7 Form of Preferred Securities Guarantee Agreement.
4.8 Form of Agreement as to Expenses and Liabilities (included
as an exhibit to Exhibit 4.5).
5.1 Opinion of Lewis, Rice & Fingersh, L.C., as to the
validity of the issuance of the Subordinated
Debentures.
5.2 Opinion of Richards, Layton & Finger, special Delaware
counsel, as to the legality of the Preferred Securities.
8.1 Opinion of Lewis, Rice & Fingersh, L.C., as to certain
federal income tax matters.
12.1 Statements Regarding Computation of Ratio of Earnings to
Fixed Charges.
23.1<F*> Consent of Crowe, Chizek and Company LLP, Independent
Accountants.
23.2 Consent of Lewis, Rice & Fingersh, L.C. (included in their
opinions filed herewith as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger (included in their
opinion filed herewith as Exhibit 5.2).
24.1 Power of Attorney (included on the signature page).
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Amended and
Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company to act as trustee under the Preferred
Securities Guarantee Agreement.
<FN>
- --------------
<F*> Filed herewith. All other exhibits previously filed.
</TABLE>
(b) Financial Statement Schedules--Not applicable as all required
information is contained in the financial statements and the notes thereto or
in the selected financial data.
ITEM 17--UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions described under
"Item 15--Indemnification of Directors and Officers" above, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes that: (1) For purposes of determining any
liability under the Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and (2) For
the purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Warsaw, Indiana on August 11, 1997.
LAKELAND FINANCIAL CORPORATION
By: /s/ R. DOUGLAS GRANT
------------------------------------
R. Douglas Grant
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Warsaw, Indiana on August 11, 1997.
LAKELAND CAPITAL TRUST
By: /s/ R. DOUGLAS GRANT
------------------------------------
R. Douglas Grant, Trustee
By: /s/ TERRY M. WHITE
------------------------------------
Terry M. White, Trustee
By: /s/ WALTER L. WELDY
------------------------------------
Walter L. Weldy, Trustee
II-3
<PAGE> 52
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ R. DOUGLAS GRANT Chairman of the Board, President and Chief Executive August 11, 1997
- --------------------------------------- Officer (Principal Executive Officer)
R. Douglas Grant
/s/ TERRY M. WHITE Secretary and Treasurer (Principal August 11, 1997
- --------------------------------------- Financial and Accounting Officer)
Terry M. White
<F*> Director August 11, 1997
- ---------------------------------------
Anna K. Duffin
Director , 1997
- ---------------------------------------
Eddie Creighton
<F*> Director August 11, 1997
- ---------------------------------------
L. Craig Fulmer
<F*> Director August 11, 1997
- ---------------------------------------
Jerry L. Helvey
<F*> Director August 11, 1997
- ---------------------------------------
Kevin L. Lambright
<F*> Director August 11, 1997
- ---------------------------------------
Allan J. Ludwig
<F*> Director August 11, 1997
- ---------------------------------------
J. Alan Morgan
<F*> Director August 11, 1997
- ---------------------------------------
Richard L. Pletcher
<F*> Director August 11, 1997
- ---------------------------------------
Joseph P. Prout
Director , 1997
- ---------------------------------------
Terry L. Tucker
<F*> Director August 11, 1997
- ---------------------------------------
G. L. White
<FN>
<F*> /s/ R. DOUGLAS GRANT
-----------------------------------
R. Douglas Grant
Attorney-in-fact
</TABLE>
II-4
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ---------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Subordinated Debenture (included as an exhibit to Exhibit 4.1).
4.3 Certificate of Trust of Lakeland Capital Trust.
4.4 Trust Agreement of Lakeland Capital Trust.
4.5 Form of Amended and Restated Trust Agreement.
4.6 Form of Preferred Security Certificate (included as an exhibit to Exhibit 4.5).
4.7 Form of Preferred Securities Guarantee Agreement.
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit to
Exhibit 4.5).
5.1 Opinion of Lewis, Rice & Fingersh, L.C., as to the validity of the issuance of
the Subordinated Debentures.
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the
legality of the Preferred Securities.
8.1 Opinion of Lewis, Rice & Fingersh, L.C., as to certain federal income tax
matters.
12.1 Statements Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1<F*> Consent of Crowe, Chizek and Company LLP, Independent Accountants.
23.2 Consent of Lewis, Rice & Fingersh, L.C. (included in their opinions filed
herewith as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger (included in their opinion filed herewith
as Exhibit 5.2).
24.1 Power of Attorney (included on the signature page).
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act
as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act
as trustee under the Amended and Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act
as trustee under the Preferred Securities Guarantee Agreement.
<FN>
<F*> Filed herewith. All other exhibits previously filed.
</TABLE>
II-5
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the reference to our firm under the caption "Experts" in this
Amendment No. 1 to the Prospectus and Registration Statement on Form S-3 of
Lakeland Financial Corporation for the registration of Lakeland Capital Trust
Preferred Securities and to the incorporation by reference of our report dated
January 16, 1997, with respect to the consolidated financial statements of
Lakeland Financial Corporation included in its Annual Report (Form 10-K) for
the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
Crowe, Chizek and Company LLP
/s/ Crowe, Chizek and Company LLP
South Bend, Indiana
August 8, 1997
