<PAGE>
As Filed with the Securities and Exchange Commission on May 12, 1999
Registration No. 333-
Registration No. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________________________________
USABancShares, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania 551111 23-2806495
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(State or Other (Primary North American (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Organization) System Number)
USA Capital Trust I
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(Exact Name of Registrant as Specified in Its Trust Agreement)
Delaware 525920 25-6639461
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(State or Other (Primary North American (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Organization) System Number)
1535 Locust Street, Philadelphia, Pennsylvania 19102, (215) 569-4200
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(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Principal Executive Offices)
Kenneth L. Tepper
President and Chief Executive Officer
USABancShares, Inc.
1535 Locust Street
Philadelphia, Pennsylvania 19102
(215) 569-4200
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(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies To:
Stephen T. Burdumy, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102
(215) 568-6060
_______________________________________
Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, 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 the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Title of Each Class Of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities Registered Offering Price Per Aggregate Offering Registration Fee
To Be Registered Unit (1) Price (1)
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<S> <C> <C> <C> <C>
Series B Capital Securities $10,000,000 100% $10,000,000 $2,780.00
of USA Capital Trust I
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Series B Junior $10,000,000 100% $10,000,000 N/A
Subordinated Deferrable
Interest Debentures of
USABancShares, Inc. (2)
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USABancShares, Inc. Series N/A N/A N/A N/A
B Guarantee with respect to
Series B Capital
Securities(3)
- --------------------------------------------------------------------------------------------------------------------
Total $10,000,000(4) 100% $10,000,000(4) $2,780.00
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the Series B Junior
Subordinated Deferrable Interest Debentures of USABancShares, Inc.
distributed upon any liquidation of USA Capital Trust I.
(3) No separate consideration will be received for the USABancShares, Inc.
Series B Guarantee.
(4) Such amount represents the liquidation amount of the USA Capital Trust
I Series B Capital Securities to be exchanged hereunder and the
principal amount of Junior Subordinated Debentures that may be
distributed to holders of such Capital Securities upon any liquidation
of USA Capital Trust I.
The Registrants hereby amend this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY ___, 1999
The information in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
USA CAPITAL TRUST I
Offer to exchange
Series B 9.50% Capital Securities
(Liquidation Amount $1,000 per Series B Capital Security)
for any and all of its outstanding
Series A 9.50% Capital Securities
(Liquidation Amount $1,000 per Series A Capital Security)
Fully and Unconditionally Guaranteed as described in this Prospectus by
USABancShares, Inc.
USA Capital Trust I, a Delaware statutory business trust, is offering
to exchange up to $10,000,000 aggregate liquidation amount of its Series B 9.50%
Capital Securities (the "Exchange Capital Securities") for a similar amount of
its outstanding Series A 9.50% Capital Securities (the "Original Capital
Securities"). The Exchange Capital Securities are registered under the
Securities Act of 1933. There is currently $10,000,000 aggregate liquidation
amount of the Original Capital Securities outstanding.
As part of this exchange offer, USABancShares, Inc. is also offering to
exchange its guarantee of USA Capital Trust I's obligations under the Original
Capital Securities (the "Original Guarantee") for a similar guarantee of USA
Capital Trust I's obligations under the Exchange Capital Securities (the
"Exchange Guarantee"), as described in this Prospectus. Also as part of this
exchange offer, USABancShares, Inc. is offering to exchange up to $10,000,000 of
its Series B 9.50% Junior Subordinated Debentures (the "Exchange Junior
Subordinated Debentures") for a similar amount of its Series A 9.50% Junior
Subordinated Debentures (the "Original Junior Subordinated Debentures"). The
Exchange Guarantee and the Exchange Junior Subordinated Debentures are also
registered under the Securities Act.
The terms of the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee are the same as the terms of
the Original Capital Securities, the Original Junior Subordinated Debentures and
the Original Guarantee except that:
o each of the exchanged securities are registered under the Securities
Act and do not have the same restrictions on transfer as the
original securities;
o the distribution rate on the Exchange Capital Securities will not
have the potential to increase; and
o the Exchange Junior Subordinated Debentures will not be entitled to
any liquidated damages.
This Prospectus and a transmittal letter describing the procedures for
exchanging original securities for the exchange securities are first being
mailed to all of the holders of the original securities on May __, 1999.
You should carefully consider the "Risk Factors" beginning on page 11
before deciding whether to exchange your Original Capital Securities for
Exchange Capital Securities.
These securities are not deposits or other obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is May __, 1999.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
USABancShares files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission in
compliance with the information reporting requirements of the Exchange Act. You
may read and copy any document that USABancShares files with the Securities and
Exchange Commission at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, DC 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 at prescribed rates. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. USABancShares' filings are also available to the
public from commercial document retrieval services and from the web site
maintained by the Securities and Exchange Commission at "http://www.sec.gov."
Separate financial statements of USA Capital Trust I are not included
in this Prospectus. We do not believe that such financial statements are helpful
because USA Capital Trust I is a newly formed special purpose entity; USA
Capital Trust I has no operating history or independent operations; and USA
Capital Trust I is not engaged in, and does not propose to engage in, any
activity other than holding as trust assets the Junior Subordinated Debentures,
issuing the Trust Securities and engaging in incidental activities. See "USA
Capital Trust I." In addition, USABancShares does not expect that USA Capital
Trust I will file reports and other information under the Exchange Act with the
Securities and Exchange Commission.
This Prospectus is part of a registration statement filed by
USABancShares and the Trust with the Securities and Exchange Commission under
the Securities Act. As allowed by Securities and Exchange Commission rules, this
Prospectus does not contain all the information you can find in the registration
statement or the exhibits filed with the registration statement. You should
review the registration statement and the exhibits filed with such registration
statement for further information regarding USABancShares, USA Capital Trust I
and the Exchange Capital Securities being offered by this Prospectus. The
registration statement and its exhibits may be inspected at the public reference
facilities of the Securities and Exchange Commission at the addresses listed
above.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.
Important factors that may cause actual results to differ from
projections include, for example,
o general economic conditions, including their impact on capital
expenditures;
o business conditions in the financial services industry;
o the regulatory environment;
o rapidly changing technology and evolving banking industry standards;
o competitive factors, including increased competition with community,
regional and national financial institutions;
o new services and products offered by competitors; and
o price pressures.
<PAGE>
SUMMARY
This summary provides an overview of selected information contained
elsewhere in this Prospectus and does not contain all the information you should
consider. Therefore, you should also read the more detailed information
appearing elsewhere in this Prospectus and USABancShares' financial statements.
As used in this Prospectus: (i) the "Indenture" means the Indenture, dated as of
March 9, 1999, as amended and supplemented from time to time, between
USABancShares and Wilmington Trust Company, as trustee (the "Debenture
Trustee"), relating to the Junior Subordinated Debentures; (ii) the "Trust
Agreement" means the Amended and Restated Declaration of Trust relating to USA
Capital Trust I by and among USABancShares, as Sponsor, Wilmington Trust
Company, as Property Trustee (the "Property Trustee"), Wilmington Trust Company,
as Delaware Trustee (the "Delaware Trustee"), the three individual trustees (the
"Administrative Trustees") named therein (collectively, with the Property
Trustee and Delaware Trustee, the "Issuer Trustees") and the holders, from time
to time, of undivided beneficial interests in the assets of the Trust; (iii) the
"Guarantee" means the Guarantee Agreement relating to the Capital Securities
between USABancShares and Wilmington Trust Company, as Guarantee Trustee (the
"Guarantee Trustee"); and (iv) the "Common Guarantee" means the Guarantee
Agreement relating to the Common Securities. In addition, as the context may
require, (i) "Capital Securities" and "Trust Securities" include the Exchange
Capital Securities and the Original Capital Securities, (ii) "Junior
Subordinated Debentures" includes the Exchange Junior Subordinated Debentures
and the Original Junior Subordinated Debentures and (iii) "Guarantee" includes
the Exchange Guarantee and the Original Guarantee.
USABancShares, Inc.
USABancShares is a Pennsylvania corporation headquartered in
Philadelphia, Pennsylvania and was organized in November 1995 in order to
facilitate the acquisition of People's Thrift Savings Bank, which changed its
name to "BankPhiladelphia" in July 1998. BankPhiladelphia, which is the primary
business of USABancShares, has operated as a community-based financial
institution for over 110 years. BankPhiladelphia was originally organized in
1887 as a mutual building and loan association and converted to a
Pennsylvania-chartered stock savings bank in December 1990. Since USABancShares'
acquisition of BankPhiladelphia, senior management has undertaken a dual
strategy of (i) aggressively growing BankPhiladelphia's loan portfolio through
the purchase of pools of primarily performing loans at a discount, and (ii)
expanding BankPhiladelphia's retail banking franchise with an increasing
emphasis on loan originations (including loan participations with local
financial institutions). In April 1997, USABancShares acquired USACapital, Inc.,
a registered broker-dealer which is engaged in the business of trading stocks,
bonds, annuities and other investment-related products to the general public.
Since December 31, 1995, USABancShares has experienced significant
growth. Total assets have increased from $25.8 million at December 31, 1995 to
$165.1 million at December 31, 1998. Net loans receivable have grown from $7.0
million at December 31, 1995 to $102.1 million at December 31, 1998. This loan
growth has been principally funded by deposits, which have increased from $20.8
million at December 31, 1995 to $114.3 million at December 31, 1998.
Stockholders' equity increased from $4.7 million at December 31, 1995 to $13.6
million at December 31, 1998, primarily due to a private placement of $7.5
million of common stock which was completed in February 1998.
USABancShares, as a registered bank holding company, is subject to
examination and regulation by the Board of Governors of the Federal Reserve
System. BankPhiladelphia, as a Pennsylvania-chartered savings bank, is subject
to comprehensive regulation and examination by the Pennsylvania Department of
Banking, as its chartering authority and primary regulator, and by the Federal
Deposit Insurance Corporation, which administers the Bank Insurance Fund, which
insures BankPhiladelphia's deposits to the maximum extent permitted by law.
BankPhiladelphia is a member of the Federal Home Loan Bank of Pittsburgh.
BankPhiladelphia is further subject to regulations of the Board of Governors of
the Federal Reserve System governing reserves required to be maintained against
deposits and certain other matters. See "Regulation of USABancShares and
BankPhiladelphia."
USABancShares' executive offices are located at 1535 Locust Street,
Philadelphia, Pennsylvania 19102. BankPhiladelphia has retail locations at 1535
Locust Street in Center City Philadelphia, Plymouth Meeting, Pennsylvania, and a
"mini" branch known as "eBank" in the office, restaurant and retail complex
known as "The Bellevue" in Center City Philadelphia. BankPhiladelphia will open
its fourth retail location in Wynnewood, Pennsylvania during the second quarter
of 1999. USABancShares' telephone number is (215) 569-4200.
2
<PAGE>
USA Capital Trust I
The Trust is a statutory business trust created under Delaware law upon
execution of a declaration of trust and the filing of a certificate of trust
with the Delaware Secretary of State. The Trust's business and affairs are
conducted by the Property Trustee, the Delaware Trustee and the three individual
Administrative Trustees, who are officers of USABancShares. USA Capital Trust I
exists exclusively to:
o issue and sell the Trust Securities;
o use the proceeds from the sale of the Trust Securities to acquire
Junior Subordinated Debentures issued by USABancShares ; and
o engage in only those other activities necessary or incidental
to such activities (such as registering the transfer of the Trust
Securities).
The Junior Subordinated Debentures are the sole assets of the Trust,
and payments under the Junior Subordinated Debentures are the sole revenue of
the Trust. All of the common securities issued by USA Capital Trust I (the
"Common Securities") are owned by USABancShares.
<TABLE>
<CAPTION>
The Exchange Offer
<S> <C>
The Exchange Offer.......................... We are offering to exchange up to $10,000,000 aggregate liquidation
amount of Exchange Capital Securities for an equal aggregate liquidation
amount of Original Capital Securities. You may exchange all of your
Original Capital Securities or less than all of them provided that the
Original Capital Securities you exchange have a liquidation amount of at
least $100,000 (100 Capital Securities) or any integral multiple of $1,000
(one Capital Security) in excess of $100,000.
We are making this exchange offer in order to satisfy our obligations under
a Registration Rights Agreement relating to your Original Capital
Securities. See "The Exchange Offer" for a description of the procedures
for tendering your Original Capital Securities.
Expiration Date............................. The exchange offer will expire at 5:00 p.m., New York City time, on
_________, 1999, unless we extend it (in which case the expiration date
will be the latest date and time to which we extend the exchange offer).
See "The Exchange Offer--Expiration Date; Extension; Amendments."
Conditions to the Exchange Offer............ The exchange offer is subject to certain conditions, which we have the
discretion to waive. The exchange offer is not conditioned upon the tender
of any minimum liquidation amount of Original Capital Securities. See
"Exchange Offer--Conditions to the Exchange Offer."
Terms of the Exchange Offer................. We reserve the right, in our discretion and subject to applicable law, at
any time and from time to time:
o to delay the acceptance of the Original Capital Securities for exchange;
o to end the exchange offer if certain specified conditions are not satisfied;
o to extend the exchange offer's expiration date and keep all of the Original
Capital Securities tendered pursuant to the exchange offer, subject,
however, to your right to withdraw your tendered Original Capital
Securities; or
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
o to waive any condition or otherwise change the terms of the exchange
offer in any way.
See "The Exchange Offer--Terms of the Exchange Offer."
Withdrawal Rights........................... You may withdraw your tender of Original Capital Securities at any time
before the expiration date by delivering written notice of such withdrawal
to the exchange agent as provided in the procedures described below
under the caption "The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Original Capital Securities................. You must appropriately complete and sign a letter of transmittal and mail,
fax or hand deliver it, together with any other documents required by the
letter of transmittal, to the exchange agent, either with your Original
Capital Securities or in compliance with the specified procedures for
guaranteed delivery of Original Capital Securities. Certain brokers,
dealers, commercial banks, trust companies and other nominees may also
effect tenders by book-entry transfer. If your Original Capital Securities
are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee, you should contact such person promptly if
you wish to tender your Original Capital Securities pursuant to the
exchange offer. See "The Exchange Offer--Procedures for Tendering
Original Capital Securities."
Please do not send your letter of transmittal and certificates representing
your Original Capital Securities to us. You should only send such documents
to the exchange agent.
Resales of Exchange Capital Securities...... In making the exchange offer, we are relying on the position of the staff of
the Securities and Exchange Commission's Division of Corporation
Finance contained in certain interpretive letters addressed to third parties
in other transactions. However, we have not sought our own interpretive
letter. Therefore, there is no guarantee that the staff of the Securities and
Exchange Commission's Division of Corporation Finance would make a
similar determination regarding the exchange offer as it has in the
interpretive letters to third parties.
Accordingly, based on these interpretations, and subject to the provisions
of the two immediately following paragraphs, we believe that you may sell
or otherwise transfer Exchange Capital Securities issued to you pursuant to
this exchange offer in exchange for your Original Capital Securities (so
long as you are not a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the Securities Act.
However, if you are an "Affiliate" (as defined in Rule 144 promulgated
under the Securities Act) of either USABancShares or the Trust, if you
intend to participate in the exchange offer for the purpose of distributing
the Exchange Capital Securities, or if you are a broker-dealer who
purchased the Original Capital Securities from USA Capital Trust I to
resell them pursuant to Rule 144A or any other available exemption under
the Securities Act:
o you will not be able to rely on the interpretations described above;
o you will not be permitted or entitled to tender such Original Capital
Securities in the exchange offer; and
o you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other
transfer of your Original Capital Securities unless such sale is made
pursuant to an exemption from such requirements.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
In addition, as described below, if you are a broker-dealer holding
Original Capital Securities which you acquired for your own account as a
result of market-making or other trading activities and you exchange such
Original Capital Securities for Exchange Capital Securities, then you must
deliver a prospectus which meets the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
If you wish to exchange your Original Capital Securities for Exchange
Capital Securities, you will be required to represent that:
o you are not an Affiliate of either USABancShares or the Trust;
o you are acquiring Exchange Capital Securities in the ordinary course of
your business;
o you have no arrangement or understanding with any person to participate
in a distribution (within the meaning of the Securities Act) of such
Exchange Capital Securities; and
o if you are not a broker-dealer, you are not engaged in, and do not intend
to engage in, a distribution (within the meaning of the Securities Act) of
such Exchange Capital Securities.
If you are a broker-dealer receiving Exchange Capital Securities for your
own account in exchange for Original Capital Securities, and if such
Original Capital Securities were acquired by you as a result of
market-making or other trading activities, then you must acknowledge that
you will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Capital Securities. The
letter of transmittal states that your acknowledgment and delivery of such
a prospectus will mean that you will not be deemed to admit that you are an
"underwriter" within the meaning of the Securities Act.
Based on the interpretive letters referred to above, we believe that if you
are a "Participating Broker-Dealer" who acquired Original Capital
Securities for your own account as a result of market-making or other
trading activities, you may fulfill your prospectus delivery requirements
with respect to the Exchange Capital Securities received upon exchange of
your Original Capital Securities (other than Original Capital Securities
which represent an unsold allotment from the initial sale of the Original
Capital Securities) with a prospectus meeting the requirements of the
Securities Act. This may be the prospectus prepared for an exchange offer
as long as it contains a description of the plan of distribution with
respect to the resale of such Exchange Capital Securities. Accordingly,
this Prospectus, as it may be changed or supplemented from time to time,
may be used for such purposes.
Nevertheless, subject to certain provisions in the Registration Rights
Agreement and subject to the limitations described under the caption "The
Exchange Offer--Resale of Exchange Capital Securities," we have agreed that
this Prospectus, as it may be changed or supplemented from time to time,
may be used by you if you are a "Participating Broker-Dealer" in connection
with resales of such Exchange Capital Securities for a period which ends on
the 180th day after the expiration date (subject to extension under certain
limited circumstances) or, if earlier, when you have disposed of all such
Exchange Capital Securities. See "Plan of Distribution."
If you are a "Participating Broker-Dealer" and are also an Affiliate of
USABancShares or the Trust, you may not rely on such interpretive letters
and you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
transaction. See "The Exchange Offer--Resale of Exchange Capital
Securities."
Exchange Agent.............................. The exchange agent with respect to the exchange offer is Wilmington
Trust Company. The address, telephone and facsimile numbers of the
exchange agent are listed in "The Exchange Offer--Exchange Agent" and
in the letter of transmittal.
Use of Proceeds............................. Neither USABancShares nor USA Capital Trust I will receive any cash
proceeds from the issuance of the Exchange Capital Securities.
Certain United States Federal
Income Tax Consequences;
ERISA Considerations........................ You should review carefully the information contained under the caption
"Certain Federal Income Tax Considerations" and "ERISA
Considerations" before tendering your Original Capital Securities in the
exchange offer.
The Exchange Capital Securities
Securities Offered.......................... We have registered up to $10,000,000 aggregate liquidation amount of the
Trust's Exchange Capital Securities under the Securities Act. The terms
of the Exchange Capital Securities are the same as the terms of the
Original Capital Securities, except that the Exchange Capital Securities:
o have been registered under the Securities Act;
o will not be subject to certain transfer restrictions applicable to the
Original Capital Securities; and
o will not provide for any increase in the distribution rate.
See "Description of Exchange Securities."
Distribution Dates.......................... March 15 and September 15 of each year, beginning September 15,
1999.
Extension Periods........................... If no default has occurred and is continuing, USABancShares will have
the right, at any time, to defer payments of interest on the Exchange Junior
Subordinated Debentures for a period not exceeding 10 consecutive
semi-annual periods (each an "Extension Period"). Distributions on the
Exchange Capital Securities will be deferred during any Extension Period
elected by USABancShares with respect to the payment of interest on the
Exchange Junior Subordinated Debentures. No Extension Period will
extend beyond March 15, 2029 (the "Stated Maturity Date") of the
Exchange Junior Subordinated Debentures. See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Option to
Extend Interest Payment Date."
During an Extension Period, interest will continue to accrue on the
Exchange Junior Subordinated Debentures. Therefore, holders of Exchange
Capital Securities would be required to accrue income for United States
federal income tax purposes. This means that you would have income from the
Exchange Capital Securities for United States federal income tax purposes
but that you would not receive any cash with which to pay any tax that
might be due on that income. See "Certain Federal Income Tax
Considerations--Original Issue Discount and Interest Income."
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
USABancShares does not currently intend to exercise its right to defer
payments of interest by extending the interest payment period of the
Exchange Junior Subordinated Debentures.
Ranking..................................... The Exchange Capital Securities will rank equally with, and payments
thereon will be made pro rata with, the Original Capital Securities and the
Common Securities of USA Capital Trust I except as described under
"Description of Exchange Securities--Description of Capital
Securities--Subordination of Common Securities."
The Exchange Junior Subordinated Debentures will rank equally with the
Original Junior Subordinated Debentures and all other junior subordinated
debentures to be issued by USABancShares pursuant to the Indenture with
substantially similar subordination terms, and which are issued and sold to
other trusts to be established by USABancShares similar to the Trust. The
Exchange Junior Subordinated Debentures will be unsecured and subordinate
and junior in right of payment as described in the Indenture to all Senior
Indebtedness of USABancShares. See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Subordination."
The Exchange Guarantee will rank equally with the Original Guarantee and
all other guarantees to be issued by USABancShares with respect to capital
securities to be issued by other trusts to be established by USABancShares
similar to the Trust, and will constitute an unsecured obligation of
USABancShares and will rank subordinate and junior in right of payment as
described in the Guarantee to all Senior Indebtedness. See "Description of
Exchange Securities--Description of Guarantee--General."
In addition, because USABancShares is a holding company, the Junior
Subordinated Debentures and the Guarantee are effectively subordinated to
all existing and future liabilities of USABancShares' subsidiaries,
including BankPhiladelphia's deposits.
Redemption.................................. You may be required to sell your Exchange Capital Securities to USA
Capital Trust I if the Junior Subordinated Debentures are prepaid. In this
case, USA Capital Trust I will buy your Exchange Capital Securities at a
redemption price equal to the applicable Optional Prepayment Price (as
defined under "Description of Exchange Securities--Description of Junior
Subordinated Debentures--Optional Prepayment") described in the
Indenture. USABancShares may redeem the Junior Subordinated
Debentures prior to maturity, in each case at the applicable Redemption
Price (as defined under the heading "Description of Junior Subordinated
Debentures--Description of Exchange Securities--Redemption"):
o in whole but not in part, on the Stated Maturity Date upon
repayment of the Junior Subordinated Debentures;
o in whole but not in part, at any time prior to March 15, 2009
contemporaneously with the optional prepayment of the Junior Subordinated
Debentures by USABancShares upon the occurrence and continuation of a
Special Event (as defined under "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Special Event
Prepayment"); and
o in whole or in part, on or after March 15, 2009, contemporaneously with
the optional prepayment of all or part of the Junior Subordinated
Debentures by USABancShares.
See "Description of Capital Securities--Description of Exchange
Securities--Redemption."
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<TABLE>
<CAPTION>
<S> <C>
Reserve Account............................. USABancShares has established a reserve account in which it deposited
$1.9 million (an amount equal to two years of interest payments on the
Junior Subordinated Debentures) from the net proceeds of the sale of the
Original Junior Subordinated Debentures. The amount deposited in the
reserve account is invested in marketable securities. USABancShares is
required to maintain the reserve account for two years from the date of
issuance of the Junior Subordinated Debentures. Thereafter, funds in the
reserve account will be applied to make interest payments on the Junior
Subordinated Debentures until the reserve account is exhausted. Holders
of the Junior Subordinated Debentures have a perfected security interest
in the reserve account. See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Reserve
Account."
Transfer Restrictions....................... The Exchange Capital Securities will be issued, and may be transferred,
only in blocks having a liquidation amount of not less than $100,000 (100
Capital Securities) and multiples of $1,000 in excess of $100,000.
ERISA Considerations........................ You should consider carefully the restrictions on purchase described under
the caption "ERISA Considerations."
Absence of Market for the Exchange
Capital Securities.......................... The Exchange Capital Securities will be a new issue of securities for
which there currently is no market. Accordingly, we cannot assure you that
any market will develop for the Exchange Capital Securities. We do not
intend to apply for listing of the Exchange Capital Securities on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System. See "Plan of
Distribution."
Risk Factors................................ You should consider carefully the "Risk Factors" beginning on page 11.
</TABLE>
8
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
Set forth below are selected financial and other data of USABancShares
and BankPhiladelphia. This financial data is derived in part from, and it should
be read in conjunction with the consolidated financial statements and related
notes included in this Prospectus beginning on page F-1.
<TABLE>
<CAPTION>
(Dollars in Thousands, except per share data) At or for the Year Ended December 31,
-------------------------------------
1998 1997
----- ----
<S> <C> <C>
Selected Financial Condition Data:
Total assets....................................................... $ 165,106 $89,326
Loans receivable, net.............................................. 102,138 56,002
Securities (1)..................................................... 44,144 24,454
Deposits........................................................... 114,387 70,474
Borrowings (2)..................................................... 35,305 12,638
Stockholders' equity............................................... 13,597 5,366
Non-performing assets, net of discount (3)......................... 2,022(4) 287
Book value per share (5)........................................... $6.43 $ 4.95
Selected Operations Data:
Total interest income.............................................. $ 12,352 $ 4,879
Total interest expense............................................. 6,454 2,530
---------- -------
Net interest income................................................ 5,898 2,349
Provision for loan losses.......................................... 510 415
---------- -------
Net interest income after
provision for loan losses.......................................... 5,388 1,934
Total non-interest income.......................................... 759 314
Total non-interest expense ........................................ 3,700 2,457(6)
---------- -------
Income before income taxes ....................................... 2,447 (209)
Income tax provision............................................... 957 17
---------- -------
Net income (loss).................................................. $ 1,490 $ (226)
========== =======
Net income (loss) per share (fully-diluted)(5)..................... $ 0.70 $ (0.21)
========== =======
Performance Ratios (7):
Return (loss) on average assets .................................... 1.16% (0.09)%
Return (loss) on average equity..................................... 12.81 (1.10)
Net interest margin (8) ............................................ 4.87 4.53
Interest rate spread (8)............................................ 4.54 3.68
Efficiency ratio (9)................................................ 58.93 79.35
Non-interest expense to average total assets........................ 2.88 1.93
Average interest-earning assets to average interest-bearing liabilities 106.14 117.50
Asset Quality Ratios:
Non-performing loans, net of discount, to total loans, net of discount(3) 1.89 0.50
Non-performing assets, net of discount, to total assets(3).......... 1.22 0.32
Allowance for loan losses to total loans, net of discount........... 1.02 1.01
Allowance for loan losses and purchase discount as a percentage of total 5.85
loans............................................................... 8.88
Allowance for loan losses to total non-performing loans, net of discount (3) 53.72(10) 197.96
Capital Ratios(11):
Equity to assets.................................................... 8.2 6.01
Tier 1 leverage capital ratio ...................................... 8.5 5.4
Tier 1 risk-based capital ratio..................................... 10.3 7.0
Total risk-based capital ratio...................................... 11.2 7.9
Other:
Number of full-service branches..................................... 3 2
Number of full-time employee equivalents............................ 39 18
</TABLE>
9
<PAGE>
- --------------------------
(1) Includes securities classified as held-to-maturity and available for sale.
(2) Consists of advances from the Federal Home Loan Bank of Pittsburgh and, to
a lesser extent, borrowings pursuant to line of credit facilities with
local financial institutions.
(3) Non-performing loans consist of non-accrual loans and accruing loans 90
days or more overdue, net of applicable purchase discounts. Non-performing
assets consist of non-performing loans and other real estate owned.
(4) The increase in non-performing assets during the year ended December 31,
1998 was due, in large part, to a single commercial real estate loan which
became non-performing during the third quarter of 1998. See Note 10. See
also "Business--Asset Quality--Delinquent Loans and Non-performing
Assets."
(5) On each of July 18, 1997 and August 17, 1998, USABancShares paid a 33%
stock dividend on its common stock. All per share data has been adjusted
to reflect such stock dividends and has been calculated based on the
weighted average number of shares outstanding during the period, assuming
the conversion of the shares of Class B common stock into shares of Class
A common stock. See "Management of USABancShares --Certain Relationships
and Related Transactions."
(6) Includes a one-time charge of $344,000 during the fourth quarter of 1997
as a result of the recognition of compensation expense due to the
mandatory conversion of USABancShares' Class B common stock. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(7) With the exception of end of period ratios, all ratios are based on
average monthly balances and are annualized where appropriate.
(8) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities, and net interest margin represents net
interest income as a percentage of average interest-earning assets.
(9) Efficiency ratio represents non-interest expense as a percentage of the
aggregate of net interest income and non-interest income (less
gains/losses on sales of assets and other non-recurring items).
(10) The significant decline in this ratio during the year ended December 31,
1998 was impacted by a single acquired commercial real estate loan.
Management believes that this loan does not present a significant risk of
loss to BankPhiladelphia on the basis of a current appraisal on the real
estate securing the loan, the loan-to-value ratio thereon, the purchase
discount and the specific reserve applied to such loan. As a general rule,
in connection with BankPhiladelphia's purchase of loan pools, a portion of
the discounted purchase price for each loan is not accreted into income
but, rather, is identified as a cash discount and is not amortized into
income until final resolution or collection of principal and interest on
the loan in question. See "Risk Factors--Risks Related to USABancShares
and BankPhiladelphia--Purchase Discount" and "Business--Asset
Quality--Delinquent Loans and Non-performing Assets."
(11) The ratio of equity to assets is presented on a consolidated basis while
the ratios of Tier 1 leverage capital, Tier 1 risk- based capital and
total risk-based capital relate only to BankPhiladelphia. For information
on USABancShares' and BankPhiladelphia's regulatory capital requirements,
see "Regulation of USABancShares and BankPhiladelphia."
10
<PAGE>
RISK FACTORS
You should carefully read the following risk factors and the other
sections of this Prospectus in connection with the exchange offer and the
Exchange Capital Securities. You should consider all of these risk factors to be
important. The risk factors below do not necessarily appear in order of
importance. Except where otherwise indicated, the following risk factors apply
to both the Original Capital Securities and the Exchange Capital Securities.
Risks Related to the Capital Securities and the Junior Subordinated Debentures
Ranking of Subordinated Obligations under the Guarantee and the Junior
Subordinated Debentures
The obligations of USABancShares under the Guarantee issued by
USABancShares and under the Junior Subordinated Debentures are unsecured and
rank subordinate and junior in right of payment to all of USABancShares' Senior
Indebtedness. As of December 31, 1998, USABancShares had no Senior Indebtedness.
USABancShares is a bank holding company. Therefore, its right to
participate in any distribution of assets of any subsidiary (including
BankPhiladelphia) upon the subsidiary's liquidation or reorganization or
otherwise (and your ability to benefit indirectly from such distribution) is
subject to the prior claims of creditors of that subsidiary, including
depositors, in the case of BankPhiladelphia, except to the extent that
USABancShares may itself be recognized as a creditor of that subsidiary. At
December 31, 1998, BankPhiladelphia had total liabilities, including deposits,
of $151.5 million. Accordingly, because the Junior Subordinated Debentures
effectively are subordinated to all existing and future liabilities of
USABancShares' subsidiaries, including BankPhiladelphia's deposit liabilities,
you should look only to the assets of USABancShares, and not its subsidiaries,
for payments on the Junior Subordinated Debentures. The Guarantee constitutes an
unsecured obligation of USABancShares and ranks subordinate and junior in right
of payment to all Senior Indebtedness in the same manner as the Junior
Subordinated Debentures. There is no limit to USABancShares' or
BankPhiladelphia's ability to incur additional indebtedness, including
indebtedness that ranks senior in priority of payment. See "Description of
Exchange Securities--Description of Junior Subordinated
Debentures--Subordination."
The ability of USA Capital Trust I to make payments with respect to the
Capital Securities is solely dependent upon USABancShares making payments on the
Junior Subordinated Debentures as and when required. If USABancShares defaults
on its obligations to pay principal, premium or interest on the Junior
Subordinated Debentures, USA Capital Trust I will not have sufficient funds to
make distributions or to pay the liquidation amount of $1,000 per Capital
Security. As a result, you will not be able to rely upon the Guarantee for
payment of these amounts. Instead, you or the Property Trustee under certain
circumstances may enforce the rights of USA Capital Trust I under the Junior
Subordinated Debentures against USABancShares.
Limitations on Source of Funds
USABancShares is a bank holding company regulated by the Board of
Governors of the Federal Reserve System, and almost all of the operating assets
of USABancShares are owned by BankPhiladelphia and USACapital. USABancShares
relies primarily on dividends from BankPhiladelphia to meet its corporate
expenses and will rely on such dividends to satisfy its obligations for payment
of principal and interest on its outstanding debt obligations. Dividend payments
from BankPhiladelphia are subject to (1) regulatory limitations, generally based
on current and retained earnings, imposed by the various regulatory agencies
with authority over BankPhiladelphia, (2) regulatory restrictions if such
dividends would impair the capital of BankPhiladelphia and (3)
BankPhiladelphia's profitability, financial condition and capital expenditures
and other cash flow requirements. Bank regulatory agencies have authority to
prohibit BankPhiladelphia or USABancShares from engaging in an unsafe or unsound
practice in conducting their business. The payment of dividends, depending upon
the financial condition of BankPhiladelphia or USABancShares, could be deemed to
constitute such an unsafe or unsound practice. The Board of Governors of the
Federal Reserve System has stated that, as a matter of prudent banking, a bank
or bank holding company should not maintain its existing rate of cash dividends
on common stock unless (1) the organization's net income available to common
shareholders over the past year has been sufficient to fund fully the dividends;
and (2) the prospective rate of earnings retention appears consistent with the
organization's capital needs, asset quality and overall financial condition.
During 1998, BankPhiladelphia paid no dividends to USABancShares.
Under the Federal Deposit Insurance Act, BankPhiladelphia would be
prohibited from making capital distributions, including the payment of
dividends, if, after making any such distribution, BankPhiladelphia would become
11
<PAGE>
"undercapitalized" (as such term is used in the statute). Based on
BankPhiladelphia's current financial condition, USABancShares does not expect
that this provision will have any impact on its ability to obtain dividends from
BankPhiladelphia; however, no assurance can be given that BankPhiladelphia will
be able to pay dividends in the future.
USABancShares has established a reserve account in which USABancShares
has deposited $1.9 million (an amount equal to two years of interest payments on
the Junior Subordinated Debentures) from the net proceeds of the sale of the
Original Junior Subordinated Debentures. The amount so deposited in the reserve
account is invested in marketable securities. USABancShares will be required to
maintain the reserve account for two years from the date of issuance of the
Original Junior Subordinated Debentures. Thereafter, funds in the reserve
account will be applied to make interest payments on the Junior Subordinated
Debentures until the reserve account is exhausted. USABancShares may not defer
payments of interest on the Junior Subordinated Debentures during any period
where funds are maintained or required to be maintained in the reserve account.
Holders of the Junior Subordinated Debentures have a perfected security interest
in the reserve account. See "Description of Exchange Securities--Description of
Junior Subordinated Debentures--Reserve Account."
Option to Extend Interest Payment Period; Tax Consequences; Market Price
Consequences
General. So long as no event of default under the Junior Subordinated
Debentures has occurred and is continuing, USABancShares has the right, at one
or more times, to defer interest payments on the Junior Subordinated Debentures
for up to 10 consecutive semi-annual periods, but not beyond the Stated Maturity
Date. As a consequence, USA Capital Trust I will defer distributions on the
Capital Securities during any such deferral period. However, during this
deferral period, you would still accumulate distributions at the rate of 9.50%
per annum, plus you would accumulate additional distributions at the same rate
of 9.50% per annum compounded semi-annually, on any unpaid distributions, to the
extent permitted by law. The Capital Securities may trade at a price that does
not fully reflect the value of accrued but unpaid interest on the Junior
Subordinated Debentures. During the pendency of any deferral period,
USABancShares generally will be prohibited from, among other things, declaring
or paying dividends on its capital stock or from making any payments on or
repaying, repurchasing or redeeming any indebtedness which ranks equal to or
junior in right of payment with the Junior Subordinated Debentures.
USABancShares has covenanted that it does not intend to defer payments of
interest on the Junior Subordinated Debentures during any period where funds are
maintained or required to be maintained in the reserve account. See "Description
of Exchange Securities--Description of Junior Subordinated Debentures--Option to
Extend Interest Payment Date."
Prior to the termination of any deferral period, USABancShares may
further extend the deferral period, provided that an extension may not cause the
deferral period to exceed 10 consecutive semi-annual periods or to extend beyond
the maturity date of the Junior Subordinated Debentures. Upon the termination of
any deferral period and the payment of all interest then accrued and unpaid on
the Junior Subordinated Debentures, USABancShares may elect to begin a new
deferral period, subject to certain requirements. There is no limitation on the
number of times that USABancShares may elect to begin a deferral period. See
"Description of Exchange Securities--Description of Junior Subordinated
Debentures--Option to Extend Interest Payment Date."
Tax Consequences. During a deferral period, you will be required to
continue to accrue interest income, in the form of Original Issue Discount, for
U.S. federal income tax purposes in respect of your pro rata share of the Junior
Subordinated Debentures held by the Trust, even if you are a cash basis
taxpayer. As a result, you must include the accrued interest in your gross
income for U.S. federal income tax purposes prior to your receiving cash. You
will not receive the cash related to any accrued and unpaid interest from USA
Capital Trust I if you sell your Capital Securities before the termination of
any deferral period. Additionally, during a deferral period, accrued and unpaid
distributions that are included in your gross income will increase your tax
basis in the Capital Securities. If you sell your Capital Securities during a
deferral period, your increased tax basis will decrease the amount of any
capital gain or will create a capital loss or increase the amount of any capital
loss that you realize on the sale. A capital loss, except in certain limited
circumstances, cannot be applied to offset ordinary income. See "Certain Federal
Income Tax Considerations--Sales of Capital Securities."
Market Price Consequences. USABancShares has no current intention of
exercising its rights to defer interest payments on the Junior Subordinated
Debentures. However, if it exercises this right in the future, the market price
of the Capital Securities is likely to be affected. If you sell your Capital
Securities during an interest deferral period, you may not receive the same
return on your investment as someone else who continues to hold the Capital
Securities.
12
<PAGE>
The Capital Securities may trade at prices that do not fully reflect
the value of accrued and unpaid interest on the underlying Junior Subordinated
Debentures. See "Certain Federal Income Tax Considerations--Sales of Capital
Securities" for a discussion of the U.S. federal income tax consequences that
may result from a taxable disposition of your Capital Securities.
Redemption of the Capital Securities upon Certain Special Events
At any time certain special events occur (an Investment Company Event,
a Regulatory Capital Event or a Tax Event, in each case as defined under
"Description of Junior Subordinated Debentures--Special Event Prepayment") and
are continuing, USABancShares has the right to redeem the Junior Subordinated
Debentures, in whole but not in part. The redemption of the Junior Subordinated
Debentures will cause a mandatory redemption of the Capital Securities and the
Common Securities within 90 days of such event at a redemption price equal to
the liquidation amount of $1,000 per Capital Security plus any accrued and
unpaid distributions. USABancShares will have to obtain any required regulatory
approval before it redeems the Junior Subordinated Debentures under these
provisions. See "Description of Exchange Securities--Description of Junior
Subordinated Debentures--Redemption."
Liquidation Distribution of Junior Subordinated Debentures
USABancShares has the right at any time to dissolve USA Capital Trust I
and, after satisfaction of liabilities to creditors of USA Capital Trust I as
required by applicable law, to cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities. USABancShares' ability to
exercise this right is subject to its receipt of (1) an opinion of counsel
stating that a distribution of the Junior Subordinated Debentures will not be a
taxable event to you, and (2) any required regulatory approval. As a result, and
subject to the terms of the Trust Agreement, the Trustees may distribute the
Junior Subordinated Debentures to the holders of Trust Securities. Accordingly,
you should carefully review all the information regarding the Junior
Subordinated Debentures, as well as the Capital Securities, contained in this
Prospectus. See "Description of Exchange Securities--Description of Capital
Securities--Liquidation of USA Capital Trust I and Distribution of Junior
Subordinated Debentures." Under current U.S. federal income tax law, a
distribution of Junior Subordinated Debentures following the dissolution of USA
Capital Trust I would not be a taxable event to you. If USA Capital Trust I is
dissolved following an Investment Company Event, a Regulatory Capital Event or a
Tax Event, and you receive distributions of cash, such distributions would
constitute a taxable event to you. See "Certain Federal Income Tax
Considerations--Distribution of Junior Subordinated Debentures or Cash Upon
Liquidation of the Trust."
Possible Adverse Effect on Market Prices
We cannot predict the market prices for the Capital Securities or the
Junior Subordinated Debentures that may be distributed if a dissolution of USA
Capital Trust I were to occur. Accordingly, the Capital Securities or the Junior
Subordinated Debentures may trade at a discount from the price that you paid for
the Capital Securities.
Limited Rights Under the Guarantee
The Guarantee guarantees to you the following payments, to the extent
not paid by or on behalf of the Trust:
o any accumulated and unpaid distributions required to be paid
on your Capital Securities, but only to the extent that USA
Capital Trust I has funds on hand legally available for the
payment of such distributions;
o the redemption price with respect to your Capital Securities
to be redeemed, but only to the extent that USA Capital Trust
I has funds on hand legally available for the redemption of
such Capital Securities at such time; and
o upon a voluntary or involuntary dissolution, winding up or
liquidation of USA Capital Trust I (unless the Junior
Subordinated Debentures are distributed to you), the lesser of
(a) the aggregate liquidation amount of your Capital
Securities and all accumulated and unpaid distributions on
your Capital Securities to the date of payment, to the extent
that USA Capital Trust I has funds on hand legally available
for the payment of such amounts at such time, and (b) the
amount of assets of USA Capital Trust I remaining available
for distribution to you at such time, after the satisfaction
of liabilities to creditors of USA Capital Trust I as provided
by applicable law.
13
<PAGE>
The holders of at least a majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available with respect of the Guarantee or to direct
the exercise of any trust power conferred under the Guarantee. As a holder of
Capital Securities, you may, to the extent permitted by applicable law,
institute a legal proceeding directly against USABancShares to enforce your
rights under the Guarantee without first instituting a legal proceeding against
the Trust, the Guarantee Trustee or any other person or entity. If USABancShares
were to default on its obligation to pay amounts payable under the Junior
Subordinated Debentures, USA Capital Trust I would not have sufficient funds for
the payment of distributions on the Capital Securities or amounts payable on
redemption of the Capital Securities, in which case you will not be able to rely
upon the Guarantee for payment of such amounts. Instead, if a Debenture Event of
Default (as defined under the heading "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Debenture Events of
Default") shall have occurred and be continuing under the Indenture and such
event is attributable to the failure of USABancShares to pay, among other
things, the principal of or interest on the Junior Subordinated Debentures on
the day on which such payment is due and payable, then you may institute a legal
proceeding directly against USABancShares for enforcement of payment.
Notwithstanding any payments made to you by USABancShares in connection with
such an action, USABancShares shall remain obligated to pay the principal of and
interest on the Junior Subordinated Debentures, and it shall be subrogated to
your rights with respect to payments on the Capital Securities to the extent of
any payments made by USABancShares to you in connection with your actions taken
against USABancShares. Except as described herein, you cannot exercise directly
any other remedy available to holders of Junior Subordinated Debentures or
assert directly any other right in respect of the Junior Subordinated
Debentures. See "Description of Exchange Securities--Description of Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of Capital
Securities," "--Debenture Events of Default" and "Description of Exchange
Securities--Description of Guarantee." The Trust Agreement provides that each
holder of Capital Securities by acceptance of such securities agrees to the
provisions of the Indenture.
Limited Voting Rights
As a holder of Capital Securities, you have limited voting rights.
These voting rights relate only to the modification of the Capital Securities
and the exercise of the Trust's rights as a holder of the Junior Subordinated
Debentures. In general, only USABancShares can replace or remove any of the
Trustees. However, if an Event of Default (as defined under the heading
"Description of Exchange Securities--Description of Capital Securities--Events
of Default; Notice") under the Trust Agreement is continuing, holders of at
least a majority in aggregate liquidation amount of the Capital Securities may
replace the Property Trustee and the Delaware Trustee. The Property Trustee, the
Administrative Trustees and USABancShares may amend the Trust Agreement without
your consent in order to ensure that USA Capital Trust I will not be classified
as an association taxable as a corporation or to enable USA Capital Trust I to
qualify as a grantor trust, in each case, for federal income tax purposes, or to
ensure that USA Capital Trust I will not be required to register as an
"investment company" under the Investment Company Act of 1940, even if such
action adversely affects your interests. You have no voting rights with respect
to any matters submitted to a vote of the stockholders of USABancShares. See
"Description of Exchange Securities--Description of Capital Securities--Removal
of Trustees."
Absence of Public Market
The Original Capital Securities have not been registered under the
Securities Act and will continue to be subject to restrictions on
transferability under the Securities Act and applicable state securities laws if
they are not exchanged for Exchange Capital Securities. Although the Exchange
Capital Securities generally may be resold or otherwise transferred by the
holders (who are not Affiliates of USABancShares or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
Capital Securities may be transferred by the holders thereof only in blocks
having a liquidation amount of not less than $100,000 (100 Capital Securities).
USABancShares and USA Capital Trust I were advised by the Initial Purchaser in
connection with the offering of the Original Capital Securities that the Initial
Purchaser intends to make a market in the Capital Securities. However, the
Initial Purchaser is not obligated to do so and any market-making activity with
respect to the Capital Securities may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act and may be limited during the
exchange offer. Accordingly, no assurance can be given that an active public or
other market will develop for the Exchange Capital Securities or the Original
Capital Securities or as to the liquidity of or the trading market for the
Exchange Capital Securities or the Original Capital Securities. If an active
public market does not develop, the market price and liquidity of the Exchange
Capital Securities may be adversely affected.
14
<PAGE>
If a public trading market develops for the Exchange Capital
Securities, future trading prices will depend on many factors, including, among
other things, prevailing interest rates, USABancShares' results of operations
and the market for similar securities.
Consequences of a Failure to Exchange Original Capital Securities
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws. As a result, the Original Capital
Securities may not be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act and any
applicable state securities laws, or in connection with an exemption from such
requirements.
Original Capital Securities which are not exchanged for Exchange
Capital Securities in this exchange offer will continue to have a legend which
describes these transfer restrictions. In addition, after the exchange offer
ends, holders of Original Capital Securities will no longer have the right to
have such Original Capital Securities registered under the Securities Act and
will no longer have any rights under the Registration Rights Agreement (except
for certain limited exceptions). We do not intend to register any Original
Securities under the Securities Act which have not been exchanged after the
exchange offer ends (except for such limited exceptions, if applicable).
Original Capital Securities are likely to be less attractive than Exchange
Capital Securities to potential purchasers.
The Original Capital Securities provide that, among other things, if a
registration statement relating to the Exchange Capital Securities has not been
filed by August 6, 1999 or has not been declared effective by September 6, 1999,
then, additional distributions will accumulate on the Original Capital
Securities at a rate of 0.25% per year until the registration statement has been
filed or declared effective. At the end of the exchange offer, you will not be
entitled to any additional distributions or any further registration rights
under the Registration Rights Agreement, except for certain limited
circumstances. See "Description of Original Securities."
Risks Related to USABancShares and BankPhiladelphia
Loan Acquisition Strategy
BankPhiladelphia's lending activities include identifying and
purchasing loans which management believes to be undervalued at discounts.
BankPhiladelphia purchases primarily performing loans at a discount from the
Federal Deposit Insurance Corporation, private sellers and the former Resolution
Trust Corporation. See "--Purchase Discount." Although BankPhiladelphia focuses
on acquiring single-family residential, multi-family residential and commercial
real estate loans secured by properties located in the Mid-Atlantic region,
BankPhiladelphia has acquired loans secured by real estate located in a number
of other states, including Texas, Florida and California. To the extent such
loans are secured by real estate located outside BankPhiladelphia's primary
market area, such loans could present greater risks of collectability than loans
located within BankPhiladelphia's primary market area.
BankPhiladelphia has historically purchased loans either from
institutions which were seeking to eliminate certain loans or categories of
loans from their portfolios or in connection with the failure or consolidation
of other financial institutions. BankPhiladelphia has developed and maintains a
proprietary model to determine what management believes to be the appropriate
price to be paid for these loans. BankPhiladelphia's model is based upon a
combination of objective and subjective criteria. The objective criteria
includes applicable loan to value ratios, collateral type, payment history and
geographic location. The more subjective criteria includes management's past
experience with purchasing and administering such loans. The prices paid to
acquire loans at a discount are based on BankPhiladelphia's estimate of the
market value of such loans. As of December 31, 1998, BankPhiladelphia's net
outstanding purchased loan portfolio totaled $51.7 million, or 50.0% of
BankPhiladelphia's total loans outstanding and 31.3% of BankPhiladelphia's total
assets.
BankPhiladelphia's loan acquisition strategy subjects BankPhiladelphia
to risks, including some risks not experienced by financial institutions engaged
in more traditional lending activities. There can be no assurance that this
component of BankPhiladelphia's operations will continue to provide the same
level of profitability it has experienced in the past. BankPhiladelphia's loan
acquisition strategy is subject to the following risks:
15
<PAGE>
o the shrinking pool of assets available because the decreasing
number of failed or failing financial institutions that are
being resolved by the Federal Deposit Insurance Corporation
may result in BankPhiladelphia not meeting its targeted level
of loan purchases;
o the competitive nature of the market for loan pools may result
in BankPhiladelphia having to acquire such loans at less
attractive prices than it has in the past;
o the cost of resolving non-performing loan pools may be
greater than that contemplated at the time of acquisition;
o the accretion of the discount associated with purchased loans
is subject to management's assumptions with respect to the
estimated value of the loans and future cash flows, all of
which is uncertain and is subject to change, resulting in
inter-period variations in income; and
o geographic concentrations of purchased loans, including loans
in geographic areas with which USABancShares has little or no
familiarity.
BankPhiladelphia also originates loans by purchasing participations in
loans from other financial institutions. BankPhiladelphia considers such loan
participations to be originations because BankPhiladelphia underwrites each
participation as an origination and the participation is closed under
BankPhiladelphia's loan participation documentation. As of December 31, 1998,
BankPhiladelphia had $10.0 million of loan participations in its portfolio,
substantially all of which consist of multi-family residential and commercial
real estate loans. Although BankPhiladelphia has participated in loans with four
other financial institutions, as of December 31, 1998, BankPhiladelphia had six
loan participations with an aggregate principal balance of $8.9 million with
affiliates of a local specialty finance and real estate company. In each of
these six loan participations, BankPhiladelphia's interest and rights to
principal recovery are senior to the rights of the junior participant which may
be an affiliate of the specialty finance company and may also be the servicer of
the loan. The senior rights created under the participation agreements were
significant considerations in BankPhiladelphia's qualification of the loan.
Although the finance company has agreed, in several (but not all) transactions,
to cause the participated loans owned by its affiliates which become
non-performing to be substituted for performing underlying loans,
BankPhiladelphia is subject to risk to the extent the finance company
experiences financial difficulties and is unable to comply with its replacement
obligations. Furthermore, to the extent the finance company experiences
financial difficulties, BankPhiladelphia's ability to receive principal and
interest payments on a timely basis from the finance company, as servicer of the
loans, could be temporarily interrupted.
Purchase Discount
At the time BankPhiladelphia purchases a pool of loans, the difference
between the note amount and the purchase price is accounted for as a discount.
The purchase price is based on BankPhiladelphia's estimate of the value of the
loan, including an estimate of future cash flows. In accordance with generally
accepted accounting principles, to the extent management believes a purchased
loan will be collected in full, the discount associated with such purchased loan
will be recognized as an increase in the yield of the loan and will be included
as interest income over the estimated life of the loan. To the extent that
management believes full repayment of principal and interest is not reasonable
and probable, the discount will be set up as a cash discount and will not be
recognized as an increase in the yield of the loan until all principal and
interest is received or a final resolution is determined. To the extent that
cash flows from the purchased loans may be uncertain, recognition of this income
will also be uncertain. As of December 31, 1998, the total discount associated
with purchased loans amounted to $5.3 million or 9.3% of total purchased loans.
As of such date, $4.0 million or 75.5% of such aggregate discount is being
accreted into income, while the remaining $1.3 million of such discount is
currently not being accreted into income. The $1.3 million currently not being
accreted into income has been identified as a cash discount and will not be
amortized into income as a yield adjustment until final resolution or collection
of principal and interest is achieved. The yield on BankPhiladelphia's portfolio
of loans which have been purchased at a discount is subject to significant
inter-period variations due to the fact that the timing of actual repayments and
prepayments of the loans may differ from the original assumptions. Such
inter-period variations can also result from the reclassification of loans from
performing to non-performing status.
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<PAGE>
Commercial Lending Risk
At December 31, 1998, a majority of BankPhiladelphia's real estate loan
portfolio consisted of loans secured by multi-family residential real estate and
commercial real estate properties. In addition, as of December 31, 1998,
BankPhiladelphia had an aggregate of $986,000 of commercial business loans.
Furthermore, all of BankPhiladelphia's commercial business loans which are
secured by real estate have in the past been classified as real estate loans.
BankPhiladelphia makes commercial real estate and commercial business loans
following analysis of credit risk, the value of the underlying collateral and
other more intangible factors. This commercial lending activity exposes
BankPhiladelphia to risks, particularly in the case of loans to small businesses
and individuals. These risks include possible errors in BankPhiladelphia's
credit analysis, the uncertainty of the borrower's ability to repay the loans,
the uncertainty of future economic conditions and the possibility of loan
defaults. Commercial lending generally includes higher interest rates and
shorter terms of repayment than non-commercial lending. Accordingly,
BankPhiladelphia is subject to greater credit risk with its commercial lending.
As of December 31, 1998, BankPhiladelphia had no non-performing commercial
business loans and $1.1 million of non-performing loans secured by commercial
real estate.
Reliance on Short-term Deposits
BankPhiladelphia has historically employed a wholesale funding strategy
consisting primarily of marketing non-retail certificates of deposit.
BankPhiladelphia has been able to maintain sufficient funds to support its
lending activities by offering rates of interest on certificates of deposit
marginally higher than rates offered by other banks on comparable deposits. As
of December 31, 1998, $104.5 million or 91.3% of BankPhiladelphia's deposits
consisted of certificates of deposit. Of this amount, $73.1 million or 70.0%
were placed with institutional investors. In addition, as of December 31, 1998,
$47.1 million, or 45.1% of BankPhiladelphia's total certificates of deposit were
due to mature within one year. In the current economic environment of low
interest rates, BankPhiladelphia has been focusing on extending the maturities
of its certificates of deposit and borrowings. BankPhiladelphia has extended the
average maturities on its certificates of deposit to approximately 18 months
from nine months. BankPhiladelphia's ability to attract and maintain deposits,
as well as BankPhiladelphia's cost of funds, has been, and will continue to be,
significantly affected by money market rates and general economic conditions. In
addition, BankPhiladelphia's ability to internally fund any additional growth
through lending will be impacted by its ability to maintain or generate
deposits. In the event BankPhiladelphia increases interest rates further to
retain deposits, earnings may be negatively affected.
Credit Risk
A significant source of risk for USABancShares arises from the
possibility that borrowers, guarantors and related parties may fail to repay
their loans or otherwise abide by the terms of their loans. To address risks
related to past loan documentation, management of USABancShares is enhancing
BankPhiladelphia's loan underwriting, documentation and credit monitoring
procedures, including delinquency reporting, collections, loan classifications
and loan loss allowance analysis. Management believes such procedures are
appropriate to minimize BankPhiladelphia's credit risk. The enhancements to such
policies and procedures may not, however, prevent unexpected credit losses that
could negatively affect USABancShares' results of operations.
Asset Quality
USABancShares' results of operations are significantly dependent on the
quality of its assets, which is measured by the level of its non-performing
assets. Non-performing assets consist of non-accrual loans, net of discount,
loans which are 90 days or more overdue but still accruing interest and real
estate acquired by foreclosure or deed-in-lieu thereof. At December 31, 1998,
USABancShares' non-performing assets, net of discount, amounted to $2.0 million
or 1.2% of total assets, which reflects an increase of $1.7 million in
non-performing assets, net of discount, since December 31, 1997. All of the $2.0
million of non-performing assets, net of discount, consisted of purchased loans.
Although BankPhiladelphia purchases loan pools at a discount to the face value
of such loans, BankPhiladelphia faces the risk that in the event one or more of
such purchased loans becomes non-performing, the underlying discount will not be
sufficient to cover BankPhiladelphia's cost of acquiring, servicing and, if
necessary, taking legal action, with respect to such loans. Although management
of BankPhiladelphia is currently in the process of enhancing policies and
procedures for monitoring asset quality and devotes a significant amount of time
and resources to the identification, collection and work-out of non-performing
assets, the real estate markets and the overall economy in the markets where
BankPhiladelphia originates and
17
<PAGE>
purchases loans are likely to be significant determinants of the quality of
BankPhiladelphia's assets in future periods and, thus, its financial condition
and results of operations.
Reserve Coverage for Loans
At December 31, 1998, USABancShares' allowance for loan losses amounted
to 1.02% of total loans, net of discount, and 53.72% of total non-performing
loans, net of discount. In addition, the applicable purchase discount for an
individual acquired loan may act as an additional reserve against loss for such
loan to the extent that the collectability of such loan becomes questionable.
Although USABancShares believes that it has established an adequate allowance
for losses on its loan portfolio, including purchased loans, material future
additions to the allowance for loan losses may be necessary due to changes in
economic conditions, the performance of USABancShares' loan portfolio and
increases in both loan originations and purchases. In addition, the Pennsylvania
Department of Banking and the Federal Deposit Insurance Corporation, as an
integral part of their examination process, periodically review USABancShares'
allowance for loan losses. Increases in the allowance for loan losses would
adversely affect USABancShares' results of operations.
Effect of Rapid Growth on Internal Operations
USABancShares has undergone tremendous growth in recent years, but has
experienced a lag in its infrastructure to accommodate this growth. Total assets
have increased from $25.8 million at December 31, 1995 to $165.1 million at
December 31, 1998. This growth was due in large part to the increase in loans,
primarily through the purchase of loan pools at a discount. In order to
accommodate such growth in the future, USABancShares must upgrade its internal
systems of accounting and monitoring. Among USABancShares' goals for fiscal 1999
are to improve its internal operating systems and the experience level of its
staff at key positions throughout USABancShares. Accordingly, BankPhiladelphia
intends to upgrade its computer-based systems and applications. Currently,
USABancShares is evaluating the upgrading of its computer systems and intends to
convert its systems in the latter part of 1999 or early in 2000. Management is
aware that investing and upgrading its infrastructure will increase non-interest
expenses, but believes that overall efficiencies obtained from such expenditures
will allow for overall higher profit levels to be achieved. As a consequence,
management anticipates that as USABancShares continues to grow, its non-interest
expense as a percentage of average assets should decrease over time.
Leverage Risk
BankPhiladelphia utilizes a leverage strategy in originating and
purchasing residential and commercial real estate loans. Originations and
purchases are funded primarily through increases in deposits, primarily
non-retail certificates of deposit and borrowings from the Federal Home Loan
Bank of Pittsburgh. Management's leverage strategy is premised on the assumption
that it will earn a positive spread on the yield generated from its originated
and purchased loans over the rate paid on its incremental deposits and that the
spread generated from such strategy will assist USABancShares in enhancing its
earnings. To the extent that maturities and cash flows differ, or if market
rates of interest fluctuate in such a manner that USABancShares is unable to
earn a positive spread as a result of its leverage strategy, USABancShares' net
interest margin and net income will be adversely affected in future periods.
Vulnerability to Interest Rate Risk
Like most financial institutions, USABancShares' results of operations
are primarily dependent on net interest income. Net interest income results from
the "margin" between interest earned on interest-earning assets, such as
investments and loans, and interest paid on interest-bearing liabilities, such
as deposits. As of December 31, 1998, based on certain assumptions,
BankPhiladelphia's interest-bearing liabilities that were estimated to mature or
reprice within one year exceeded similar interest-earning assets by $26.4
million, or 17.5% of total interest-earning assets.
Interest rates are highly sensitive to many factors that are beyond
BankPhiladelphia's control. Some of these factors include: governmental monetary
policies; inflation; recession; unemployment; the money supply; domestic and
international economic and political conditions; and domestic and international
crises. Changes in interest rates could have adverse effects on
BankPhiladelphia's operations. Specifically,
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<PAGE>
o Historically, BankPhiladelphia has relied on short-term and
institutional deposits as a source of funds.
BankPhiladelphia's ability to retain these deposits is
directly related to the rate of interest paid by
BankPhiladelphia.
o When interest-bearing liabilities mature or reprice more
quickly than interest-earning assets, in a particular period
of time, a significant increase in interest rates could
adversely impact BankPhiladelphia's net interest income.
o Changes in interest rates could adversely affect:
o the volume of loans BankPhiladelphia originates;
o the value of BankPhiladelphia's purchased loans and other
interest-earning assets, particularly the investment
securities and trust preferred securities portfolio;
o BankPhiladelphia's ability to recognize income on loans
purchased at a discount; and
o loan prepayments.
"Year 2000" Issues
Management of USABancShares is aware of the issues associated with the
programming code in existing computer systems as the Year 2000 approaches. The
"Year 2000" problem is pervasive and complex. Virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize this information could generate incorrect data or cause a system to
fail. USABancShares has consulted with its outside vendors as well as its
third-party computer and software providers and is preparing its systems to
operate without significant modification as a result of Year 2000 issues
(including any new hardware and software which are integral to the proposed
conversion of its computer-based systems). USABancShares has not been advised by
any of its primary outside vendors and service providers that they do not have
plans in place to address and correct any Year 2000 problems. Nevertheless,
unanticipated problems could cause USABancShares' systems to malfunction or
cause USABancShares to incur significant costs to remediate such problems.
USABancShares anticipates incurring approximately $120,000 in additional costs
during the year ended December 31, 1999 related to the proposed implementation
of its Year 2000 Plan. See "Management's Discussion and Analysis and Analysis of
Financial Condition and Results of Operations--Year 2000 Compliance."
Competition
BankPhiladelphia faces strong competition from larger more established
banks and from non-bank financial institutions which are aggressively expanding
into the Philadelphia market. Most of these competitors have facilities and
financial resources greater than BankPhiladelphia's and have other competitive
advantages over BankPhiladelphia. Among the advantages of these larger
institutions are their ability to: make larger loans; finance extensive
advertising campaigns; conduct retail operations at a significant number of
branches; and to allocate their investment assets to business lines of highest
yield and demand.
BankPhiladelphia's profits in recent periods have been largely
attributable to the identification and purchase of loans at a discount and the
origination of commercial loans. The primary factors in competing for loan pool
acquisitions are knowledge of the availability of such loans, the ability to
efficiently and accurately evaluate such loans and the ability to accurately
price such loans. The primary factors in competing for commercial loans are
interest rates, loan origination fees and the quality and range of lending
services offered. BankPhiladelphia faces strong competition in attracting and
retaining deposits and in purchasing and originating loans. There can be no
assurance that BankPhiladelphia will maintain its competitive position in the
future or continue to operate profitably.
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<PAGE>
Dependence on Key Employees
The success of USABancShares will depend heavily on the expertise and
guidance of its President and Chief Executive Officer, Kenneth L. Tepper, and
certain other senior executive officers, including Brian M. Hartline,
USABancShares' Chief Financial Officer. USABancShares has entered into
employment agreements with Mr. Tepper and Mr. Hartline. The loss of the services
of Mr. Tepper or Mr. Hartline would have a negative effect on USABancShares.
USABancShares does not maintain key-man life insurance on Mr. Tepper or Mr.
Hartline.
Economic Conditions
The performance of financial institutions like BankPhiladelphia is
sensitive to general economic conditions. Unfavorable economic conditions at the
local, national or international level may adversely affect BankPhiladelphia's
performance. For example, much of the United States experienced a significant
economic decline in the late 1980's and early 1990's. This decline adversely
affected the real estate market and the banking industry. As a result of this
decline, loan repayment delinquencies increased and the value of properties
underlying secured loans declined. Numerous bank failures resulted in the
placement of many properties in the hands of a federal banking agency with the
primary objective of prompt liquidation. In addition, recent activity in
financial markets in the United States and the rest of the world has
demonstrated an increasing interdependency among the various world markets and
economies and has raised concerns among those in the banking industry. The
implications of this interdependency are very uncertain and present risks to
financial institutions such as BankPhiladelphia, particularly in light of the
current turmoil in some foreign markets and economies. Economic conditions are
unpredictable and the potential for downturns is always present.
Although BankPhiladelphia focuses on acquiring loans in the
Mid-Atlantic region, BankPhiladelphia has acquired loans secured by real estate
located in a number of other states including Texas, Florida and California. To
the extent such loans are secured by real estate outside BankPhiladelphia's
primary market area, such loans may present a greater risk of collectability
than loans located in BankPhiladelphia's primary market area. Thus, adverse
economic conditions affecting any of these market areas could have a negative
impact on the financial condition and results of operations of BankPhiladelphia.
Federal and State Government Regulation and Deregulation of the Financial
Services Industry
BankPhiladelphia is subject to a complex body of federal and state
banking laws and regulations which are intended primarily for the protection of
depositors. In addition, there are several bills relating to the regulation and
deregulation of the financial services industry pending in the U.S. Congress.
Any resulting legislation could significantly affect the operations and
oversight of financial institutions such as BankPhiladelphia as well as the
competitive environment in which BankPhiladelphia operates. Further, the laws
and regulations which affect BankPhiladelphia, as well as the interpretation by
the authorities who examine BankPhiladelphia, may be changed at any time. It is
not possible to predict the content, timing or effect of regulation by federal,
state and local regulatory bodies. However, compliance with, or any violation
of, current and future laws or regulations could require material expenditures
by USABancShares or otherwise adversely affect USABancShares' business or
financial results.
Environmental Liabilities
In the course of BankPhiladelphia's business, BankPhiladelphia may
acquire properties through foreclosure. There is a risk that hazardous
substances could be discovered on such properties. Various federal, state and
local laws subject property owners or operators to liability for the costs of
removal or remediation of certain hazardous substances released on a property.
Such laws often impose liability without regard to whether the owner or operator
knew of, or was responsible for, the release of hazardous substances. There is a
risk that BankPhiladelphia may be required to bear the cost of removing
hazardous substances from any affected properties. The cost of such removal
could exceed the value of the affected properties or the loans secured by the
properties. In addition, BankPhiladelphia may not have adequate remedies against
the prior owner or other responsible parties and may find it difficult or
impossible to sell the affected properties.
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<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, USA Capital Trust I is treated as a
subsidiary of USABancShares and, accordingly, the accounts of USA Capital Trust
I will be included in the consolidated financial statements of USABancShares.
The Capital Securities will be presented as a separate line item in the
consolidated balance sheets of USABancShares, entitled "Guaranteed Preferred
Beneficial Interests in Subordinated Debt," and appropriate disclosures about
the Capital Securities, the Guarantee and the Junior Subordinated Debentures
will be included in the notes to the consolidated financial statements for
financial reporting purposes. For financial reporting purposes, USABancShares
will record distributions payable on the Capital Securities as a non-interest
expense in the consolidated statements of income.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of USABancShares, on
a consolidated basis, as of December 31, 1998, and as adjusted to give effect to
consummation of the offering of the Capital Securities. This table should be
read in conjunction with USABancShares' consolidated financial statements and
notes thereto, which are included in this Prospectus beginning on Page F-1.
<TABLE>
<CAPTION>
At
December 31, 1998
---------------------------------
As
Actual Adjusted
--------------- ---------------
(In Thousands)
<S> <C> <C>
Liabilities:
Deposits....................................................................... $114,387 $114,387
Borrowed funds................................................................. 31,106 31,106
Collateralized borrowings...................................................... 4,199 4,199
Accrued expenses and other liabilities......................................... 1,817 1,817
-------- --------
Total liabilities.............................................................. 151,509 151,509
-------- --------
Guaranteed Preferred Beneficial Interests in Subordinated Debt(1)................. -- 10,000
-------- --------
Stockholders' Equity:
Preferred stock, $1.00 par value; authorized 5,000,000 shares;
no shares issued and outstanding.............................................
Common stock, $1.00 par value; authorized 10,000,000 shares; 2,007,392
shares issued and outstanding and 108,230 shares of converted and unissued
Class B common stock........................................................... 2,116 2,116
Additional paid-in-capital........................................................ 10,683 10,683
Accumulated earnings.............................................................. 1,112 1,112
Accumulated other comprehensive (loss) income - unrealized depreciation
on securities available-for-sale............................................... (314) (314)
-------- --------
Total stockholders' equity............................................. 13,597 13,597
-------- --------
Total liabilities and stockholders' equity.................................. 165,106 175,106
======== ========
</TABLE>
- ---------------------
(1) As described herein, the sole assets of the Trust, which is a
subsidiary of USABancShares, are $10,310,000 aggregate principal amount
of the 9.50% Junior Subordinated Debentures, which will mature on March
15, 2029. USABancShares owns all of the Common Securities issued by
the Trust.
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<PAGE>
PRO FORMA REGULATORY CAPITAL
Under regulations adopted by the Board of Governors of the Federal
Reserve System, USABancShares is required to maintain Tier 1 capital and total
capital (Tier 1 plus Tier 2 capital) equal to at least 4.0% and 8.0%,
respectively, of its risk weighted assets, and Tier 1 capital equal to at least
4.0% of its average total assets (calculated quarterly).
At December 31, 1998, USABancShares' Tier 1 capital and total capital
amounted to $13.8 million, or 10.7% of risk weighted assets and 8.7% of average
total assets, and $15.6 million, or 12.1% of risk-weighted assets, respectively.
The following tables set forth the pro forma regulatory capital and pro
forma regulatory capital ratios of USABancShares at December 31, 1998, as
adjusted to give effect to the receipt of the net proceeds from the sale of the
Original Junior Subordinated Debentures to the Trust. USABancShares contributed
$6.0 million of such net proceeds to BankPhiladelphia.
<TABLE>
<CAPTION>
Risk Based
----------------------------------
Tier 1 Leverage Capital Tier 1 Capital Total Capital
------------------------ --------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C>
Stockholders' equity............................... $13,911 $13,911 $13,911
Minority interest - Capital Securities............. 4,509(1) 4,509(1) 10,000
Unrealized losses on securities available for sale. (314) (314) (314)
Non-allowable capital:
Direct real estate investments.................. -- -- --
Intangible assets............................... (69) (69) (69)
Supplemental capital:
Allowance for loan losses....................... -- -- 1,051
------- ------- -------
Regulatory capital................................. $18,037 $18,037 $24,579
======= ======= =======
</TABLE>
- -------------------
(1) Under the Board of Governors of the Federal Reserve System regulations, the
Capital Securities cannot represent more than 25% of Tier 1 capital.
<TABLE>
<CAPTION>
Risk-Based
--------------------------------
Tier 1 Leverage Tier 1 Capital Total Capital
Ratio Ratio Ratio
--------------- -------------- -------------
<S> <C> <C> <C>
Regulatory capital........................ 10.7% 11.4% 15.6%
Regulatory requirement.................... 4.0 4.0 8.0
----- ----- -----
Excess above required ratio............... 6.7% 7.4% 7.6%
===== ===== =====
</TABLE>
The amount of average adjusted total assets used for the Tier 1 leverage ratio
was approximately $158.0 million. Risk-weighted assets used for the risk-based
capital ratios amounted to approximately $129.0 million.
At December 31, 1998, BankPhiladelphia's Tier 1 leverage capital, Tier
1 risk-based capital and total capital amounted to $12.9 million (8.5% of
average adjusted total assets), $12.9 million (10.3% of risk weighted assets)
and $13.9 million (11.2% of risk weighted assets), respectively, and
BankPhiladelphia exceeded all of its minimum regulatory requirements. Assuming
USABancShares' contribution of $6.0 million from the sale of the Original Junior
Subordinated Debentures to the capital of BankPhiladelphia, and the investment
of such amounts in assets having a risk weighting of 100%, BankPhiladelphia's
pro forma Tier 1 leverage capital, Tier 1 risk-based capital and total capital
as of December 31, 1998 would have amounted to $17.5 million (11.6% of average
total assets), $17.5 million (13.4% of risk weighted assets) and $19.9 million
(15.2% of risk weighted assets), respectively. For additional information on the
regulatory capital requirements applicable to BankPhiladelphia, see "Regulation
of USABancShares and BankPhiladelphia."
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<PAGE>
USE OF PROCEEDS
Neither USABancShares nor USA Capital Trust I will receive any cash
proceeds from the issuance of the Exchange Capital Securities. The Original
Capital Securities surrendered in exchange for the Exchange Capital Securities
will be retired and canceled. The proceeds to USA Capital Trust I from the
offering of the Original Capital Securities was $10,000,000 (before giving
effect to approximately $916,000 of commissions and expenses of the offering
payable by USABancShares ). All of the proceeds from the sale of Original
Capital Securities were invested by USA Capital Trust I in the Junior
Subordinated Debentures. USABancShares contributed $6.0 million of the net
proceeds to BankPhiladelphia to increase BankPhiladelphia's capital position.
BankPhiladelphia expects to leverage the proceeds contributed to it by
increasing its origination and purchase of loans. An aggregate of $1.9 million
of the net proceeds was placed in the reserve account to be held for two years
and thereafter applied to payment of interest on the trust preferred securities.
The remaining net proceeds of $1.2 million were retained by USABancShares for
general corporate purposes, including the repayment of outstanding debt.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion is to focus on significant and ongoing
changes in the financial condition and results of operations of USABancShares
and its subsidiaries during the periods indicated. The discussion and analysis
is intended to supplement and highlight information contained in the
accompanying consolidated financial statements and the selected financial data
presented elsewhere in this Prospectus.
On each of July 18, 1997 and August 17, 1998, USABancShares paid a 33%
stock dividend on its common stock. All prior period stock, per share, and
option information included in this Prospectus has been adjusted to reflect such
stock dividends. This discussion does not reflect the consummation of the sale
of the Original Junior Subordinated Debentures and the Original Capital
Securities.
Comparison of Financial Condition and Results of Operations
for the Years Ended December 31, 1998 and December 31, 1997
Financial Condition
USABancShares' total assets increased from $89.3 million at December
31, 1997 to $165.1 million at December 31, 1998, an increase of $75.8 million,
or 84.8%. The increase was due primarily to increases in the loan and securities
portfolios of $46.1 million and $23.3 million, respectively. This growth was
funded by increases in certificates of deposit (primarily non-retail
certificates of deposit) and borrowed funds of $41.8 million, and $22.7 million,
respectively. The increase in the loan portfolio was primarily due to the
purchase of commercial and single-family residential real estate loans at a
discount. These purchased loans, which had an aggregate unpaid principal balance
of approximately $37.3 million (38% of commercial and 62% of residential loans)
as of the date of acquisition, were acquired for approximately $35.2 million
(reflecting an aggregate discount of $2.1 million, or 5.6%). The increase in the
securities portfolio was primarily due to the acquisition of trust preferred
securities and financial institution bonds. Total deposits increased $43.9
million to $114.4 million at December 31, 1998. The increase in deposits was
comprised of an increase in certificates of deposit of $41.8 million and an
increase in transaction accounts of $2.1 million during the period which
resulted from BankPhiladelphia's marketing efforts to attract new customers.
Borrowed funds consist of fixed-rate callable advances from the Federal Home
Loan Bank of Pittsburgh. Total borrowed funds increased to $35.3 million at
December 31, 1998, from $12.6 million at December 31, 1997. The increases in
deposits and in borrowed funds were utilized to fund increases in loans and
securities as part of BankPhiladelphia's overall growth strategy. Management
plans to continue to utilize advances from the Federal Home Loan Bank of
Pittsburgh in conjunction with deposit expansion to provide the necessary
funding for BankPhiladelphia's continued growth. BankPhiladelphia's borrowing
limit at the Federal Home Loan Bank of Pittsburgh as of December 31, 1998, was
approximately $30.0 million, all of which was drawn upon as of such date.
USABancShares' stockholders' equity increased from $5.4 million at December 31,
1997 to $13.6 million at December 31, 1998. The $8.2 million or 151.8% increase
in stockholders' equity was primarily due to USABancShares' private placement of
$7.5 million of common stock in February 1998.
Results of Operations
Net Income. USABancShares reported net income of $1.5 million, or $0.70
per share, diluted, for the year ended December 31, 1998, compared to a net loss
of $226,000, or $0.21 per share, diluted, for the year ended December 31, 1997.
The increase in net income was primarily the result of an increase in net
interest income of $3.5 million and an increase in non-interest income of
$445,000. These increases were partially offset by an increase in the provision
for loan losses of $95,000, an increase in non-interest expense of $1.2 million,
and an increase in income tax expense of $940,000.
Interest Income. Interest income increased 153.2% or $7.5 million to
$12.4 million, for the year ended December 31, 1998, compared to the prior year.
The increase in interest income was the result of an increase in interest income
on loans, investment securities, and interest-bearing deposits of $5.9 million,
$1.4 million, and $157,000, respectively. The increase in interest income on
loans was due to an increase in the average balance of the loan portfolio, as
well as accretion income recognized on loan pools purchased by BankPhiladelphia
at a discount since 1995. The discount associated with such loan pools is
recognized as a yield adjustment and is included as interest income using the
level yield method (to the extent that the timing and amount of cash flows can
reasonably be determined). Any changes from original estimates used in the
purchase price could result in either an increase or decrease in accretion
income. During the years ended
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<PAGE>
December 31, 1998 and 1997, BankPhiladelphia recognized $1.3 million and
$691,000 in accretion income, respectively, representing 10.5% and 14.2% of
total interest income, respectively. The significant increase in the average
balance of BankPhiladelphia's loan portfolio reflects the $37.3 million of loan
purchases and the more than $30.0 million of loan originations (including
participations with local financial institutions) which were closed during the
year ended December 31, 1998.
Interest Expense. Interest expense increased 155.1% or $3.9 million to
$6.5 million, for the year ended December 31, 1998, compared to the year ended
December 31, 1997, due to higher volumes of new certificates of deposit and
advances from the Federal Home Loan Bank of Pittsburgh. In order to fund
USABancShares' substantial growth during the year ended December 31, 1998,
USABancShares relied primarily on non-retail certificates of deposit and, to a
lesser extent, long term callable advances from the Federal Home Loan Bank of
Pittsburgh. The increase in interest expense during the year ended December 31,
1998 was also due to BankPhiladelphia extending the average maturity of its
certificates of deposit from approximately nine months to approximately 18
months. The average cost of funds, including borrowings, decreased 0.08% to
5.65% for the year ended December 31, 1998 compared to the prior year.
Net Interest Income. The earnings of USABancShares depend primarily on
its level of net interest income, which is the difference between interest
earned on USABancShares' interest-earning assets (loans and investment
securities) and the interest paid on interest-bearing liabilities (deposits and
borrowings). Net interest income is a function of USABancShares' interest rate
spread, which is the difference between the yield earned on interest-earning
assets and the rate paid on interest-bearing liabilities, as well as a function
of the average balance of interest-earning assets as compared to the average
balance of interest-bearing liabilities. Net interest income for the year ended
December 31, 1998, increased $3.5 million, or 151.1%, to $5.9 million from $2.3
million for the same period in 1997. Average interest-earning assets increased
by $69.3 million, or 133.6%, to $121.2 million, for the year ended December 31,
1998. Average interest-bearing liabilities increased $70.0 million or 158.6%
over the same period. USABancShares' interest rate spread increased from 3.68%
to 4.54% while USABancShares' net interest margin increased from 4.53% to 4.87%.
The increase in USABancShares' interest rate spread and margin reflects
USABancShares' significant growth in loans and securities which were funded at a
positive spread with deposits and borrowings.
Average Balance Sheet and Yield/Rate Analysis. Net interest income is
affected by changes in both average interest rates and average volumes of
interest-earning assets and interest-bearing liabilities. The following table
presents for the periods indicated the total dollar amount of interest income
from average interest-earning assets and the resultant yields, as well as the
interest expense on average interest-bearing liabilities, expressed both in
dollars and rates.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1998 1997
------------------------------------ ------------------------------------
(Dollars in Thousands) Average Average Average Average
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans................................ $ 78,797 $ 9,028 11.46% $26,421 $3,090 11.70%
Securities........................... 36,510 3,015 8.26 22,696 1,637 7.21
Interest-bearing deposits and other.. 5,842 309 5.30 2,739 152 5.55
--------- -------- ------ -------- ------- ----
Total interest-earning assets...... 121,149 12,352 10.20 51,856 4,879 9.41
--------- -------- ------ -------- ------- ----
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1998 1997
------------------------------------ ------------------------------------
(Dollars in Thousands) Average Average Average Average
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities:
Deposits:
Passbook........................... $ 3,650 $ 70 1.91% $ 1,888 $ 47 2.49%
NOW accounts....................... 842 21 2.48 705 16 2.27
Money market accounts.............. 3,573 134 3.76 1,684 63 3.74
Certificates of deposit............ 83,592 5,041 6.03 35,627 2,158 6.06
Borrowings........................... 22,482 1,188 5.29 4,227 246 5.82
--------- ------- ----- -------- ------- ----
Total interest-bearing liabilities. 114,139 6,454 5.66 44,131 2,530 5.73
--------- ------- ----- -------- ------- ----
Excess of interest-earning assets over
interest-bearing liabilities.......... $ 7,010 $ 7,725
========== ========
Net interest income..................... $ 5,898 $2,349
======= ======
Effective interest differential (spread) 4.54% 3.68%
===== =====
Net interest margin .................... 4.87% 4.53%
===== =====
</TABLE>
- -----------------------
(1) Average balances are calculated on a monthly basis.
Rate/Volume Analysis. The following schedule presents the dollar amount
of changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities. It distinguishes
between changes (a) related to outstanding balances and (b) due to the changes
in interest rates. Information is provided in each category with respect to: (i)
changes attributable to changes in volume (changes in volume multiplied by prior
rate); (ii) changes attributable to changes in rate (changes in rate multiplied
by prior volume); and (iii) the net change in rate/volume (change in rate
multiplied by change in volume). The changes attributable to the combined impact
of volume and rate have been allocated proportionately to the changes due to
volume and the changes due to rate.
<TABLE>
<CAPTION>
December 31, 1998 vs. December 31, 1997
--------------------------------------------------------
(Dollars in Thousands) Increase or Decrease
Due to Change in
-------------------------------------
Average Total Increase
Volume Average Rate (Decrease)
------------------- ----------------- ------------------
<S> <C> <C> <C>
Variance in interest income on:
Interest-earning assets:
Loans................................. $6,000 $ (62) $5,938
Securities............................ 1,113 265 1,378
Interest-bearing deposits and other... 164 (7) 157
------ ------ ------
Total interest-earning assets....... 7,277 196 7,473
====== ====== ======
Interest-bearing liabilities:
Deposits:
Passbook........................ 30 (7) 23
NOW accounts.................... 3 2 5
Money market accounts........... 71 -- 71
Certificates of deposit......... 2,892 (9) 2,883
Borrowings........................... 962 (20) 942
------- ------ ------
Total interest-bearing liabilities... $3,958 $ (34) $3,924
====== ====== ======
Change in net interest income............... $3,319 $ 230 $3,549
====== ====== ======
</TABLE>
27
<PAGE>
Provision for Loan Losses. Management records a provision for loan
losses in an amount that it believes will result in an allowance for loan losses
sufficient to cover all potential net charge-offs and risks believed to be
inherent in the loan portfolio. Management's evaluation includes such factors as
past loan loss experience as related to current loan portfolio mix, evaluation
of actual and potential losses in the loan portfolio, prevailing regional and
national economic conditions that might have an impact on the portfolio, regular
reviews and examinations of the loan portfolio conducted by bank regulatory
authorities, and other factors that management believes deserve current
recognition. As a result of management's evaluation of these factors, the
provision for loan losses increased $95,000 during the year ended December 31,
1998, compared to the same period last year. The increase in the provision for
loan losses during the year ended December 31, 1998, as compared to the same
period in the prior year was due primarily to the substantial growth in
BankPhiladelphia's loan portfolio and the shift in such loan portfolio from
predominantly residential loans to a mix of residential and commercial real
estate loans. The allowance for loan losses as a percentage of loans
outstanding, net of discount, was 1.02% at December 31, 1998, compared to 1.01%
at December 31, 1997. In addition, the allowance for loan losses as a percentage
of total non-performing loans, net of discount, was 53.72% at December 31, 1998,
compared 197.96% at December 31, 1997. The significant decline in this ratio
during the year ended December 31, 1998 was due, in large part, to a single
acquired commercial real estate loan which became non-performing during the
third quarter of 1998. Management believes that this loan does not present a
significant risk of loss to BankPhiladelphia on the basis of a current appraisal
on the real estate securing the loan, the loan-to-value ratio thereon, the
applicable purchase discount and specific reserve applied to such loan. See
"Risk Factors--Risks Related to USABancShares and BankPhiladelphia--Purchase
Discount" and "Business --Asset Quality--Delinquent Loan and Non-performing
Assets."
Management believes that the allowance for loan losses is adequate to
cover actual and potential losses in the loan portfolio under current
conditions. Nevertheless, there can be no assurance that additions to such
allowance will not be necessary in future periods, particularly if the growth in
BankPhiladelphia's commercial loan originations and purchases continues.
Non-Interest Income. Non-interest income increased by $445,000 to
$759,000, for the year ended December 31, 1998. The increase was primarily the
result of an increase in gain on sales of investment securities of $251,000, an
increase in other non-interest income of $155,000 and brokerage operating income
of $39,000 generated by USABancShares' brokerage subsidiary, USACapital.
Non-Interest Expense. Non-interest expense increased 50.6%, or $1.2
million to $3.7 million, for the year ended December 31, 1998. Compensation and
benefits expense increased $194,000 due primarily to the hiring of 21 additional
persons to assist in BankPhiladelphia's retail operations, including personnel
for a new branch, persons to service BankPhiladelphia's increased number of
loans and staff to assist with USABancShares' financial reporting and other
compliance issues. Occupancy expense increased $321,000 due to the costs
associated with the opening of BankPhiladelphia's headquarters and branch in
Center City, Philadelphia. Advertising expense increased $115,000 as a result of
opening BankPhiladelphia's Center City branch and corporate headquarters, a
promotional campaign for the branch opening and an image campaign. Office and
supplies expense increased $150,000 due to BankPhiladelphia changing its name in
July 1998. Data processing expense increased $84,000 as a result of the increase
in the number of loans and deposit accounts, as well as the number of
transactions processed.
Income Tax Expense. Income tax expense increased $940,000 to $957,000,
for the year ended December 31, 1998, compared to the same period in 1997. The
increase in income tax expense reflected the increase in earnings before income
taxes.
Asset and Liability Management. A principal objective of
BankPhiladelphia's asset and liability management is to minimize
BankPhiladelphia's exposure to changes in interest rates. BankPhiladelphia's
policy is to attempt to manage assets and liabilities in such a way as to
maximize net interest income through changing interest rate environments. An
interest rate sensitive asset or liability is one that, within a defined time
period, either matures or experiences an interest rate change in line with
general market rates. Interest rate sensitivity measures the relative volatility
of a bank's net interest margin resulting from changes in market interest rates.
The following table summarizes repricing intervals for interest-earning
assets and interest-bearing liabilities for the period ended December 31, 1998
and the difference or "gap" between them on an actual and cumulative basis for
the periods indicated. The table was prepared with the following assumptions:
(1) 50% of BankPhiladelphia's transaction
28
<PAGE>
accounts are considered core deposits and are assumed to mature in the "Over 5
Years" category; the remaining 50% are not considered to be core transaction
accounts, are sensitive to rate changes, and, as such, are placed in the "1-90
Days" category; (2) interest-earning assets are calculated based on contractual
adjustments or stated maturities in the instruments without any adjustments for
prepayment; and (3) certificates of deposit and borrowings are scheduled based
on the applicable stated maturities.
<TABLE>
<CAPTION>
(Dollars in Thousands) 12/31/98
1-90 Days 91-364 Days 1-5 Years Over 5 Years Balance
--------- ----------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable.................... $ 6,955 $ 6,245 $ 35,108 $ 54,997 $103,305
Investments......................... 22,004 -- 3,247 22,416 47,667
-------- -------- -------- -------- --------
Total Assets..................... $ 28,959 $ 6,245 $ 38,355 $ 77,413 $150,972
======== ======== ======== ======== ========
Interest-bearing liabilities:
NOW accounts........................ $ 846 $ -- $ -- $ -- $ 846
Money Market accounts............... 2,345 -- -- -- 2,345
Passbook savings accounts........... 5,281 -- -- -- 5,281
Certificates of deposit............. 12,599 34,469 56,501 907 104,476
Borrowings.......................... -- 6,106 25,000 -- 31,106
Collateralized borrowings........... -- -- 3,202 997 4,199
-------- -------- -------- -------- --------
Total interest-bearing liabilities $ 21,071 $ 40,575 $ 84,703 $ 1,904 $148,253
======== ======== ======== ======== ========
Periodic gap........................... $ 7,888 $(34,330) $(46,348) $ 75,509 $ 2,719
======== ======== ======== ======== ========
Cumulative gap......................... $ 7,888 $(26,442) $(72,790) $ 2,719 --
======== ======== ======== ======== ========
Ratio of gap to interest-earning
assets........................... 5% -22% -31% 50% --
Ratio of cumulative gap to interest-
earning assets.................... 5% -17% -48% 2% --
</TABLE>
A gap is considered positive when the amount of interest rate sensitive
assets exceeds the amount of interest rate sensitive liabilities. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds interest rate sensitive assets. During a period of falling interest
rates, a positive gap would tend to adversely affect net interest income, while
a negative gap would tend to result in an increase in net interest income.
During a period of rising interest rates, a positive gap would tend to result in
an increase in net interest income while a negative gap would tend to affect net
interest income adversely.
If repricing of BankPhiladelphia's assets and liabilities were equally
flexible and moved concurrently, the impact of an increase or decrease in
interest rates on net income would be minimal. At December 31, 1998,
BankPhiladelphia had a negative cumulative one year gap, which suggests that net
interest income may decrease during periods of rising interest rates.
The method used to analyze interest rate sensitivity in the table above
has a number of limitations. Certain assets and liabilities may react
differently to changes in interest rates even though they reprice or mature in
the same or similar time periods. The interest rates on certain assets and
liabilities may change at different times than changes in market interest rates,
with some changing in advance of changes in market rates and some lagging behind
changes in market rates. Also, certain assets, such as adjustable-rate loans,
often have provisions which may limit changes in interest rates each time market
interest rates change and on a cumulative basis over the life of the loan.
Additionally, the actual prepayments and withdrawals experienced by
BankPhiladelphia in the event of a change in interest rates may deviate
significantly from those assumed in calculating the data shown in the table.
In the event BankPhiladelphia should experience a mismatch in its
desired gap ranges or an excessive decline in its market value of equity
resulting from changes in interest rates, it has a number of options which it
could utilize to remedy such mismatch. BankPhiladelphia could restructure its
investment portfolio through sales or purchases of securities with
29
<PAGE>
more favorable repricing attributes. It could also emphasize loan products with
appropriate maturities or repricing attributes, or it could attract deposits or
obtain borrowings with desired maturities.
Liquidity and Capital Resources
Liquidity. As BankPhiladelphia is the primary operating subsidiary of
USABancShares, liquidity management is generally handled by BankPhiladelphia's
management. Liquidity refers to a company's ability to generate sufficient cash
to meet the funding needs of current loan demand, deposit withdrawals, principal
and interest payments with respect to outstanding borrowings and to pay
operating expenses. It is management's policy to maintain greater liquidity than
required by the applicable regulatory authorities in order to be in a position
to fund loan originations and purchases, to meet withdrawals from deposit
accounts, to make principal and interest payments with respect to outstanding
borrowings and to make investments that take advantage of interest rate spreads.
BankPhiladelphia monitors its liquidity in accordance with guidelines
established by BankPhiladelphia and applicable regulatory requirements.
BankPhiladelphia can minimize the cash required during times of heavy loan
demand by modifying its credit policies or reducing its marketing effort.
Liquidity demand caused by net reductions in deposits are usually caused by
factors over which BankPhiladelphia has limited control. BankPhiladelphia
derives its liquidity from both its assets and liabilities. Liquidity is derived
from assets by receipt of interest and principal payments and prepayments, by
the ability to sell assets at market prices and by utilizing unpledged assets as
collateral for borrowings. Liquidity is derived from liabilities by maintaining
a variety of funding sources, including deposits, advances from the Federal Home
Loan Bank of Pittsburgh and other short and long-term borrowings.
BankPhiladelphia's liquidity management is both a daily and long-term
function of funds management. Liquid assets are generally invested in short-term
investment securities and other short-term investments. If BankPhiladelphia
requires funds beyond its ability to generate them internally, various forms of
both short and long-term borrowings provide an additional source of funds. At
December 31, 1998, BankPhiladelphia had $30.0 million in borrowing capacity
under a collateralized line of credit with the Federal Home Loan Bank of
Pittsburgh (all of which had been drawn upon as of such date) and an additional
$2.0 million of borrowing capacity under lines of credit maintained with several
local financial institutions ($1.1 million of which had been drawn upon as of
such date).
At December 31, 1998, BankPhiladelphia had outstanding commitments,
including unused lines of credit, of $1.1 million and letters of credit of $1.1
million. Certificates of deposit which are scheduled to mature within one year
totaled $47.1 million at December 31, 1998, and USABancShares, on a consolidated
basis, had no borrowings scheduled to mature within one year. BankPhiladelphia
anticipates that it will have sufficient funds available to meet its current
loan commitments.
Capital Resources. USABancShares and BankPhiladelphia are subject to
various regulatory capital requirements administered by federal and state
banking agencies. Failure to meet minimum capital requirements can result in
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on USABancShares'
financial condition and results of operations. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, USABancShares and
BankPhiladelphia must meet specific capital guidelines that involve quantitative
measures of USABancShares' assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. USABancShares and
BankPhiladelphia's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital
adequacy require USABancShares and BankPhiladelphia to maintain minimum amounts
and ratios (set forth in the table below) of Total and Tier 1 capital to
risk-weighted assets and of Tier 1 capital to average assets. As of December 31,
1998, USABancShares and BankPhiladelphia exceeded all capital adequacy
requirements to which they were subject.
30
<PAGE>
At December 31, 1998 and December 31, 1997, BankPhiladelphia's actual
and required minimum capital ratios were as follows:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Adequacy Under Prompt Corrective
(Dollars in Thousands) Actual Purposes Action Provisions
----------------------- --------------------------- ----------------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ---------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital
(to Risk Weighted Assets)...... $13,930 11.2% $9,987 8.0% $12,483 10.0%
Tier 1 Capital
(to Risk Weighted Assets)...... 12,879 10.3 4,994 4.0 7,490 6.0
Leverage........................ 12,879 8.5 6,068 4.0 7,585 5.0
As of December 31, 1997:
Total Capital
(to Risk Weighted Assets)...... 5,315 7.9 5,400 8.0 6,750 10.0
Tier 1 Capital
(to Risk Weighted Assets)...... 4,747 7.0 2,700 4.0 4,050 6.0
Leverage........................ 4,747 5.4 3,548 4.0 4,435 5.0
</TABLE>
At December 31, 1998 and December 31, 1997, USABancShares' actual and
required minimum capital ratios were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) Actual For Capital Adequacy Purposes
------------------------------ ------------------------------------
Amount Ratio Amount Ratio
------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital
(to Risk Weighted Assets)...... $15, 566 12.1% $10,317 8.0%
Tier 1 Capital
(to Risk Weighted Assets)...... 13,782 10.7 5,159 4.0
Leverage........................ 13,782 8.7 6,319 4.0
As of December 31, 1997:
Total Capital
(to Risk Weighted Assets)...... 5,752 8.5 5,431 8.0
Tier 1 Capital
(to Risk Weighted Assets)...... 5,184 7.6 2,715 4.0
Leverage........................ 5,184 5.8 3,570 4.0
</TABLE>
Year 2000 Compliance
Changing from the year 1999 to 2000 has the potential to cause problems
in data processing and other date-sensitive systems. The Year 2000 date change
can affect any system that uses computer software programs or computer chips,
including automated equipment and machinery. The Year 2000 problem is the result
of computer programs using two digits rather than four to define the year. Any
of USABancShares' programs that are time sensitive may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a major
system failure or miscalculations. Regarding USABancShares, computer systems are
used to perform financial calculations, track deposits and loan payments,
transfer funds and make direct deposits. The primary processing of
USABancShares' loan and deposit transactions is performed by Intrieve
Incorporated, a third-party data processing vendor. Computer software and
computer chips also are used to run security systems, communications networks
and other essential bank equipment. Because of its reliance on these systems
31
<PAGE>
(including those used by its existing third-party data processing vendor),
USABancShares is following a comprehensive process to assure that such systems
are ready for the Year 2000 date change. To become Year 2000 compliant,
USABancShares is following guidelines suggested by federal bank regulatory
agencies and the Securities and Exchange Commission. A description of each of
the steps and the status of USABancShares' efforts in completing the steps is as
follows.
During 1997, USABancShares formed a Year 2000 committee that has
investigated the Year 2000 problem and its potential impact on USABancShares'
systems. The Year 2000 Committee reports to the Year 2000 Committee of the Board
of Directors which in turn reports to the full Board of Directors.
An independent consulting firm has been engaged to assist USABancShares
in developing its approach to becoming Year 2000 compliant. The initial phase of
achieving Year 2000 compliance includes educating USABancShares' employees and
customers about Year 2000 issues. USABancShares has completed this initial
awareness and understanding phase.
BankPhiladelphia has identified all potentially affected systems. This
step has included a review of all major information technology and
non-information technology systems to determine how Year 2000 issues affect
them. In connection with the foregoing, USABancShares has completed its
assessment of which systems and equipment are most prone to placing
USABancShares at risk if they are not Year 2000 compliant (i.e., mission
critical systems).
The Year 2000 Committee has developed an inventory of its vendors, an
inventory of actions to be taken, identification of the team members responsible
for completion of each action, a completion timetable and a project tracking
methodology. Significant vendors have been requested to advise USABancShares in
writing of their Year 2000 readiness, including actions to become compliant if
they are not already compliant. A plan has been developed to repair or replace
systems and equipment not currently Year 2000 compliant. Although responses from
certain vendors have not yet been received, this step is substantially complete
and is expected to be completed by September 1999.
USABancShares' third party data processing servicer as well as vendors
who provide significant technology-related services have modified their systems
to become Year 2000 compliant. USABancShares has developed scripts involving
typical transactions to test the proper functioning of the modified systems. It
has also arranged for repair or replacement of equipment programs affected by
Year 2000 issues. Most of the testing and corrections have taken place and all
of USABancShares' mission critical applications have been deemed compliant
through testing or vendor certification, or a plan has been developed for the
software upgrades required. This step is expected to be completed by June 30,
1999. The monitoring of certain vendors will continue into 1999.
BankPhiladelphia is preparing a contingency plan for how USABancShares
would resume business if unanticipated problems arise from non-performance by
vendors. Such plans are expected to be completed in the first quarter of 1999.
The Year 2000 issues also affect certain of USABancShares' customers,
particularly in the areas of access to funds and additional expenditures to
achieve compliance. As of December 31, 1998, USABancShares had contacted its
commercial credit customers and borrowers regarding the customers' awareness of
the Year 2000 Issue. While no assurance can be given that its customers will be
Year 2000 compliant, management believes, based on representations of such
customers and a review of their operations (including assessments of the
borrowers' level of sophistication and data and record keeping requirements),
that the customers are either addressing the appropriate issues to insure
compliance or that they are not faced with material Year 2000 issues. In
addition, in substantially all cases the credit extended to such borrowers is
collateralized by real estate which inherently minimizes USABancShares' exposure
in the event that such borrowers do experience problems or delays becoming Year
2000 compliant.
Inflation and Changing Prices
Management is aware of the impact of inflation on interest rates and the
corresponding impact on a bank's performance. The ability of a financial
institution to cope with inflation can only be determined by ongoing analysis
and monitoring of its asset and liability structure. USABancShares monitors its
asset and liability position with particular emphasis on the mix of
interest-sensitive assets and liabilities in order to reduce the effect of
inflation upon its performance.
32
<PAGE>
Inflation can have a more direct impact on categories of non-interest
expenses such as salaries and wages, supplies, and employee benefit costs. These
expenses are closely monitored by management for both the effects of inflation
and non-inflationary increases in such items as staffing levels, usage of
supplies and occupancy costs.
33
<PAGE>
BUSINESS
General
USABancShares is a Pennsylvania corporation headquartered in Philadelphia,
Pennsylvania and was organized in November 1995 in order to facilitate the
acquisition of People's Thrift Savings Bank, which changed its name to
"BankPhiladelphia" in July 1998. BankPhiladelphia, which is the primary business
of USABancShares, has operated as a community-based financial institution for
over 110 years. BankPhiladelphia was originally organized in 1887 as a mutual
building and loan association and converted to a Pennsylvania-chartered stock
savings bank in December 1990. Since USABancShares' acquisition of
BankPhiladelphia in November 1995, USABancShares has experienced rapid growth
which was fueled primarily by the purchase of loan pools at a discount from a
wide variety of sources. Recently, these sources consist primarily of private
sector sellers and, to a lesser extent, governmental agencies. USABancShares has
historically funded its loan growth primarily through certificates of deposit
and, to a lesser extent, advances from the Federal Home Loan Bank of Pittsburgh.
USABancShares expects this growth to continue as BankPhiladelphia leverages its
deposit inflows into new loan originations with continued purchases of pools of
loans at a discount, consisting primarily of performing loans secured by
single-family residential, multi-family residential and commercial properties.
From December 31, 1995 through December 31, 1998, USABancShares' total assets,
net loans receivable, deposits and stockholders' equity have increased by $139.3
million, $95.1 million, $93.6 million and $8.9 million or 540%, 1,359%, 450% and
189%, respectively. At December 31, 1998, USABancShares had total assets of
$165.1 million, net loans receivable of $102.1 million, total deposits of $114.4
million and total stockholders' equity of $13.6 million.
Strategy
USABancShares' business strategy focuses on achieving attractive returns
consistent with USABancShares' risk management objectives. USABancShares seeks
to implement this strategy by: (i) aggressively growing BankPhiladelphia's loan
portfolio through the acquisition of loan pools at a discount, together with an
increasing emphasis on loan originations; (ii) expanding BankPhiladelphia's
retail franchise through new branch openings and pursuing strategic acquisition
opportunities; (iii) making a substantial investment in BankPhiladelphia's
management, data processing systems and internal controls while at the same time
enhancing BankPhiladelphia's policies, procedures and credit risk management
functions in order to support BankPhiladelphia's ongoing growth strategy; (iv)
reducing funding costs through the attraction of lower cost transaction
accounts; (v) maintaining a community focus and capitalizing on recent
consolidation within BankPhiladelphia's primary market area; and (vi) improving
operating efficiency by reducing the level of non-interest expense relative to
interest-earning assets.
Market Area and Competition
BankPhiladelphia's primary market area encompasses the greater Delaware
Valley, which is served by several major commercial banks such as First Union,
PNC Bank and Mellon Bank as well as a number of mid-sized commercial banks,
savings banks and thrifts such as Commerce Bank, Jefferson Bank, Royal Bank,
Progress Bank, Prime Bank and Crusader Savings Bank, and other small community
banks and thrifts.
BankPhiladelphia encounters strong competition both in attracting deposits
and in originating loans. Its most direct competition for deposits comes from
financial institutions in its market area as well as brokerage operations and
mutual funds. BankPhiladelphia's direct competition for originated loans comes
from small to mid-size financial institutions located in the greater Delaware
Valley, while its most direct competition for purchased loans comes from local
and national companies in the business of acquiring loans. BankPhiladelphia
expects continued strong competition in the foreseeable future, including
increased competition from a number of growing mid-size regional banks in
BankPhiladelphia's market area. BankPhiladelphia competes for savings deposits
by offering depositors a higher level of personal service and a range of
competitively priced financial services. BankPhiladelphia competes for loan
originations and purchases by pricing its products competitively and by
providing superior customer service.
Based upon statistics provided by the Federal Reserve Bank of Philadelphia,
as of December 31, 1998, there were 116 different banking institutions operating
approximately 1,500 branch offices and having total deposits of approximately
$76.4 billion within the Philadelphia banking market as identified by the
Federal Reserve Bank of Philadelphia. Three of such institutions had
approximately 77% of deposits in the Philadelphia banking market. As of December
31, 1998,
34
<PAGE>
BankPhiladelphia had approximately .15% of deposits in the Philadelphia banking
market and .22% of deposits in the two counties in which BankPhiladelphia
maintains branches.
Lending Activities
Loan Portfolio. The principal components of BankPhiladelphia's loan
portfolio are first mortgage loans secured by residential real estate and
commercial real estate and, to a much lesser extent, home equity loans, passbook
and other consumer loans and commercial business loans. At December 31, 1998,
BankPhiladelphia's total loans receivable, net amounted to $102.1 million, which
represented 61.8% of USABancShares' $165.1 million in total assets at that date.
The following table sets forth the composition of BankPhiladelphia's loan
portfolio in dollar amounts and as a percentage of the portfolio as of the dates
indicated.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------
(Dollars in Thousands) 1998 1997
----------------------------------- -----------------------------
<S> C> <C> <C> <C>
Real estate(1)(2).................... $102,076 98.8% $54,262 95.1%
Commercial business (3).............. 986 1.0 1,091 1.9
Consumer(4).......................... 243 0.2 1,694 3.0
-------- ----- ------- ------
Total loans receivable............... 103,305 100.0% 57,047 100.0%
===== ======
Less
Loans in process.................. -- 260
Deferred loan fees................ 116 217
Allowance for loan losses......... 1,051 568
-------- -------
Net loans receivable................. $102,138 $56,002
======== =======
</TABLE>
- --------------------------
(1) Consists of loans secured by single-family residential, multi-family
residential and commercial real estate.
(2) At December, 31, 1998, a majority of BankPhiladelphia's real estate loans
consisted of loans secured by multi-family residential and commercial real
estate.
(3) Consists primarily of inventory and working capital loans.
(4) Consists primarily of home equity loans and installment loans.
Loan Maturity. The following table sets forth the maturity or period of
repricing of BankPhiladelphia's loan portfolio at December 31, 1998. Demand
loans, loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due within one year. Adjustable and floating rate
loans are included in the period in which interest rates are next scheduled to
adjust rather than in which they contractually mature, and fixed rate loans are
included in the period in which the final contractual repayment is due. The
table does not include the effect of future principal prepayments.
<TABLE>
<CAPTION>
Within 1 1-3 3-5 5-15 Beyond
(Dollars In Thousands) Year Years Years Years 15 years Total
---- ----- ----- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Real estate (1): $13,200 $11,837 $23,028 $19,143 $34,868 $102,076
Commercial business(2)............... -- -- -- 986 -- 986
Consumer (3)......................... -- -- 243 -- -- 243
-------- -------- -------- -------- -------- --------
Total loans receivable.......... $13,200 $11,837 $23,271 $20,129 $34,868 $103,305
======== ======== ======== ======== ======== ========
</TABLE>
35
<PAGE>
- -----------------------------
(1) Consists of loans secured by single-family residential, multi-family
residential and commercial real estate.
(2) Consists primarily of inventory and working capital loans.
(3) Consists primarily of home equity loans and installment loans.
Origination, Purchase and Sale of Loans. The lending activities of
BankPhiladelphia are subject to the underwriting policies and loan origination
and purchase procedures established by the Board of Directors and management.
Loan originations are derived from a number of sources, such as existing
customers, BankPhiladelphia's loan officers, borrowers, builders, attorneys,
walk-in customers and correspondent lenders. Upon receiving a loan application,
BankPhiladelphia obtains a credit report and employment verification to verify
specific information relating to the applicant's employment, income and credit
standing. In the case of a real estate loan, an appraiser approved by
BankPhiladelphia appraises the real estate intended to collateralize the
proposed loan. An underwriter checks the loan application file for accuracy and
completeness, and verifies the information provided. If the appraisal and credit
information generally comply with BankPhiladelphia's underwriting guidelines,
the loan is approved by the Board of Directors. The Bank has not delegated to
any of its loan officers approval authority and all loan originations are
required to be approved by the Board of Directors. For multi-family residential
and commercial real estate loans, BankPhiladelphia requires that the borrower
provide operating statements, pro forma cash flow statements and, if applicable,
rent rolls. In addition, BankPhiladelphia reviews the borrower's credit standing
and expertise in owning and managing the type of property that will
collateralize the loan. Fire and casualty insurance, and in certain cases, flood
insurance, are required on the property serving as collateral at the time the
loan is made and throughout the term of the loan.
The Bank's internal originations consist primarily of multi-family
residential and commercial real estate loans. Although BankPhiladelphia will and
does originate single-family residential and consumer loans, such originations
have historically been made as an accommodation to BankPhiladelphia's customers
and such loans are generally not emphasized by BankPhiladelphia. In addition,
although commercial business loans have also historically not been a major line
of business for BankPhiladelphia, BankPhiladelphia's current business focus is
to increase its emphasis on small business commercial loan originations.
Since December 1995, BankPhiladelphia has been supplementing its
originations with purchases of loan pools at a discount. Such purchases have
been the primary factor in BankPhiladelphia's substantial growth since 1995.
Prior to 1997, BankPhiladelphia acquired loans at a discount, generally from the
Federal Deposit Insurance Corporation and the Resolution Trust Corporation,
primarily in auctions of pools of loans acquired by such agencies from the large
number of financial institutions which had failed during the late 1980s and
early 1990s. Although governmental agencies, such as the Federal Deposit
Insurance Corporation, continue to be a potential source of loans at a discount,
in recent periods BankPhiladelphia has obtained discounted loans primarily from
various private sector sellers, such as banks, savings institutions, mortgage
companies and insurance companies which generally were seeking to eliminate a
loan or a category of loans from their portfolio.
At December 31, 1998, BankPhiladelphia's net discounted loan portfolio
amounted to $51.7 million or 31.3% of USABancShares' total assets. These loans
had a face value of $57.0 million, reflecting a discount of $5.3 million or
9.3%. The Bank's discounted loan portfolio is secured by residential and
commercial real estate properties. At December 31, 1998, management believes
that approximately 59% and 41% of its discounted loan portfolio was secured by
residential and commercial properties, respectively.
Substantially all of the loans purchased by BankPhiladelphia at a
discount were performing in accordance with their terms at the time of purchase.
The Bank has developed and maintains a proprietary model to determine what
management believes to be the appropriate purchase price to be paid for a
discounted loan pool. The discount is determined based on objective and
subjective criteria. The objective criteria includes geographic location,
loan-to-value ratio, collateral type, past payment performance, and the term and
structure of the loan. The subjective criteria relies on senior management's
substantial experience with respect to the acquisition and management of
discounted real estate loans.
Real estate loans generally are acquired in pools, although
multi-family residential and commercial real estate loans may be acquired
individually. These pools generally are acquired in auctions or competitive bid
circumstances in which USABancShares faces substantial competition. Although
many of USABancShares' competitors have access to greater capital and have other
advantages, USABancShares believes that it has a competitive advantage relative
to many of its
36
<PAGE>
competitors as a result of its experience in acquiring and managing loans
purchased at a discount and the strategic relationships and contacts which it
has developed in connection with these activities.
Prior to making an offer to purchase a portfolio of loans,
USABancShares conducts an extensive investigation and evaluation of the loans in
the portfolio. Evaluations of potential loans are conducted primarily by
USABancShares' senior management who specialize in the analysis of such loans.
USABancShares' employees may use third parties to assist them in conducting an
evaluation of the value of the collateral property as well as to assist them in
the evaluation and verification of information and the gathering of other
information not previously made available by the potential seller.
Although BankPhiladelphia focuses on acquiring loans in the
Mid-Atlantic region, BankPhiladelphia has acquired loans secured by real estate
located in a number of other states including Texas, Florida and California. The
Bank believes that the relatively broad geographic distribution of its
discounted loan portfolio reduces the risks associated with concentrating such
loans in limited geographic areas and that due to its expertise and
BankPhiladelphia's policies and procedures, the geographic diversity of its
discounted loan portfolio does not place greater burdens on BankPhiladelphia's
ability to administer and, if applicable, service such loans.
One-to-Four Family Residential Mortgage Lending. The Bank has
historically not been an active originator of single-family residential loans
and such loans have generally been originated as an accommodation to
BankPhiladelphia's customers. These loans are generally made to borrowers who,
because of the size of the loan, prior credit problems, the absence of a credit
history or other factors, are unable to qualify as borrowers for a single-family
residential loan under Federal Home Loan Mortgage Corporation or Federal
National Mortgage Association guidelines ("conforming loans"). As a result,
these loans are not eligible for resale in the secondary mortgage market. Loans
to non-conforming borrowers are perceived by BankPhiladelphia's management as
being advantageous to BankPhiladelphia because they generally have higher
interest rates and origination and servicing fees and generally lower
loan-to-value ratios.
Substantially all of BankPhiladelphia's one-to-four family residential
loans have been acquired through loan purchases. A majority of these loans are
located outside of the greater Delaware Valley. Although BankPhiladelphia's
purchased single-family residential loans carry a variety of terms, management
believes the majority of such loans have loan-to-value ratios of 80% or below
and carry fixed rates of interest. The Bank generally attempts to acquire the
servicing rights with respect to purchased single-family residential loans,
which includes collecting and remitting loan payments, inspecting the properties
and making certain insurance and tax payments on behalf of the borrowers.
However, BankPhiladelphia may on occasion purchase such loans where the seller
retains the servicing rights. At December 31, 1998, BankPhiladelphia held in its
portfolio approximately $22.0 million of loans which were being serviced by
others.
The Bank currently offers fixed rate one-to-four family mortgage loans
with terms typically ranging from 15 to 30 years. One-to-four family residential
real estate loans often remain outstanding for significantly shorter periods
than their contractual terms because borrowers may refinance or prepay loans at
their option. The average length of time that BankPhiladelphia's one-to-four
family residential mortgage loans remain outstanding varies significantly
depending upon trends in market interest rates and other factors. In recent
years, the average maturity of BankPhiladelphia's mortgage loans has decreased
significantly due to the unprecedented volume of refinancing activity.
Accordingly, estimates of the average length of time that one-to-four family
loans may remain outstanding cannot be made with any degree of accuracy.
The Bank is permitted under applicable law to lend up to 100% of the
appraised value of the real property securing a residential loan. However, if
the amount of a residential loan originated or refinanced exceeds 80% of the
appraised value, BankPhiladelphia is required by federal regulations to obtain
private mortgage insurance on the portion of the principal amount that exceeds
80% of the appraised value of the security property. Pursuant to underwriting
guidelines adopted by the Board of Directors, BankPhiladelphia will generally
only lend up to 80% of the appraised value of the property securing a
single-family residential loan.
From time to time, BankPhiladelphia will originate loans for the
construction of single-family residential properties. Such loans may be made to
individuals or builders. The Bank does not expect to emphasize construction
lending in the near term and at December 31, 1998, BankPhiladelphia had no
construction loans outstanding.
Multi-family Residential Real Estate and Commercial Real Estate
Lending. The Bank's lending activities currently emphasize the origination and
acquisition of loans secured by existing multi-family residential and commercial
properties. As of December 31, 1998, over a majority of BankPhiladelphia's real
estate loan portfolio consisted of loans secured by
37
<PAGE>
multi-family residential and commercial properties. The Bank has generally
targeted higher quality, smaller multi-family residential and commercial real
estate loans with principal balances up to its legal lending limit.
The Bank's multi-family residential loans are secured by multi-family
properties of five units or more, while BankPhiladelphia's commercial real
estate loans are secured primarily by industrial, warehouse and self-storage
properties, office buildings, office and industrial condominiums, retail space
and strip shopping centers and mixed-used commercial properties. At December 31,
1998, substantially all of the properties securing BankPhiladelphia's
multi-family residential and commercial real estate loans were located in the
greater Delaware Valley. The Bank will presently originate multi-family
residential and commercial real estate loans for terms of up to 25 years. Some
of these loans contain call or repayment option features within three to seven
years after origination. The Bank will originate such loans on both a fixed-rate
or adjustable-rate basis, with the latter based on an applicable prime rate.
Adjustable-rate loans may have an established ceiling and floor, and the maximum
loan-to-value for these loan products is generally 80%. As part of the criteria
for underwriting multi-family residential and commercial real estate loans,
BankPhiladelphia generally requires a debt coverage ratio (the ratio of net cash
from operations before payment of debt service to debt service) of at least 1.1
to 1.0 on originated loans and at least 1.0 to 1.0 on acquired loans. It is also
BankPhiladelphia's general policy to seek additional protection, such as
secondary collateral and personal guarantees from the principals of the
borrowers, to mitigate any weaknesses identified in the underwriting process.
Loans collateralized by multi-family residential and commercial real
estate generally involve a greater degree of credit risk than one-to-four family
residential mortgage loans and carry larger loan balances. This increased credit
risk is a result of several factors, including the concentration of principal in
a limited number of loans and borrowers, the effects of general economic
conditions on income producing properties, and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by commercial real estate and multi-family real estate is
typically dependent upon the successful operation of the related property. If
the cash flow from the project is reduced, the borrower's ability to repay the
loan can become impaired. At December 31, 1998, $1.1 million of
BankPhiladelphia's commercial real estate loans were classified as
non-performing. As of such date, a significant portion of BankPhiladelphia's
non-performing commercial real estate loans was comprised of one purchased loan.
Commercial Business Loans. The Bank originates commercial business
loans consisting primarily of lines of credit and term loans secured by
equipment and accounts receivable. At December 31, 1998, commercial business
loans totaled $986,000 or 1.0%, of BankPhiladelphia's total loan portfolio. In
addition, all of BankPhiladelphia's commercial business loans which are secured
by real estate have been classified as commercial real estate loans. Currently,
BankPhiladelphia is placing greater emphasis on the origination of commercial
business loans and, in connection with the expansion of its community banking
franchise, BankPhiladelphia is currently in the process of hiring additional
commercial business lenders. Commercial business loans generally have shorter
terms and higher interest rates than mortgage loans because of the type and
nature of the collateral. At December 31, 1998, none of BankPhiladelphia's
commercial business loans were classified as non-performing.
Consumer Loans. The Bank originates consumer loans consisting
principally of loans secured by deposit accounts and marketable securities, and
home improvement, personal and automobile loans. At December 31, 1998, consumer
loans totaled $243,000, or 0.02%, of BankPhiladelphia's total loan portfolio.
The Bank offers consumer loans as a service to its customers. Consumer loans are
offered primarily on a fixed-rate basis with maturities generally of less than
ten years. Consumer loans entail greater credit risk than do residential
mortgage loans but have smaller balances and tend to have higher interest rates.
At December 31, 1998, none of BankPhiladelphia's consumer loans were classified
as non-performing.
Loan Origination Fees and Other Income. In addition to interest earned
on loans, BankPhiladelphia generally receives fees in connection with loan
originations. Such loan origination fees, net of costs to originate, are
deferred and amortized using the interest method over the contractual life of
the loan. Fees deferred are recognized as income immediately upon prepayment of
the related loan. At December 31, 1998, BankPhiladelphia had $116,000 of net
deferred loan origination fees. Such fees vary with the volume and type of loans
and commitments made and purchased, the principal repayments on such loans, and
competitive conditions in the real estate market that reflect the demand and
availability of money. In addition to loan origination fees, BankPhiladelphia
also receives loan fees and service charges that consist primarily of deposit
transaction account service charges and late charges.
38
<PAGE>
Loans to One Borrower. Current regulations restrict loans to one
borrower to an amount equal to 15% of unimpaired capital and unimpaired surplus
on an unsecured basis, and an additional amount equal to 10% of unimpaired
capital and unimpaired surplus if the loan is secured by readily marketable
collateral (generally, financial instruments). At December 31, 1998,
BankPhiladelphia's regulatory limit on loans to one borrower was $2.1 million
and its five largest loans or groups of loans to one borrower, including related
entities, aggregated $1.9 million, $1.9 million, $1.8 million, $1.8 million and
$1.8 million. All five of these loans or loan concentrations were secured by
multi-family residential or commercial real estate and were performing in
accordance with their terms at December 31, 1998.
Asset Quality
Collection Procedures. The Bank's collection procedures provide that
when a loan is 16 days past due, a computer generated late charge notice is sent
to the borrower requesting payment of the amount due under the loan, plus a late
charge. If such delinquency continues, on the first day of the next month, a
delinquent notice is mailed advising the borrower of the violation of the terms
of the loan. A representative of BankPhiladelphia attempts to contact borrowers
whose loans are more than 30 days past due. If such attempts are unsuccessful,
BankPhiladelphia will engage counsel to facilitate the collection process. A
delinquent loan report is presented to the Board of Directors on a regular basis
for their review. Historically, BankPhiladelphia has instituted legal action on
loans 90 days past due. It is sometimes necessary and desirable to arrange
special repayment schedules with borrowers to prevent foreclosure or filing for
bankruptcy. The schedule is prepared by BankPhiladelphia pursuant to discussions
with the borrower and reviewed by the Board of Directors.
Delinquent Loans and Non-performing Assets. Loans are reviewed on a
monthly basis. Loans are typically placed on nonaccrual status when either
principal or interest is 90 days or more past due. Delinquent loans are charged
off when it appears no longer reasonable or probable that the loan will be
collected. Interest accrued and unpaid at the time a loan is placed on
nonaccrual status is charged against interest income.
Real estate acquired by BankPhiladelphia as a result of foreclosure or
by deed in lieu of foreclosure is deemed other real estate owned ("OREO") until
such time as it is sold. When OREO is acquired, it is recorded at the lower of
the unpaid principal balance of the related loan or its estimated fair value,
less estimated selling expenses. Valuations are periodically performed, or
obtained, by management and any subsequent decline in fair market value is
charged to operations. The Bank had no OREO as of December 31, 1997. At December
31, 1998, OREO totaled $66,000 and consisted of one parcel of commercial real
estate.
The following table sets forth information with respect to
BankPhiladelphia's delinquent loans at December 31, 1998. At December 31, 1998,
BankPhiladelphia had no delinquent consumer loans.
Balance Number
------- ------
(Dollars in Thousands)
Residential real estate (1):
Loans 30 to 89 days delinquent................ $1,272 28
Loans 90 or more days delinquent.............. 818 20
----- -----
Total....................................... 2,090 48
----- -----
Commercial real estate:
Loans 30 to 89 days delinquent................ 382 2
Loans 90 or more days delinquent.............. 1,138 5
------ ------
Total....................................... 1,520 7
------ ------
Commercial business loans:.......................
Loans 30 to 89 days delinquent................ -- --
Loans 90 or more days delinquent.............. 58 1
------ ------
Total....................................... 58 1
------ ------
Total delinquent loans .......................... $3,668 56
====== ======
- ----------------------
(1) Consists solely of loans secured by single-family residential real estate.
39
<PAGE>
The following table presents information on USABancShares'
non-performing assets at the dates indicated. USABancShares did not have any
troubled debt restructurings at any of the dates presented.
<TABLE>
<CAPTION>
(Dollars in thousands) December 31,
---------------------------------------------
1998 1997
-------------------- ------------------
<S> <C> <C>
Non-accruing loans:
Residential real estate(1).................................... $ 666 $ 258
Commercial real estate........................................ 1,138(2) --
Commercial business........................................... -- 29
Consumer...................................................... -- --
------- -------
Total..................................................... 1,804 287
------- -------
Accruing loans greater than 90 days delinquent................... 152 --
------- -------
Total non-performing loans(3)............................. 1,956 287
------- -------
Other real estate owned (4)...................................... 66 --
------- -------
Total non-performing assets...................................... $2,022 $ 287
======= =======
Total non-performing loans, net of discount, as a
percentage of total loans, net of discount..................... 1.89% 0.50%
======= =======
Total non-performing assets, net of discount, as a
percentage of total assets, net of discount.................... 1.22% 0.32%
======= =======
</TABLE>
- ---------------
(1) Consists solely of loans secured by single-family residential real estate.
(2) The significant increase in non-performing commercial real estate loans
during the year ended December 31, 1998 was due, in large part, to a single
acquired loan. Management believes that this loan does not present a
significant risk of loss to BankPhiladelphia on the basis of a current
appraisal on the real estate securing the loan, the loan-to-value ratio
thereon, as well as the purchase discount and specific reserve applied to
such loan.
(3) All of USABancShares' non-performing loans as of December 31, 1998 consisted
of acquired loans.
(4) Consists of one parcel of commercial real estate.
The interest income that would have been recorded during the year ended
December 31, 1998 if BankPhiladelphia's non-accrual loans at the end of such
period had been current in accordance with their terms during such period was
$140,000.
Classification of Assets. Federal regulations provide for the
classification of delinquent or non-homogeneous loans and other assets such as
debt and equity securities as "special mention," "substandard," "doubtful," or
"loss" assets. In analyzing loans for purchase as well as for purposes of
BankPhiladelphia's loan classification, management has placed increased emphasis
on the payment history of the obligor and, to a lesser extent, the purchase
discount associated with a specific loan. Assets that do not expose
BankPhiladelphia to risk sufficient to warrant classification in one of the
aforementioned categories, but which possess some weaknesses, are required to be
designated "special mention" by management. Loans designated as special mention
are generally loans that, while current in required payment, have exhibited some
potential weaknesses that, if not corrected, could increase the level of risk in
the future. An asset is considered "substandard" if it is inadequately protected
by the current net worth and paying capacity of the obligor. "Substandard"
assets include those characterized by the "distinct possibility" that
BankPhiladelphia will sustain "some loss" if the deficiencies are not corrected.
Assets classified as "doubtful" have all of the weaknesses inherent in those
classified "substandard," with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions and values, "highly questionable and improbable."
Assets classified as "loss" are those considered "uncollectible" and of such
little value that their continuance as assets is not warranted and are charged
against the loan loss reserve. Pursuant to internal procedures, loans with a
history of 30-89 day delinquencies will generally be classified either special
mention or substandard. However, all loans 90 days or more delinquent are
classified either substandard, doubtful or loss.
40
<PAGE>
The following table sets forth the aggregate amount of
BankPhiladelphia's special mention and classified assets at December 31, 1998:
(Dollars in thousands)
Special mention...................................... $ 422
Substandard.......................................... 1,500
Doubtful ............................................ 211
Loss................................................. --
------
Total special mention and classified assets.......... 2,133
Other real estate owned............................. 66
------
Total special mention and classified assets,
including other real estate owned.................. $2,199
======
Allowance for Loan Losses. Management's policy is to provide for
estimated losses on BankPhiladelphia's loan portfolio based on management's
evaluation of the probable losses that may be incurred. The Bank's method of
determining provisions for loan losses is based partially on the Pennsylvania
Department of Banking's and the Federal Deposit Insurance Corporation's
Allowance for Loan and Lease Loss Guidelines, and partially on an in-house asset
classification policy. The policy provides for the monthly evaluation of
concentrations of credit, past loan experience, current economic conditions,
amount and composition of the loan portfolio, estimated fair value of
collateral, delinquencies and other factors.
The asset classifications are reviewed monthly by senior management
with respect to the loan portfolio and the adequacy of the allowance for loan
losses. Based upon that review, management determines whether any loans require
the establishment of appropriate reserves or allowances for losses. Such
evaluation, which includes a review of all loans for which full collectability
of interest and principal may not be reasonably assured, considers, among other
matters, the estimated fair value of the underlying collateral. Other factors
considered by management include the site and risk exposure of each segment of
the loan portfolio, present indicators such as delinquency rates and the
borrower's current financial condition, and the potential for losses in future
periods. Management also prepares a summary classifying all delinquent loans and
non-homogenous loans as special mention, substandard, doubtful or loss.
Management then recommends the general allowance for loan losses in part based
on past experience, and in part based on specified loan balances within each
classification.
Based on the recommendation of management, the Board of Directors makes
determinations as to any reserves and changes to the provision for loan losses
and allowance for loan losses. Both general and specific loan loss allowances
are charged against earnings; however, general loan loss allowances are added
back to capital in computing total risk-based capital under Department and
Federal Deposit Insurance Corporation regulations, subject to certain
limitations.
The Bank will continue to monitor the allowance for loan losses and
make future adjustments to the allowance through the provision for loan losses
as conditions indicate. Although BankPhiladelphia maintains its allowance for
loan losses at a level that it considers to be adequate to provide for the
inherent risk of loss in the loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition,
BankPhiladelphia's determination as to the amount of its allowance for loan
losses is subject to review by the Pennsylvania Department of Banking and the
Federal Deposit Insurance Corporation as part of their examination process,
which may result in the establishment of an additional allowance based upon the
judgment of the applicable regulator.
41
<PAGE>
The following table sets forth activity in BankPhiladelphia's allowance
for loan losses at or for the specified periods.
<TABLE>
<CAPTION>
At or for the Year
Ended December 31,
--------------------------------
(Dollars in Thousands) 1998 1997
---- ----
<S> <C> <C>
Total loans outstanding................................................ $103,305 $57,047
Average loans outstanding.............................................. 78,797 26,421
Allowance balance (at beginning of period)............................. 568 182
Provision for loan losses.............................................. 510 415
Charge offs, net of recoveries......................................... 27 29
-------- -------
Allowance balance (at end of period)................................... $ 1,051 $ 568
======== =======
Allowance for loan losses as a percent of
total loans, net of discount, at end of period.................... 1.02% 1.01%
======== =======
Allowance for loan losses as a percent of total
non-performing loans, net of discount, at end of period........ 53.72% 197.96%
======== =======
Allowance for loan losses and purchase discount
as a percentage of total loans..................................... 5.85% 8.88%
======== =======
Net loans charged off as a percent of average loans outstanding........ 0.03% 0.11%
======== =======
</TABLE>
The following tables set forth BankPhiladelphia's percentage of allowance
for loan losses to total allowance for loan losses and the percentage of loans
to total loans in each of the categories listed at the dates indicated:
<TABLE>
<CAPTION>
At December 31, 1998 At December 31, 1997
------------------------------------------ --------------------------------------------
Percentage of Percentage of Percentage of Percentage of
Allowance Loans in Each Allowance Loans in Each
(Dollars in Thousands) to Total Category to to Total Category to
Amount Allowance Total Loans Amount Allowance Total Loans
------ --------- ----------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance of allowance for loan
losses at end of period applicable
to:
Real estate.................... $1,037 98.8% 98.8% $528 93.0% 95.1%
Commercial business............ 11 1.0 1.0 30 5.3 1.9
Consumer....................... 3 0.3 0.2 10 1.7 3.0
------ ----- ----- ---- ----- -----
Total ..................... $1,051 100.0% 100.0% $568 100.0% 100.0%
====== ====== ===== ==== ===== =====
</TABLE>
Investment Activities
USABancShares' securities portfolio is managed by the President and the
Chief Financial Officer (the "Investment Officers") in accordance with a written
Investment Policy of the Board of Directors which addresses strategies, types
and levels of allowable investments.
At December 31, 1998, USABancShares' securities portfolio amounted to
$44.1 million or 26.7% of USABancShares' total assets. USABancShares' investment
portfolio is comprised of trust preferred securities, mortgage-backed
securities, U.S. Government agency securities, corporate and municipal
obligations and equity securities. At December 31, 1998, USABancShares' trust
preferred securities amounted to $24.9 million, mortgage-backed securities
amounted to $8.3 million, equity securities (consisting of common stock of a
local financial institution, a self-service photocopy business, stock in
BankPhiladelphia's computer vendor and a financial institution managed fund)
equaled $1.9 million, financial institution debt obligations totaled $4.6
million, corporate and municipal obligations amounted to $3.2 million, and U.S.
Government agency securities amounted to $1.2 million.
42
<PAGE>
Securities are classified by management as either available for sale or
held to maturity based upon USABancShares' intent and ability to hold such
securities. Securities available for sale include debt and equity securities
that are held for an indefinite period of time and are not intended to be held
to maturity. Securities available for sale include securities that management
intends to use as part of its overall asset/liability management strategy and
that may be sold in response to changes in interest rates and resultant
prepayment risk and other factors related thereto. Securities available for sale
are carried at fair value, and unrealized gains and losses (net of related tax
effects) on such securities are excluded from earnings but are included in
stockholders' equity. Upon realization, such gains and losses will be included
in USABancShares' earnings. Investment securities and mortgage-backed
securities, other than those designated as available for sale, are comprised of
debt securities that BankPhiladelphia has the affirmative intent and ability to
hold to maturity. Securities held to maturity are carried at cost, and are
adjusted for amortization of premiums and accretion of discounts over the
estimated terms of the securities.
The Bank is required under federal regulations to maintain a minimum
amount of liquid assets that may be invested in specified short-term securities
and certain other investments. The Bank has maintained a portfolio of liquid
assets that exceeds regulatory requirements. The Bank's Asset Liability
Management Committee generally meets on a monthly basis to decide, based on
market levels and conditions, current economic data, political and regulatory
information, and internal needs, whether any alterations need to be made to
BankPhiladelphia's investment portfolio. Based on the parameters of
BankPhiladelphia's Investment Policy, BankPhiladelphia endeavors to diversify
its holdings through the purchase of medium-term and long-term, fixed-rate and
variable-rate instruments, which provide both an adequate return and moderate
risk. All investment decisions are made by the Investment Officers of
USABancShares in accordance with the Investment Policy and Asset Liability
Management Committee guidelines.
USABancShares' securities portfolio composition is designed to provide
a liquid portfolio yet maximize yield on a risk adjusted basis. The process by
which management decides to acquire debt instruments, trust preferred securities
and corporate and municipal obligations is similar to that of underwriting a
loan. Management evaluates the potential credit risk associated with these types
of investment instruments by becoming familiar with the institution, its
earnings history, its ability to meet its debt obligation and, if possible, by
meeting its management team. The trust preferred securities are fixed-rate
long-term obligations with a weighted average yield of 9.21% as of December 31,
1998. The trust preferred securities are obligations of primarily non-rated
financial institutions located throughout the United States, and thus there is a
limited market in which to purchase and sell these securities. As long-term
instruments, this portfolio is also subject to interest rate risk. If interest
rates were to rise, these securities would lose value and require USABancShares
to reflect a charge to its equity.
The Bank's investments include mortgage-backed securities, which
represent an interest in, or are collateralized by, pools of mortgage loans
originated by private lenders that have been grouped by various governmental,
government-related or private organizations. Mortgage-backed securities
generally enhance the quality of BankPhiladelphia's assets by virtue of the
insurance or guarantees that back such securities, are more liquid than
individual mortgage loans and may be used to collateralize borrowings or other
obligations of BankPhiladelphia. Investments in mortgage-backed securities,
however, may involve risks not present with mortgage loans. Specifically,
mortgage-backed securities are subject to the risk that actual prepayments will
be greater than estimated prepayments over the life of the security, which may
require adjustments to the amortization of any premium or accretion of any
discount relating to such instruments, thereby reducing the net yield on such
securities. Like mortgage loans, there is also reinvestment risk associated with
the cash flows from such securities in the event such securities are redeemed by
the issuer. In addition, the market value of such securities may be adversely
affected by changes in interest rates. At December 31, 1998, $1.8 million, or
21.7%, of BankPhiladelphia's total mortgage-backed securities portfolio of $8.3
million had adjustable interest rates. Management is seeking to increase its
portfolio of adjustable-rate mortgage-backed securities. The Bank's
mortgage-backed securities are primarily pass-through securities, which provide
BankPhiladelphia with payments consisting of both principal and interest as
mortgage loans in the underlying mortgage pool are paid off by the borrowers.
The average maturity of pass-through mortgage-backed securities varies with the
maturities of the underlying mortgage instruments and with the occurrence of
unscheduled prepayments of those mortgage instruments.
43
<PAGE>
The following tables present the book values and estimated market
values at December 31, 1998 and December 31, 1997, for each major category of
USABancShares' investment securities:
<TABLE>
<CAPTION>
December 31, 1998
-----------------------------------------------------------------------------
(Dollars in Thousands) Amortized Gross Unrealized Gross Unrealized Approximate Fair
Cost Gains Losses Value
--------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Available-for-Sale:
Mortgage-backed securities $ 2,628 $ -- $ (8) $ 2,620
Corporate obligations 1,322 13 (89) 1,246
Trust preferred securities and
other securities (1)......... 24,944 243 (664) 24,523
------- ------ ------- -------
Total available-for-sale....... $28,894 $ 256 $ (761) $28,389
======= ------ ------- -------
Held-to-Maturity:
U.S. Government agency
securities..................... $ 1,201 $ 1 $ -- $ 1,202
Mortgage-backed securities..... 5,650 104 (1) 5,753
Municipal securities........... 3,166 69 -- 3,235
Trust preferred securities and
other securities (1)......... 5,738 79 (56) 5,761
------- ------ ------- -------
Total held-to-maturity....... $15,755 $ 253 $ (57) $15,951
======= ====== ======= =======
December 31, 1997
----------------------------------------------------------------------------
Amortized Gross Unrealized Gross Unrealized Approximate Fair
(Dollars in Thousands) Cost Gains Losses Value
--------- ---------------- ---------------- ----------------
Available-for-Sale:
U.S. Government agency $ 1,243 $ 16 $ -- $ 1,259
securities.....................
Trust preferred securities....... 6,737 150 (11) 6,876
------- ---- ----- -------
Total available-for-sale....... $ 7,980 $166 $(11) $ 8,135
======= ==== ===== =======
Held-to-Maturity:
U.S. Government agency
securities..................... $ 3,557 $ -- $ (10) $ 3,547
Mortgage-backed securities....... 6,306 50 -- 6,356
Municipal securities............. 3,163 101 -- 3,264
Trust preferred securities
and other securities (1)....... 2,393 84 -- 2,477
------- ---- ----- -------
Total held-to-maturity......... $15,419 $235 $(10) $15,644
======= ==== ===== =======
</TABLE>
- ------------------------------------
(1) Trust preferred securities and other securities are primarily comprised of
trust preferred securities of financial institutions located throughout the
United States. At December 31, 1998, BankPhiladelphia held $22.6 million of
trust preferred securities available-for-sale and $2.3 million
held-to-maturity. Also included in the available-for-sale category was
approximately $1.9 million of equity securities consisting of equity
securities of a local financial institution and a self-service photocopy
business, equity securities of BankPhiladelphia's computer vendor and a
financial institution managed fund. At December 31, 1997, trust preferred
securities held to maturity totaled $500,000. The remaining $1.9 million in
the held to maturity category at such date consisted of debt instruments of
financial institutions on the East Coast of the United States.
USABancShares does not hold more than $2.0 million of trust preferred
securities of any one issuer.
44
<PAGE>
The following table shows the contractual maturity of USABancShares'
investment securities portfolio at December 31, 1998:
<TABLE>
<CAPTION>
(Dollars in Thousands) Available-for-Sale Held-to-Maturity
------------------------------------ ---------------------------------------
Weighted Weighted
Amortized Approximate Average Amortized Approximate Average
Cost Fair Value Yield Cost Fair Value Yield
----------- ------------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Due after one year through five years.. $ 1,246 $ 1,170 11.92% $ 2,001 $ 2,015 7.31%
Due after five years through ten years. 816 770 9.88 2,635 2,581 7.90
Due after ten years.................... 22,312 21,996 9.61 5,479 5,613 7.06
Mortgage-backed securities............. 2,628 2,620 7.00 5,640 5,724 6.59
Equity securities...................... 1,892 1,833 -- -- -- --
------- ------- ------- -------
$28,894 $28,389 $15,755 $15,951
======= ======= ======= =======
</TABLE>
Sources of Funds
General. Deposits are the major source of BankPhiladelphia's funds for
lending and other investment purposes. In addition to deposits, BankPhiladelphia
derives funds from the scheduled payments as well as prepayment of loans, the
maturity of investment securities and the sale of assets available for sale.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are influenced
significantly by general interest rates and market conditions. Borrowings may be
used to compensate for reductions in the availability of funds from other
sources or on a longer term basis for general business purposes.
Deposits. Consumer and commercial deposits are attracted principally
from within BankPhiladelphia's market area through the offering of a broad
selection of deposit instruments, including non interest-bearing demand
accounts, NOW accounts, passbook savings accounts, money market accounts, term
certificate accounts and individual retirement accounts. Deposit account terms
vary according to the minimum balance required, the period of time during which
the funds must remain on deposit, and the interest rate, among other factors.
Deposits have increased 450% from $20.8 million at December 31, 1995 to $114.4
million at December 31,1998. The largest area of increase occurred in
certificates of deposit as BankPhiladelphia continued to rely primarily on
non-retail certificates of deposits. At December 31, 1998, BankPhiladelphia had
$104.5 million of certificates of deposit, $34.7 million of which were in excess
of $100,000, of which $10.1 million mature within twelve months.
The Bank regularly evaluates its internal cost of funds, surveys rates
offered by competing institutions, reviews BankPhiladelphia's cash flow
requirements for lending and liquidity, and executes rate changes when deemed
appropriate. The Bank will open a new branch office during the second quarter of
1999 in Montgomery County, Pennsylvania. Management anticipates that the mix of
deposits will shift towards transaction accounts as BankPhiladelphia expands its
commercial line of business. The Bank anticipates that the growth in deposits
would be accomplished through aggressive marketing of its retail branch network
in surrounding communities, competitive pricing of retail products and the
ability to provide loan and deposit products to consumers and commercial
businesses in its market area. See "Management's Discussion and Analysis and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
45
<PAGE>
The following table sets forth the balance of each deposit type and the
weighted average rate paid on each deposit type of BankPhiladelphia for the
periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------
1998 1997
---- ----
(Dollars in Thousands) Percent of Weighted Percent of Weighted
Total Average Total Average
Balance Deposits Yield Balance Deposits Yield
------- -------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand.............. $ 1,439 1.26% -- $ 257 0.37% --
NOW accounts............................ 846 0.73 2.31% 688 0.98 2.27
Savings and Passbook accounts........... 5,281 4.62 4.40 2,019 2.86 2.49
Money market deposit accounts........... 2,345 2.05 3.66 4,802 6.81 3.74
Certificates of deposit ................ 104,476 91.34 5.73 62,708 88.98 6.06
-------- ------ ------- ------
Total deposits.......................... $114,387 100.00% 5.53% $70,474 100.0% 5.72%
======== ====== ======= ======
</TABLE>
At December 31, 1998, BankPhiladelphia's certificates of deposit had
the following stated maturities:
Amount
Maturity Period (In Thousands)
Within 12 months.................. $ 47,067
Within 13 to 36 months............. 43,168
Beyond 36 months................... 14,241
--------
Total.............................. $104,476
========
The following table presents, by various rate categories, the amount of
certificates of deposit outstanding at December 31, 1998.
Certificate Rates: Outstanding Amount
(In Thousands)
0 to 3.99%......................... $ 1,584
4.00% to 5.99%..................... 58,356
6.00% to 7.99%..................... 44,534
Over 8.00%......................... 2
--------
Total.............................. $104,476
========
The following table summarizes the maturity composition of certificates
of deposit with balances of $100,000 or more at December 31, 1998:
(Dollars in Thousands) December 31, 1998
-------------------------
Balance %
----------- --------
Three months or less....................... $ 3,227 9.30%
Over three months to six months............ 1,130 3.26
Over six months to twelve months........... 5,757 16.59
Over twelve months......................... 24,590 70.85
-------- ------
$ 34,704 100.00%
======== ======
Borrowings. If the need arises, BankPhiladelphia may rely upon advances
from the Federal Home Loan Bank of Pittsburgh and the Board of Governors of the
Federal Reserve System discount window to supplement its supply of lendable
funds and to meet deposit withdrawal requirements. Advances from the Federal
Home Loan Bank of Pittsburgh typically are collateralized by BankPhiladelphia's
stock in the Federal Home Loan Bank of Pittsburgh and a portion of
46
<PAGE>
BankPhiladelphia's first mortgage loans. At December 31, 1998, BankPhiladelphia
had $30.0 million of advances from the Federal Home Loan Bank of Pittsburgh
available, which amount had been fully drawn as of such date.
The Federal Home Loan Bank of Pittsburgh functions as a central reserve
bank providing credit for BankPhiladelphia and other member savings and
financial institutions. As a member, BankPhiladelphia is required to own capital
stock in the Federal Home Loan Bank of Pittsburgh and is authorized to apply for
advances on the security of such stock and certain of its home mortgages and
other assets (principally, securities that are obligations of, or guaranteed by,
the United States) provided certain standards related to creditworthiness have
been met. Advances are made pursuant to several different programs. Each credit
program has its own interest rate and range of maturities. Depending on the
program, limitations on the amount of advances are based either on a fixed
percentage of a member institution's net worth or on the Federal Home Loan Bank
of Pittsburgh's assessment of the institution's creditworthiness.
At December 31, 1998, BankPhiladelphia had five callable fixed-rate
advances for $30.0 million from the Federal Home Loan Bank of Pittsburgh. The
callable advances mature within five to ten years with call options ranging from
18 months to five years. The interest rates on the callable advances range from
4.83% to 5.63%, with a weighted average interest rate of 5.31% at December 31,
1998.
The following table sets forth certain information regarding
BankPhiladelphia's borrowed funds, which consist solely of the advances from the
Federal Home Loan Bank of Pittsburgh, at or for the years ended on the dates
indicated:
At or for the
Year Ended December 31,
---------------------------
(Dollars in Thousands) 1998 1997
---- ----
FHLB advances:
Maximum month-end balance.............. $31,000 $12,700
Balance at end of period............... 30,000 9,000
Average balance........................ 22,482 7,000
Weighted average interest rate on:
Balance at end of period............... 5.30% 5.87%
Average balance for period............. 5.29% 5.87%
USABancShares also has three line of credit facilities with local
financial institutions totaling $2.0 million. The aggregate outstanding balance
on the lines of credit at December 31, 1998 was $1.1 million. The interest rates
paid on these advances are floating, prime based rates, ranging from prime to
prime plus one percentage point, with the average interest rate at December 31,
1998 equaling 8.21%.
USACapital
USACapital, a registered broker-dealer with the National Association of
Securities Dealers, is a Pennsylvania corporation wholly owned by USABancShares.
A subsidiary of USABancShares acquired USACapital in April 1997 for a purchase
price of $75,000, paid in shares of USABancShares' common stock. USACapital is
engaged in the business of trading stocks, bonds, annuities, and other
investment related products to the general public. The operations of USACapital
presently represent less than 10% of USABancShares' consolidated net income.
However, during the year ended December 31, 1998, USACapital increased its staff
from two persons to 18 persons, which management believes will facilitate the
growth of USACapital's business. The majority of the additional employees at
USACapital are compensated on a commission basis, which will maintain a variable
expense base related to performance. USACapital operates out of USABancShares'
corporate office. USACapital generated pre-tax earnings of $141,000 for the year
ended December 31, 1998 and $102,000 from USABancShares' acquisition of
USACapital in April 1997 through December 31, 1997.
Personnel
As of December 31, 1998, USABancShares, BankPhiladelphia and USACapital
have a total of 38 full-time and 2 part-time employees.
47
<PAGE>
Description of Properties
On December 23, 1997, BankPhiladelphia purchased a building at 1535
Locust Street in Center City Philadelphia, formerly owned and operated by PNC
Bank, which serves as its corporate offices and flagship retail operation. This
new location consists of approximately 10,000 square feet of space, and includes
not only a first floor retail operation, but also houses senior management of
USABancShares and USACapital, in addition to selected members of
BankPhiladelphia staff.
Pursuant to a lease dated May 11, 1989, BankPhiladelphia leases its
building located at 803 East Germantown Pike in Norristown, Pennsylvania, which
contains a retail branch as well as administrative offices. The lease is for an
initial period of 10 years, with an option to renew or extend the lease for an
additional 10 years. The annual lease payments total $37,400.
The Bank intends to renew the lease upon expiration.
Pursuant to a lease dated July 27, 1998, BankPhiladelphia leases a
building at 18 East Wynnewood Road, Wynnewood, Pennsylvania. USABancShares will
open a retail branch at this location during the second quarter of 1999. The
lease is for an initial period of 10 years with an option to renew for an
additional 10 years. The annual lease payments total $48,000.
The Bank also leases an additional "mini" branch, known as "eBank" in
the office, restaurant and retail complex known as "The Bellevue" which is
located in Center City Philadelphia. The annual lease payments total $8,200.
Deposits are received at the Locust Street headquarters, the Norristown
branch and the eBank, and BankPhiladelphia will receive deposits in the
Wynnewood branch when the branch is opened. At December 31, 1998,
BankPhiladelphia's branches had the following deposits: Locust Street, $53.0
million; Norristown, $54.8 million; and eBank, $6.3 million.
The Bank may acquire or lease other real estate in the future for
purposes of opening new branch locations. In addition, BankPhiladelphia may
acquire or lease real estate parcels for purposes of establishing mini-branch
locations, which would likely include state of the art automated teller
facilities that would involve minimal staffing requirements.
Legal Proceedings
USABancShares is not involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of
BankPhiladelphia's business. Such routine legal proceedings, in the aggregate,
are believed by management to be immaterial to USABancShares' and
BankPhiladelphia's financial condition and results of operation.
48
<PAGE>
MANAGEMENT OF USABANCSHARES
Directors and Executive Officers
Certain information concerning the present directors and executive
officers of USABancShares is set forth below. The term of office for each
director is one year or until the date of USABancShares' next meeting of
shareholders, at which time elections are held for each seat on the Board of
Directors.
<TABLE>
<CAPTION>
Name Position with USABancShares Age Director Since
- ---- --------------------------- --- --------------
<S> <C> <C> <C>
George M. Laughlin ................. Chairman 78 1995
Zeev Shenkman ...................... Vice-Chairman 46 1998
Kenneth L. Tepper .................. President and Chief Executive Officer/Director 36 1995
Clarence L. Rader................... Director/Chairman of BankPhiladelphia 67 1995
Jeffrey A. D'Ambrosio .............. Director 43 1995
George C. Fogwell, III ............. Director 51 1995
John A. Gambone .................... Director 59 1995
Carol J. Kauffman .................. Director 51 1997
Wayne O'Leevy ...................... Director 54 1996
Brian M. Hartline .................. Chief Financial Officer 34 N/A
</TABLE>
Following is a brief summary of each director's and executive officer's
occupation over the last five years.
George M. ("Dewey") Laughlin is a real estate investor and insurance
broker, and is the founder/owner of Best Auto Tags and Abat's Auto Tags, one of
the first companies to originate 24-hour licensed messenger service in
Pennsylvania. Mr. Laughlin owns and manages a total of twenty-four branch
locations throughout the Commonwealth of Pennsylvania. He is a veteran of the
United States Navy, having served on the aircraft carrier U.S.S. Independence in
every major South Pacific campaign of World War II.
Zeev Shenkman has been the Chief Executive Officer of Shen Management
Corporation since September 1995. From 1996 through 1997, Mr. Shenkman was Chief
Financial Officer of Global Sports, Inc. Prior thereto, from May 1984 through
March 1995, Mr. Shenkman was the Chief Financial Officer of Today's Man, Inc. In
1996, Today's Man filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code, and emerged under a plan approved in 1998.
Kenneth L. Tepper has been a Director and President and Chief Executive
Officer of USABancShares and of BankPhiladelphia since 1995. Prior thereto, Mr.
Tepper served as an agent of the Federal Deposit Insurance Corporation assigned
to the RTC from 1990 through 1991. Thereafter, Mr. Tepper was Director of
Merchant Banking at Tucker Federal SLA, and from 1994 through 1995 was Managing
Director of Merchant*BancShares, Inc., an investment banking firm specializing
in community bank mergers and loan portfolio acquisitions. He was Finance
Chairman of the Pennsylvania Republican State Committee during the 1994
gubernatorial campaign, and a principal of the 1995 Congressional Medal of Honor
Society Convention. He serves on the Board of Directors of TRM Corporation, a
public company in the self-service photocopy business in which USABancShares
maintains a $500,000 investment in debt securities.
Clarence L. Rader has served as Chairman of BankPhiladelphia since
November 1995. Prior thereto, he served as President and Chief Executive Officer
of BankPhiladelphia from 1986 to 1995. Mr. Rader was President of the Norristown
School Board, and Chairman of the Central Montgomery Chamber of Commerce from
1991-1992. He is a senior appraiser with the American Society of Appraisers.
Jeffrey A. D'Ambrosio has been the owner and is Chief Executive Officer
of D'Ambrosio Dodge in Downingtown, Pennsylvania since 1985. Mr. D'Ambrosio
presently owns and manages 11 auto franchises in Chester County, Pennsylvania.
Mr. D'Ambrosio is a member of the Dodge Dealers National Advertising Council and
serves on the Pennsylvania Board of Vehicle Manufacturers, Dealers and
Salespersons.
George C. Fogwell, III is a Senior Captain with Delta Airlines, where
he also serves as a flight instructor.
John A. Gambone is the Chairman, President and Chief Executive Officer
of Gambone Bros. Organization, Inc., a real estate development concern founded
in 1958 and headquartered in Fairview Village, Pennsylvania. He is a member
of the Pennsylvania Horse Breeders Association as well as numerous professional
organizations related to the building industry.
49
<PAGE>
Carol J. Kauffman has served as the Director of Business Development
for Lawyers' Travel Service Division of the World Travel Specialists Group since
1996. Prior to Lawyers' Travel, Ms. Kauffman was Senior Account Executive,
Account Services for Reimel Carter Public Relations firm after successfully
selling the firm she founded over ten years ago, Lawlor Jackson, Inc.
Wayne O. Leevy is the Managing Partner of Mitchell & Titus, LLP, a
public accounting firm. Prior to Mitchell & Titus, Mr. Leevy was Managing
Officer of Leevy, Redcross and Co., which merged with Mitchell & Titus in 1990.
Brian M. Hartline is currently Chief Financial Officer of USABancShares
and Chief Operating Officer of BankPhiladelphia, where he has been employed
since December 1998. Prior to joining USABancShares, Mr. Hartline served from
1994 through 1998 in a number of positions, including Executive Vice President
and Chief Financial Officer, at ML Bancorp, Inc. in Villanova, Pennsylvania, and
from 1990 to 1994 as Vice President and Controller of PNC Bank (Central Region),
formerly United Federal Bank, in State College, Pennsylvania. Mr. Hartline is a
licensed certified public accountant.
Compensation of the Board of Directors
During 1998, members of the Boards of Directors of USABancShares and
BankPhiladelphia were compensated at the following rates for their services:
$200 per meeting of the Board of Directors and $100 per meeting of any committee
of the Board of Directors.
During 1998, an aggregate of $58,880 was paid to directors for their
services. No director received more than $14,200.
Executive Compensation
The following table sets forth compensation paid in fiscal 1998 for
services performed in all capacities for USABancShares and BankPhiladelphia with
respect to the Chief Executive Officer. With the exception of Mr. Tepper, no
executive officer of USABancShares earned over $100,000 in fiscal year 1998.
<TABLE>
<CAPTION>
Long Term Compensation
No. of Securities
Name and Principal Position Fiscal Year Annual Salary Underlying Options
- --------------------------- ----------- ------------- -----------------------
<S> <C> <C> <C>
Kenneth L. Tepper, President and CEO ........ 1998 $245,000(1) --
1997 $132,000(1) --
1996 $132,000(1) 100,000
</TABLE>
- ---------------
(1) In addition to a base salary of $120,000, Mr. Tepper received $12,000 in
additional compensation which was used to purchase a deferred compensation
life insurance policy. Mr. Tepper's salary was increased to $245,000
effective March 1, 1998. In addition, Mr. Tepper has received from
USABancShares payments of $150,000 per year for each of 1998 and 1999 and
may receive a third payment in January 2000 in connection with his agreement
to cap the non-dilutive feature of the Class B common stock. See "-Certain
Relationships and Related Transactions."
50
<PAGE>
Stock Options
The following table sets forth certain information concerning options
to purchase common stock of USABancShares made to the executive officer named in
the Summary Compensation Table in the fiscal year ended December 31, 1998.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------
Number of % of Total Options
Securities Underlying Granted to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price Date
- ---- -------------------- --------------------- --------- -----------
<S> <C> <C> <C> <C>
Kenneth L. Tepper............... 26,600(1) 17.50% $10.00/share 2/11/03
Kenneth L. Tepper............... 13,300(1) 8.75% $15.04/share 2/11/03
</TABLE>
(1) All information set forth gives effect to the 33% stock dividend which
USABancShares paid on July 18, 1997 and August 17, 1998.
The following table sets forth certain information concerning the
exercise in the fiscal year ended December 31, 1998 of options to purchase
common stock of the USABancShares by the executive officer named in the Summary
Compensation Table and the unexercised options to purchase common stock of
USABancShares held by Mr. Tepper at December 31, 1998. Year-end values are based
upon the closing market price of a share of USABancShares' common stock on
December 31, 1998 of $9.00.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
FY-End(#) at FY-End ($)(1)
------------------------- --------------------------
Shares
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth L. Tepper........... 8,800 $24,595 179,980 27,930 $562,834 --
</TABLE>
- -----------------
(1) All information set forth gives effect to the 33% stock dividend which
USABancShares paid on July 18, 1997 and August 17, 1998. Values are
calculated by subtracting the exercise price from the fair market value as
of the exercise date or fiscal year end, as appropriate. Values are reported
before any taxes associated with exercise or subsequent sale of the
underlying stock.
Employment Agreements
On November 30, 1995, USABancShares entered into a five-year employment
agreement with Mr. Tepper pursuant to which Mr. Tepper received an annual base
salary of $120,000 and may receive an annual cash bonus and grant of stock
options as determined by the Board of Directors. Mr. Tepper has not received any
cash bonuses. Pursuant to the agreement, Mr. Tepper was granted options to
purchase 100,000 shares of common stock at an exercise price of $10.00 per
share. All of the options are exercisable and expire in November 2005. Pursuant
to the stock dividends declared and issued in July 1997 and August 1998, Mr.
Tepper's options were adjusted to 176,890 and the exercise price was adjusted to
$5.65 per share. The agreement provides that in the event USABancShares
discharges Mr. Tepper other than for cause (as defined in the employment
agreement), disability or incapacity, or Mr. Tepper terminates his employment
with USABancShares upon the occurrence of certain specified events or
occurrences, including a change of control (as defined in employment agreement)
of USABancShares, Mr. Tepper will receive severance payments equal to his
accrued but unpaid base compensation and incentive compensation plus a lump sum
equal to no more than 2.99 times the average of his total annual compensation
over the previous five years. Effective March 1, 1998, USABancShares extended
Mr. Tepper's agreement through February 12, 2001, at an annual base salary of
$245,000 and an annual cash bonus and grants of stock options as
51
<PAGE>
may be determined by the Board of Directors. Pursuant to the agreement, Mr.
Tepper was granted options to purchase 26,600 shares of common stock at $10.00
per share, and options to purchase 13,300 shares of common stock at $15.04 per
share. Of the 26,600 options, 11,970 vested on August 13, 1998, 11,970 vested on
February 13, 1999, and 2,660 will vest on February 13, 2000. Of the 13,300
options granted, 5,187 will vest on February 13, 2000, 6,650 will vest on
February 13, 2001 and 1,463 will vest on February 13, 2002.
On November 30, 1998, USABancShares and BankPhiladelphia entered into a
three-year employment agreement with Mr. Hartline pursuant to which Mr. Hartline
serves as Chief Financial Officer of USABancShares and Chief Operating Officer
of BankPhiladelphia. Mr. Hartline receives an annual base salary of $160,000 and
will receive incentive compensation in the amount of $40,000 if USABancShares
earns in excess of $1.00 per share (as adjusted for stock splits, stock
dividends, etc.) in any fiscal year. Pursuant to the agreement, Mr. Hartline was
granted or will be granted options to purchase 20,000 shares of common stock on
November 30 of each of 1998, 1999 and 2000, for a total of 60,000 options. The
options vest over a three year period using the following vesting schedule:
10,000 in year one, 5,000 in year two and 5,000 in year three. The exercise
price of the options will be the last reported sale price on the Nasdaq SmallCap
Market of USABancShares' common stock for the business day preceding the date of
grant. If Mr. Hartline's employment is terminated by USABancShares without cause
(as defined in the employment agreement), Mr. Hartline will receive, until the
earlier of the remaining term of the employment agreement or obtaining
employment elsewhere, his current salary, medical benefits, use of an automobile
and any earned bonuses. In the event of a change in control, Mr. Hartline shall
receive his current salary, medical benefits and the use of an automobile for
twenty-four months, if he is not offered continued employment with the same job
title, responsibilities and compensation following the change in control.
Indemnification of Directors and Officers
USABancShares' charter and by-laws provide that USABancShares will
indemnify every person who is or was a director or executive officer of
USABancShares to the fullest extent permitted by law. This indemnification
applies to all expenses and liabilities reasonably incurred in connection with
any proceeding to which the director or executor officer may become involved by
reason of being or having been a director or executive officer of USABancShares.
Pennsylvania law, under which USABancShares is incorporated, allows
USABancShares to indemnify its directors and officers if the indemnified person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interest of USABancShares and, with respect to any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. USABancShares maintains a director and officer liability insurance
policy covering each of USABancShares 's directors and executive officers.
Under the Declaration of Trust, USABancShares has agreed to indemnify
each of the Trustees of the Trust, and to hold each Trustee harmless against any
loss, damage, claim, liability or expense incurred without negligence or bad
faith on its part, arising out of, or in connection with, the acceptance or
administration of the Declaration of Trust, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under the Declaration of Trust.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information concerning the beneficial
ownership of USABancShares' shares of common stock as of March 31, 1999, by each
director, the Chief Executive Officer, all directors and officers as a group,
and each person known to USABancShares to beneficially own 5% or more of
USABancShares' outstanding Class A common stock. The information in the table
concerning persons known by USABancShares to own beneficially 5% or more of
USABancShares' common stock is derived, without independent investigation on the
part of USABancShares, from the most recent filings made by such persons with
the Securities and Exchange Commission on Schedule 13D and Schedule 13G pursuant
to Rule 13d-3 of the Exchange Act. Mr. Tepper, USABancShares' President and
Chief Executive Officer, owns all 10,000 shares of the issued and outstanding
Class B common stock. Except as otherwise noted, the address for each such
person is 1535 Locust Street, Philadelphia, Pennsylvania 19102. All share
information set forth gives effect to 33% stock dividends which USABancShares
paid on July 18, 1997 and August 17, 1998.
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<TABLE>
<CAPTION>
Shares of Class A Percentage of Shares of
Common Stock Class A Common Stock
Name of Beneficial Owner Beneficially Owned (1) Beneficially Owned (1)
- ------------------------ ---------------------- ----------------------
<S> <C> <C>
George M. Laughlin ................................. 62,043(2)(3) 3.1
Zeev Shenkman ...................................... 55,700(4) 2.7
Clarence L. Rader .................................. 17,689(2) *
Kenneth L. Tepper .................................. 271,322(5) 12.3
Jeffrey A. D'Ambrosio .............................. 53,067(2) 2.6
George C. Fogwell, III ............................. 44,753(2)(6) 2.2
John A. Gambone .................................... 56,401(2)(7) 2.8
Carol J. Kauffman .................................. 61,337(8)(9) 3.0
Wayne O. Leevy ..................................... 10,613(2) *
Sandler O'Neill Asset Management LLC (10)........... 143,060 7.1
Investors of America Limited (11) .................. 115,949 5.8
Financial Stocks LP (12) 127,525 6.4
Rainbow Partners LP (13) 136,410 6.8
------- ---
Directors and Executive Officers 642,925 27.5%
======= ====
(9 persons) ........................................
</TABLE>
- ---------------
* Less than one percent (1%)
(1) Based upon 2,007,392 shares of common stock outstanding as of March 24,
1999 (which does not include the shares of Class B common stock which are
convertible into shares of Class A common stock). Calculated in accordance
with Rule 13d-3 promulgated under the Exchange Act. Also includes shares
owned by (i) a spouse, minor children or by relatives sharing the same
home, (ii) entities owned or controlled by the named person and (iii) other
persons if the named person has the right to acquire such shares within 60
days by the exercise of any right or option. Unless otherwise noted, shares
are owned of record and beneficially by the named person.
(2) Includes options to purchase 8,845 shares which are exercisable at $5.65
per share.
(3) Includes 17,689 shares held by Mr. Laughlin's wife and 884 shares held by
his daughter.
(4) Includes options to purchase 33,250 shares of common stock which are
exercisable at $11.28 per share.
(5) Includes 177 shares of common stock held by Mr. Tepper as custodian for his
minor son. Also includes options to purchase 168,090 shares of common stock
which are exercisable at $5.65 per share and options to purchase 23,940
shares of common stock which are exercisable at $7.85 per share. Does not
include 10,000 shares of USABancShares' Class B common stock which are
beneficially owned by Mr. Tepper and which are convertible in 2001 into
108,237 shares of Class A common stock.
(6) Includes 531 shares of common stock held by Mr. Fogwell's children.
(7) Mr. Gambone's shares of common stock are held in the name of a trust, of
which Mr. Gambone is trustee (26,533 shares), and in the name of a
corporation (18,944 shares), of which Mr. Gambone is president. Includes
310 shares of common stock owned by family members who reside in Mr.
Gambone's home, as to which Mr. Gambone disclaims beneficial ownership.
(8) Includes 1,620 shares of common stock owned by Mrs. Kauffman's husband,
options to purchase 53,067 shares of common stock held by Mrs. Kauffman's
husband, which are exercisable at $5.65 per share and options to purchase
1,330 shares of common stock presently exercisable at $7.52.
(9) Includes options to purchase 6,650 shares of common stock which are
exercisable at $11.28 per share.
(10) The address for Sandler O'Neill Asset Management LLC is 712 Fifth Avenue,
22nd Floor, New York, New York 10019.
(11) The address for Investors of America Limited is 39 Glen Eagles, St Louis,
Missouri 63124.
(12) The address for Financial Stocks LP is 441 Vine Street, Suite 507,
Cincinnati, Ohio 45202.
(13) The address for Rainbow Partners LP is 375 Park Avenue, New York, New York
10152.
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Certain Relationships and Related Transactions
BankPhiladelphia has engaged in, and expects in the future to engage
in, banking transactions in the ordinary course of business with its directors,
executive officers and principal shareholders (or their affiliate organizations)
on substantially the same terms as those prevailing for comparable transactions
with others. All loans by BankPhiladelphia to such persons (i) were made in the
ordinary course of business, (ii) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and (iii) did not involve more than
the normal risk of collectability or present other unfavorable features. As of
December 31, 1998, certain executive officers and directors of USABancShares or
BankPhiladelphia had outstanding indebtedness in amounts exceeding $60,000 to
BankPhiladelphia as follows: As of December 31, 1998, two companies in which Mr.
Gambone owns a minority interest had outstanding indebtedness totaling $431,093.
Of this amount, $278,523 is secured by real estate and $152,570 is secured by
titles to motor vehicles, with all loans personally guaranteed by Mr. Gambone.
Mr. Tepper had outstanding loan commitments totaling $695,770, of which $645,770
is secured by a residential mortgage and $50,000 is an unsecured line of credit.
Mr. Shenkman has outstanding two loan commitments totaling $1.2 million. Both
loans are secured by marketable securities and a second mortgage on residential
real estate. Additionally, Mr. Laughlin had outstanding loan commitments
totaling $190,000, of which $140,000 is secured by commercial real estate and
$50,000 is an unsecured line of credit. The aggregate amount of loans
outstanding to executive officers and directors of BankPhiladelphia as of
December 31, 1998 equaled 21.7% of stockholder's equity.
Mr. Tepper, USABancShares' President and Chief Executive Officer, is
the sole holder of USABancShares' Class B common stock. The terms of the Class B
common stock provide that on January 1, 2001, all of the authorized shares of
Class B common stock will automatically convert into 10% of the then issued
shares of Class A common stock, rounded up to the nearest whole share. In
connection with a private placement of USABancShares' common stock in February
1998, USABancShares and Mr. Tepper entered into an agreement by which
USABancShares has an option to pay Mr. Tepper $150,000 per year for each of the
three years beginning in 1998 in exchange for Mr. Tepper agreeing to cap the
non-dilutive feature of the Class B common stock to 10% of the Class A common
stock outstanding prior to the February 1998 private placement of Class A common
stock, or 81,381 shares, and waive any future exercise of the non-dilutive
feature of the Class B common stock. The first payment was made upon the closing
of the February 1998 private placement. The second payment was made in January
1999. The third optional payment is anticipated to be made in January 2000.
REGULATION OF USABANCSHARES AND THE BANK
USABancShares and BankPhiladelphia are extensively regulated under both
federal and state law. From time to time, various new types of federal and state
legislation have been proposed that could result in additional or diminished
regulation of and restrictions on, or altered forms of supervision of, banks or
bank holding companies. It cannot be predicted whether any such legislation will
be adopted or how such legislation, if adopted, would affect the business of
BankPhiladelphia or USABancShares. As a consequence of the extensive regulation
of commercial banking activities and financial institutions in the United
States, the business and activities of BankPhiladelphia are susceptible to
changes in federal and state legislation which may affect the scope, nature and
costs of such business and activities. The following description of statutory
and regulatory provisions, which is not intended to be a complete description of
these provisions or their effects on USABancShares or BankPhiladelphia, is
qualified in its entirety by reference to the particular statutory or regulatory
provisions.
USABancShares
General. USABancShares is a registered bank holding company pursuant to
BankPhiladelphia Holding Company Act of 1956, and is subject to regulation and
supervision by the Board of Governors of the Federal Reserve System and the
Pennsylvania Department of Banking. USABancShares is required to file annually a
report of its operations with, and is subject to examination by, the Board of
Governors of the Federal Reserve System and the Pennsylvania Department of
Banking.
Bank Holding Company Act of 1956 Activities and Other Limitations. The
Bank Holding Company Act prohibits a bank holding company from acquiring direct
or indirect ownership or control of more than 5% of the voting shares of any
bank, or increasing such ownership or control of any bank, without prior
approval of the Board of Governors of the Federal Reserve System. The Bank
Holding Company Act also generally prohibits a bank holding company from
acquiring any bank located outside of the state in which the existing bank
subsidiaries of the bank holding company are located unless specifically
authorized by applicable state law. No approval under the Bank Holding Company
Act is required, however, for a bank holding company already owning or
controlling 50% of the voting shares of a bank to acquire additional shares of
such bank.
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<PAGE>
The Bank Holding Company Act also prohibits a bank holding company,
with certain exceptions, from acquiring more than 5% of the voting shares of any
company that is not a bank and from engaging in any business other than banking
or managing or controlling banks. Under the Bank Holding Company Act, the Board
of Governors of the Federal Reserve System is authorized to approve the
ownership of shares by a bank holding company in any company, the activities of
which the Board of Governors of the Federal Reserve System has determined to be
so closely related to banking or to managing or controlling banks as to be a
proper incident thereto. In making such determinations, the Board of Governors
of the Federal Reserve System is required to weigh the expected benefit to the
public, such as greater convenience, increased competition or gains in
efficiency, against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest or unsound
banking practices.
The Board of Governors of the Federal Reserve System has by regulation
determined that certain activities are closely related to banking within the
meaning of the Bank Holding Company Act. These activities include operating a
mortgage company, finance company, credit card company, factoring company, trust
company or savings association; performing certain data processing operations;
providing limited securities brokerage services; acting as an investment or
financial advisor; acting as an insurance agent for certain types of
credit-related insurance; leasing personal property on a full-payout,
non-operating basis; providing tax planning and preparation services; operating
a collection agency; and providing certain courier services. The Board of
Governors of the Federal Reserve System also has determined that certain other
activities, including real estate brokerage and syndication, land development,
property management and underwriting of life insurance not related to credit
transactions, are not closely related to banking and a proper incident thereto.
Limitations on Transactions with Affiliates. Transactions between banks
and any affiliate are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a bank is any company or entity which controls, is
controlled by or is under common control with the bank. In a holding company
context, the parent holding company of a bank (such as USABancShares ) and any
companies which are controlled by such parent holding company are affiliates of
the bank. Generally, Sections 23A and 23B (i) limit the extent to which
BankPhiladelphia or its subsidiaries may engage in "covered transactions" with
any one affiliate to an amount equal to 10% of such bank's capital stock and
surplus, and contain an aggregate limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable, to BankPhiladelphia or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar transactions. In
addition to the restrictions imposed by Sections 23A and 23B, no bank may (i)
loan or otherwise extend credit to an affiliate, except for any affiliate which
engages only in activities which are permissible for bank holding companies, or
(ii) purchase or invest in any stocks, bonds, debentures, notes or similar
obligations of any affiliate, except for affiliates which are subsidiaries of
BankPhiladelphia.
In addition, Sections 22(h) and (g) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer and
to a greater than 10% stockholder of a bank, and certain affiliated interests of
either, may not exceed, together with all other outstanding loans to such person
and affiliated interests, BankPhiladelphia's loans to one borrower limit
(generally equal to 15% of the institution's unimpaired capital and surplus).
Section 22(h) also requires that loans to directors, executive officers and
principal stockholders be made on terms substantially the same as offered in
comparable transactions to other persons unless the loans are made pursuant to a
benefit or compensation program that (i) is widely available to employees of the
institution and (ii) does not give preference to any director, executive officer
or principal stockholder, or certain affiliated interests of either, over other
employees of BankPhiladelphia. Section 22(h) also requires prior board approval
for certain loans. In addition, the aggregate amount of extensions of credit by
a bank to all insiders cannot exceed the institution's unimpaired capital and
surplus. Furthermore, Section 22(g) places additional restrictions on loans to
executive officers.
Capital Requirements. The Board of Governors of the Federal Reserve
System has adopted capital adequacy guidelines pursuant to which it assesses the
adequacy of capital in examining and supervising a bank holding company and in
analyzing applications to it under the Bank Holding Company Act. The Board of
Governors of the Federal Reserve System capital adequacy guidelines generally
require bank holding companies to maintain total capital equal to 8% of total
risk-weighted assets, with at least one-half of that amount consisting of Tier 1
or core capital and up to one-half of that amount consisting of Tier 2 or
supplementary capital. Tier 1 capital for bank holding companies generally
consists of the sum of common stockholders' equity and perpetual preferred stock
(subject in the case of the latter to limitations on the kind and amount of such
stocks which may be included as Tier 1 capital), less goodwill and, with certain
exceptions, intangibles. Tier 2 capital generally consists of hybrid capital
55
<PAGE>
instruments; perpetual preferred stock which is not eligible to be included as
Tier 1 capital; term subordinated debt and intermediate-term preferred stock;
and, subject to limitations, general allowances for loan losses. Assets are
adjusted under the risk-based capital guidelines to take into account different
risk characteristics, with the categories ranging from 0% (requiring no
additional capital) for assets such as cash to 100% for the bulk of assets which
are typically held by a bank holding company, including multi-family residential
and commercial real estate loans, commercial business loans and consumer loans.
Single-family residential first mortgage loans which are not past-due (90 days
or more) or non-performing and which have been made in accordance with prudent
underwriting standards are assigned a 50% level in the risk-weighing system, as
are certain privately-issued mortgage-backed securities representing indirect
ownership of such loans. Off-balance sheet items also are adjusted to take into
account certain risk characteristics.
In addition to the risk-based capital requirements, the Board of
Governors of the Federal Reserve System requires bank holding companies to
maintain a minimum leverage capital ratio of Tier 1 capital to average total
assets of 3.0%. Total assets for this purpose does not include goodwill, certain
mortgage and non-mortgage servicing assets, purchased credit card relationships
and any other intangible assets and investments that the Board of Governors of
the Federal Reserve System determines should be deducted from Tier 1 capital.
The Board of Governors of the Federal Reserve System has announced that the 3.0%
Tier 1 leverage capital ratio requirement is the minimum for the top-rated bank
holding companies without any supervisory, financial or operational weaknesses
or deficiencies or those which are not experiencing or anticipating
significant growth. Other bank holding companies will be expected to maintain
Tier 1 leverage capital ratios of at least 4.0% or more, depending on their
overall condition.
As of December 31, 1998, USABancShares was in compliance with the
above-described Board of Governors of the Federal Reserve System regulatory
capital requirements.
Financial Support of Affiliated Institutions. Under Board of Governors
of the Federal Reserve System policy, USABancShares will be expected to act as a
source of financial strength to BankPhiladelphia and to commit resources to
support BankPhiladelphia in circumstances when it might not do so absent such
policy. The legality and precise scope of this policy is unclear, however, in
light of recent judicial precedent.
The Bank
General. The Bank is incorporated under the Pennsylvania Banking Code
and is subject to extensive regulation and examination by the Pennsylvania
Department of Banking and by the Federal Deposit Insurance Corporation. The
federal and state laws and regulations which are applicable to banks regulate,
among other things, the scope of their business, their investments, their
reserves against deposits, the timing of the availability of deposited funds and
the nature and amount of and collateral for certain loans. There are periodic
examinations by the Pennsylvania Department of Banking and the Federal Deposit
Insurance Corporation to test BankPhiladelphia's compliance with various
regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulation, whether by the Pennsylvania Department of Banking,
the Federal Deposit Insurance Corporation or the Congress could have a material
adverse impact on USABancShares, BankPhiladelphia and their operations.
Federal Deposit Insurance Corporation Assessments. The deposits of
BankPhiladelphia are insured by Bank Insurance Fund of the Federal Deposit
Insurance Corporation, up to applicable limits, and are subject to deposit
premium assessments by the Bank Insurance Fund. Under the Federal Deposit
Insurance Corporation's risk-based insurance system, Bank Insurance
Fund-assessed deposits have been subject to premiums which have varied,
depending upon the institution's capital position and other supervisory factors.
The Federal Deposit Insurance Corporation may terminate the deposit
insurance of any insured depository institution, including BankPhiladelphia, if
it determines after a hearing that the institution has engaged or is engaging in
unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, order or any
condition imposed by an agreement with the Federal Deposit Insurance
Corporation. The Federal Deposit Insurance Corporation may also suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of the
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the Federal Deposit
Insurance Corporation. Management is aware of no circumstances which would
result in termination of BankPhiladelphia's deposit insurance.
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<PAGE>
Capital Requirements. The Federal Deposit Insurance Corporation has
promulgated regulations and adopted a statement of policy regarding the capital
adequacy of state-chartered banks which, like BankPhiladelphia, will not be
members of the Federal Reserve System. These requirements are substantially
similar to those adopted by the Board of Governors of the Federal Reserve System
regarding bank holding companies, as described above.
The Federal Deposit Insurance Corporation's capital regulations
establish a minimum 3.0% Tier 1 leverage capital requirement for the most
highly-rated state-chartered, non-member banks, with an additional cushion of at
least 100 to 200 basis points for all other state-chartered, non-member banks,
which effectively will increase the minimum Tier 1 leverage ratio for such other
banks to 4.0% to 5.0% or more. Under the Federal Deposit Insurance Corporation's
regulation, highest-rated banks are those that the Federal Deposit Insurance
Corporation determines are not anticipating or experiencing significant growth
and have well diversified risk, including no undue interest rate risk exposure,
excellent asset quality, high liquidity, good earnings and, in general, which
are considered a strong banking organization and are rated composite 1 under the
Uniform Financial Institutions Rating System. Leverage or core capital is
defined as the sum of common stockholders' equity (including retained earnings),
noncumulative perpetual preferred stock and related surplus, and minority
interests in consolidated subsidiaries, minus all intangible assets other than
certain qualifying supervisory goodwill and certain purchased mortgage servicing
rights.
The Federal Deposit Insurance Corporation also requires that savings
banks meet a risk-based capital standard. The risk-based capital standard for
savings banks requires the maintenance of total capital (which is defined as
Tier 1 capital and supplementary (Tier 2) capital) to risk-weighted assets of
8.0%, of which at least 4.0% shall be Tier 1 capital. In determining the amount
of risk-weighted assets, all assets, plus certain off balance sheet assets, are
multiplied by a risk-weight of 0% to 100%, based on the risks the Federal
Deposit Insurance Corporation believes are inherent in the type of asset or
item. The components of Tier 1 capital are equivalent to those discussed above
under the 3.0% leverage capital standard. The components of supplementary
capital include certain perpetual preferred stock, certain mandatory convertible
securities, certain subordinated debt and intermediate preferred stock and
general allowances for loan and lease losses. Allowance for loan and lease
losses includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital. As of December 31,
1998, BankPhiladelphia met each of its capital requirements.
In August 1995, the Federal Deposit Insurance Corporation, along with
the other federal banking agencies, adopted a regulation providing that the
agencies will take account of the exposure of a bank's capital and economic
value to changes in interest rate risk in assessing a bank's capital adequacy.
According to the agencies, applicable considerations include the quality of the
bank's interest rate risk management process, the overall financial condition of
the bank and the level of other risks at the bank for which capital is needed.
Institutions with significant interest rate risk may be required to hold
additional capital. The agencies also have issued a joint policy statement
providing guidance on interest rate risk management, including a discussion of
the critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy.
The Bank is also subject to more stringent Department capital
guidelines. Although not adopted in regulation form, the Pennsylvania Department
of Banking utilizes capital standards requiring a minimum of 6% leverage capital
and 10% risk-based capital. The components of leverage and risk-based capital
are substantially the same as those defined by the Federal Deposit Insurance
Corporation. As of December 31, 1998, BankPhiladelphia exceeded the Pennsylvania
Department of Banking's capital guidelines.
Activities and Investments of Insured State-chartered Banks. The
activities and equity investments of Federal Deposit Insurance
Corporation-insured, state-chartered banks are generally limited to those that
are permissible for national banks. Under regulations dealing with equity
investments, an insured state bank generally may not directly or indirectly
acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank. An insured state bank is not prohibited from,
among other things, (i) acquiring or retaining a majority interest in a
subsidiary, (ii) investing as a limited partner in a partnership the sole
purpose of which is direct or indirect investment in the acquisition,
rehabilitation or new construction of a qualified housing project, provided that
57
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such limited partnership investments may not exceed 2% of the bank's total
assets, (iii) acquiring up to 10% of the voting stock of a company that solely
provides or reinsures directors', trustees' and officers' liability insurance
coverage or bankers' blanket bond group insurance coverage for insured
depository institutions, and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met. In addition, an insured
state-chartered bank may not, directly, or indirectly through a subsidiary,
engage as "principal" in any activity that is not permissible for a national
bank unless the Federal Deposit Insurance Corporation has determined that such
activities would pose no risk to the insurance fund of which it is a member and
the bank is in compliance with applicable regulatory capital requirements. Any
insured state-chartered bank directly or indirectly engaged in any activity that
is not permitted for a national bank must cease the impermissible activity.
Pennsylvania Banking Law. The Pennsylvania Banking Code contains
detailed provisions governing the organization, location of offices, rights and
responsibilities of directors, officers, employees and members, as well as
corporate powers, savings and investment operations and other aspects of
BankPhiladelphia and its affairs. The Pennsylvania Banking Code delegates
extensive rulemaking power and administrative discretion to the Pennsylvania
Department of Banking so that the supervision and regulation of state-chartered
savings banks may be flexible and readily responsive to changes in economic
conditions and in savings and lending practices.
One of the purposes of the Pennsylvania Banking Code is to provide
banks with the opportunity to be competitive with each other and with other
financial institutions existing under other Pennsylvania laws and other state,
federal and foreign laws. A Pennsylvania bank may locate or change the location
of its principal place of business and establish an office anywhere in the
Commonwealth, with the prior approval of the Pennsylvania Department of Banking.
The Department generally examines each savings bank not less frequently
than once every two years. Although the Pennsylvania Department of Banking may
accept the examinations and reports of the Federal Deposit Insurance Corporation
in lieu of the Pennsylvania Department of Banking's examination, the present
practice is for the Pennsylvania Department of Banking to conduct individual
examinations. The Department may order any savings bank to discontinue any
violation of law or unsafe or unsound business practice and may direct any
trustee, officer, attorney or employee of a savings bank engaged in an
objectionable activity, after the Pennsylvania Department of Banking has ordered
the activity to be terminated, to show cause at a hearing before the
Pennsylvania Department of Banking why such person should not be removed.
Restrictions on Payment of Dividends. Under the Federal Deposit
Insurance Act, insured depository institutions such as BankPhiladelphia are
prohibited from making capital distributions, including the payment of
dividends, if, after making any such distribution, the institution would become
"undercapitalized" (as such term is used in the statute). Under the Federal
Deposit Insurance Act, no dividends may be paid by an insured bank if the bank
is in arrears in the payment of any insurance assessment due to the Federal
Deposit Insurance Corporation. Dividend payments by BankPhiladelphia are subject
to the Pennsylvania Banking Code. Under the Pennsylvania Banking Code, no
dividends may be paid except from "accumulated net earnings" (generally,
undivided profits). State and federal regulatory authorities have adopted
standards for the maintenance of adequate levels of capital by banks. Adherence
to such standards further limits the ability of BankPhiladelphia to pay
dividends. In addition, BankPhiladelphia's regulators have authority to prohibit
BankPhiladelphia or USABancShares from engaging in an unsafe or unsound practice
in conducting their business. The payment of dividends, depending upon the
financial condition of BankPhiladelphia or USABancShares, could be deemed to
constitute such an unsafe or unsound practice.
Regulatory Enforcement Authority. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess civil
monetary penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. Other actions or
inactions may provide the basis for enforcement action, including misleading or
untimely reports filed with regulatory authorities.
USA CAPITAL TRUST I
The USA Capital Trust I is a statutory business trust created under
Delaware law upon the filing of a certificate of trust with the Secretary of
State of the State of Delaware. The USA Capital Trust I exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, which represent
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds from the sale of the Trust Securities in the Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. Accordingly, the Junior Subordinated Debentures
are the sole assets of USA Capital Trust I and payments under the Junior
Subordinated Debentures are the sole revenues of the Trust. All of the Common
Securities are owned directly by USABancShares. The Common Securities rank pari
passu, and payments will be made thereon pro rata, with the Capital Securities,
except that upon the occurrence and during the continuance of an Event of
Default, the rights of USABancShares as holder of the Common Securities to
payments in respect of distributions and payments upon liquidation, redemption
or otherwise will be subordinated and rank junior to the rights of the holders
of the Capital Securities. See "Description of Exchange Securities-- Description
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of Capital Securities-- Subordination of Common Securities." USABancShares
acquired the Common Securities in a liquidation amount equal to 3% of the total
capital of the Trust. USA Capital Trust I has a term of 31 years, but may
terminate earlier as provided in the Trust Agreement. The Trust's business and
affairs are conducted by the Issuer Trustees appointed by USABancShares as the
direct holder of the Common Securities. The Issuer Trustees are Wilmington Trust
Company as the Property Trustee, Wilmington Trust Company as the Delaware
Trustee and the Administrative Trustees. Wilmington Trust Company also acts as
indenture trustee under the Guarantee and the Indenture. See "Description of
Exchange Securities-- Description of Guarantee" and "--Description of Junior
Subordinated Debentures." The holder of the Common Securities or, if an Event of
Default under the Trust Agreement has occurred and is continuing, the holders of
not less than a majority in liquidation amount of the Capital Securities, are
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee. In no event will the holders of the Capital Securities have the right
to vote to appoint, remove or replace the Administrative Trustees; such voting
rights are vested exclusively in the holder of the Common Securities. The duties
and obligations of each Issuer Trustee are governed by the Trust Agreement.
USABancShares will pay directly all fees, expenses, debts and obligations (other
than the Trust Securities) related to the exchange offer, except as provided
herein, and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of the Trust. The principal executive office of USA Capital Trust I
is c/o USABancShares, Inc., 1535 Locust Street, Philadelphia, Pennsylvania
19102.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the sale of the Original Capital Securities,
USABancShares and USA Capital Trust I entered into the Registration Rights
Agreement with the Initial Purchasers, pursuant to which USABancShares and USA
Capital Trust I agreed to file and to use their reasonable best efforts to cause
to be declared effective by the Securities and Exchange Commission a
registration statement with respect to the exchange of the Original Capital
Securities for capital securities with terms identical in all material respects
to the terms of the Original Capital Securities. A copy of the Registration
Rights Agreement has been filed as an Exhibit to the Registration Statement of
which this Prospectus is a part.
The exchange offer is being made to satisfy the contractual obligations
of USABancShares and USA Capital Trust I under the Registration Rights
Agreement. The form and terms of the Exchange Capital Securities are the same as
the form and terms of the Original Capital Securities except that the Exchange
Capital Securities (i) have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer under federal
and state securities laws and (ii) will not provide for any increase in the
distribution rate thereon. In that regard, the Original Capital Securities
provide, among other things, that, if a registration statement relating to the
exchange offer has not been filed by August 6, 1999 and declared effective by
September 6, 1999, the distribution rate borne by the Original Capital
Securities will increase by 0.25% per annum until the exchange offer is
consummated. Upon consummation of the exchange offer, holders of Original
Capital Securities will not be entitled to any increase in the distribution rate
thereon or any further registration rights under the Registration Rights
Agreement. See "Risk Factors--Risks Related to the Capital Securities and the
Junior Subordinated Debentures--Consequences of a Failure to Exchange Original
Capital Securities" and "Description of Original Capital Securities."
The exchange offer is not being made to, nor will USA Capital Trust I
accept tenders for exchange from, holders of Original Capital Securities in any
jurisdiction in which the exchange offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the exchange offer means any person in whose name the Original Capital
Securities are registered on the books of USA Capital Trust I or any other
person who has obtained a properly completed bond power from the registered
holder, or any participant in the DTC system whose name appears on a security
position listing as the holder of such Original Capital Securities and who
desires to deliver such Original Capital Securities by book-entry transfer at
DTC.
Pursuant to the exchange offer, USABancShares will exchange as soon as
practicable after the date hereof, the Original Guarantee for the Exchange
Guarantee and the Original Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Exchange Junior Subordinated Debentures.
The Exchange Guarantee and the Exchange Junior Subordinated Debentures have been
registered under the Securities Act.
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Terms of the Exchange Offer
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying letter of transmittal, to
exchange up to $10,000,000 aggregate liquidation amount of Exchange Capital
Securities for a like aggregate liquidation amount of Original Capital
Securities properly tendered on or prior to the expiration date and not properly
withdrawn in accordance with the procedures described below. The USA Capital
Trust I will issue, promptly after the expiration date, an aggregate liquidation
amount of up to $10,000,000 of Exchange Capital Securities in exchange for a
like aggregate liquidation amount of outstanding Original Capital Securities
tendered and accepted in connection with the exchange offer. Holders may tender
their Original Capital Securities in whole or in part in a liquidation amount of
not less than $100,000 (100 Capital Securities) or any integral multiple of
$1,000 liquidation amount (one Capital Security) in excess thereof, provided
that if any Original Capital Securities are tendered in exchange for part, the
untendered liquidation amount must be $100,000 or any integral multiple of
$1,000 in excess thereof.
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The exchange offer is not conditioned upon any minimum liquidation
amount of Original Capital Securities being tendered. As of the date of this
Prospectus, $10,000,000 aggregate liquidation amount of the Original Capital
Securities is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the exchange offer. Original Capital
Securities which are not tendered for or are tendered but not accepted in
connection with the exchange offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement. See "Risk
Factors--Risks Related to the Capital Securities and the Junior Subordinated
Debentures--Consequences of a Failure to Exchange Original Capital Securities"
and "Description of Original Securities."
If any tendered Original Capital Securities are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Original
Capital Securities will be returned, without expense, to the tendering holder
thereof promptly after the expiration date.
Holders who tender Original Capital Securities in connection with the
exchange offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
exchange offer. USABancShares will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the exchange offer.
See "--Fees and Expenses."
Neither the Board of Directors of USABancShares nor any Trustee of USA
Capital Trust I makes any recommendation to holders of Original Capital
Securities as to whether to tender or refrain from tendering all or any portion
of their Original Capital Securities pursuant to the exchange offer. In
addition, no one has been authorized to make any such recommendation. Holders of
Original Capital Securities must make their own decision whether to tender
pursuant to the exchange offer and, if so, the aggregate amount of Original
Capital Securities to tender based on such holders own financial position and
requirements.
Expiration Date; Extensions; Amendments
The expiration date is 5:00 p.m., New York City time, on ___________,
1999, unless the exchange offer is extended by USABancShares or USA Capital
Trust I (in which case the expiration date shall be the latest date and time to
which the exchange offer is extended).
USABancShares and USA Capital Trust I expressly reserve the right in
their sole and absolute discretion, subject to applicable law, at any time and
from time to time, (i) to delay the acceptance of the Original Capital
Securities for exchange, (ii) to terminate the exchange offer (whether or not
any Original Capital Securities have theretofore been accepted for exchange) if
USABancShares and USA Capital Trust I determine, in their sole and absolute
discretion, that any of the events or conditions referred to under "--Conditions
to the Exchange Offer" have occurred or exist, (iii) to extend the expiration
date of the exchange offer and retain all Original Capital Securities tendered
pursuant to the exchange offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described under "--Withdrawal Rights," and (iv) to waive any
condition or otherwise amend the terms of the exchange offer in any respect. If
the exchange offer is amended in a manner determined by USABancShares and USA
Capital Trust I to constitute a material change, or if USABancShares and USA
Capital Trust I waive a material condition of the exchange offer, USABancShares
and USA Capital Trust I will promptly disclose such amendment by means of a
Prospectus supplement that will be distributed to the registered holders of the
Original Capital Securities, and USABancShares and USA Capital Trust I will
extend the exchange offer to the extent required by Rule 14e-1 under the
Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the exchange agent and
by making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Without limiting
the manner in which USABancShares and USA Capital Trust I may choose to make any
public announcement and subject to applicable law, USABancShares and USA Capital
Trust I shall have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by issuing a release to an appropriate
news agency.
Acceptance for Exchange and Issuance of Exchange Capital Securities
Upon the terms and subject to the conditions of the exchange offer, USA
Capital Trust I will exchange, and will issue to the exchange agent, Exchange
Capital Securities for Original Capital Securities validly tendered and not
withdrawn promptly after the expiration date.
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In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
exchange offer will be made only after timely receipt by the exchange agent of
(i) Original Capital Securities or a book-entry confirmation of a book-entry
transfer of Original Capital Securities into the exchange agent's account at
DTC, including an Agent's Message if the tendering holder has not delivered a
letter of transmittal, (ii) the letter of transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
(in the case of a book-entry transfer) an Agent's Message in lieu of the letter
of transmittal, and (iii) any other documents required by the letter of
transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Original Capital Securities into the exchange agent's
account at DTC. The term "Agent's Message" means a message, transmitted by DTC
to and received by the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by the letter of transmittal and that USA
Capital Trust I and USABancShares may enforce such letter of transmittal against
such participant.
Subject to the terms and conditions of the exchange offer,
USABancShares and USA Capital Trust I will be deemed to have accepted for
exchange, and thereby exchanged, Original Capital Securities validly tendered
and not withdrawn as, if and when USA Capital Trust I gives oral or written
notice to the exchange agent of USABancShares' and the Trust's acceptance of
such Original Capital Securities for exchange pursuant to the exchange offer.
The exchange agent will act as agent for USA Capital Trust I for the purpose of
receiving tenders of Original Capital Securities, Letters of Transmittal and
related documents, and as agent for tendering holders for the purpose of
receiving Original Capital Securities, Letters of Transmittal and related
documents and transmitting Exchange Capital Securities to validly tendering
holders. Such exchange will be made promptly after the expiration date. If, for
any reason whatsoever, acceptance for exchange or the exchange of any Original
Capital Securities tendered pursuant to the exchange offer is delayed (whether
before or after the Trust's acceptance for exchange of Original Capital
Securities) or USABancShares and USA Capital Trust I extend the exchange offer
or are unable to accept for exchange or exchange Original Capital Securities
tendered pursuant to the exchange offer, then, without prejudice to
USABancShares' and the Trust's rights set forth herein, the exchange agent may,
nevertheless, on behalf of USABancShares and USA Capital Trust I and subject to
Rule 14e-1(c) under the Exchange Act, retain tendered Original Capital
Securities and such Original Capital Securities may not be withdrawn except to
the extent tendering holders are entitled to withdrawal rights as described
under "--Withdrawal Rights."
Pursuant to the letter of transmittal or Agent's Message in lieu
thereof, a holder of Original Capital Securities will warrant and agree in the
letter of transmittal that it has full power and authority to tender, exchange,
sell, assign and transfer Original Capital Securities, that USA Capital Trust I
will acquire good, marketable and unencumbered title to the tendered Original
Capital Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Original Capital Securities tendered for exchange are not
subject to any adverse claims or proxies. The holder also will warrant and agree
that it will, upon request, execute and deliver any additional documents deemed
by USABancShares, USA Capital Trust I or the exchange agent to be necessary or
desirable to complete the exchange, sale, assignment and transfer of the
Original Capital Securities tendered pursuant to the exchange offer.
Procedures for Tendering Original Capital Securities
Valid Tender. Except as set forth below, in order for Original Capital
Securities to be validly tendered pursuant to the exchange offer, a properly
completed and duly executed letter of transmittal (or facsimile thereof), with
any required signature guarantees, or (in the case of a book-entry transfer) an
Agent's Message in lieu of a letter of transmittal, and any other required
documents, must be received by the exchange agent at one of its addresses set
forth under "--Exchange Agent," and (i) tendered Original Capital Securities
must be received by the exchange agent, or (ii) such Original Capital Securities
must be tendered pursuant to the procedures for book-entry transfer set forth
below and a book-entry confirmation, including an Agent's Message if the
tendering holder has not delivered a letter of transmittal, must be received by
the exchange agent, in each case on or prior to the expiration date, or (iii)
the guaranteed delivery procedures set forth below must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities being
tendered in the appropriate box on the letter of transmittal or so indicate in
an Agent's Message in lieu of the letter of transmittal and the untendered
liquidation amount must be $100,000 or any integral multiple of $1,000 in excess
thereof. The entire amount of Original Capital Securities delivered to the
exchange agent will be deemed to have been tendered unless otherwise indicated.
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The method of delivery of certificates, the letter of transmittal and
all other required documents is at the option and sole risk of the tendering
holder, and delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, registered mail, return-receipt
requested, properly insured, or an overnight delivery service is recommended. In
all cases, sufficient time should be allowed to ensure a timely delivery.
Book-Entry Transfer. The exchange agent will establish an account with
respect to the Original Capital Securities at DTC for purposes of the exchange
offer within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Original Capital Securities by causing DTC
to transfer such Original Capital Securities into the exchange agent's account
at DTC in accordance with DTC's procedures for transfers. However, although
delivery of Original Capital Securities may be effected through book-entry
transfer into the exchange agent's account at DTC, the letter of transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in lieu of the letter of
transmittal, and any other required documents, must in any case be delivered to
and received by the exchange agent at its address set forth under "--Exchange
Agent" on or prior to the expiration date, or the guaranteed delivery procedure
set forth below must be complied with.
Delivery of documents to DTC in accordance with DTC's procedures does
not constitute delivery to the Exchange Agent.
Signature Guarantees. Certificates for the Original Capital Securities
need not be endorsed and signature guarantees on the letter of transmittal are
unnecessary unless (i) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the letter of transmittal. In the case of
(i) or (ii) above, such certificates for Original Capital Securities must be
duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the letter of transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the letter of
transmittal.
Guaranteed Delivery. If a holder desires to tender Original Capital
Securities pursuant to the exchange offer and the certificates for such Original
Capital Securities are not immediately available or time will not permit all
required documents to reach the exchange agent on or prior to the expiration
date, or the procedure for book-entry transfer cannot be completed on a timely
basis, such Original Capital Securities may nevertheless be tendered, provided
that all of the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the letter of transmittal, is
received by the exchange agent, as provided below, on or prior to the expiration
date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Original Capital Securities, in proper form for transfer, together with
a properly completed and duly executed letter of transmittal (or facsimile
thereof), or Agent's Message in lieu thereof, with any required signature
guarantees and any other documents required by the letter of transmittal, are
received by the exchange agent within three New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the exchange agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Original Capital Securities tendered and
accepted for exchange pursuant to the exchange offer will in all cases be made
only after timely receipt by the exchange agent of Original Capital Securities,
or of a book-entry confirmation with respect to such Original Capital
Securities, and a properly completed and duly executed letter of transmittal (or
facsimile thereof), or Agent's Message in lieu thereof, together with any
required signature guarantees and any other documents required by the letter of
transmittal. Accordingly, the delivery of Exchange Capital Securities might not
be made to all tendering holders at the same time, and will depend upon when
Original Capital Securities, book-entry confirmations with respect to Original
Capital Securities and other required documents are received by the exchange
agent.
USABancShares' and the Trust's acceptance for exchange of Original
Capital Securities tendered pursuant to any of the procedures described above
will constitute a binding agreement between the tendering holder, USABancShares
and USA Capital Trust I upon the terms and subject to the conditions of the
exchange offer.
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Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Original Capital Securities will be determined by USABancShares and
the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. USABancShares and USA Capital Trust I reserve the
absolute right, in their sole and absolute discretion, to reject any and all
tenders determined by them not to be in proper form or the acceptance of which,
or exchange for, may, in the opinion of counsel to USABancShares and the Trust,
be unlawful. USABancShares and USA Capital Trust I also reserve the absolute
right, subject to applicable law, to waive any of the conditions of the exchange
offer as set forth under "--Conditions to the Exchange Offer" or any condition
or irregularity in any tender of Original Capital Securities of any particular
holder whether or not similar conditions or irregularities are waived in the
case of other holders.
The interpretation by USABancShares and USA Capital Trust I of the
terms and conditions of the exchange offer (including the letter of transmittal
and the instructions thereto) will be final and binding. No tender of Original
Capital Securities will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. None of
USABancShares, the Trust, any affiliates or assigns of USABancShares or the
Trust, the exchange agent or any other person shall be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If any letter of transmittal, endorsement, bond power, power of
attorney or any other document required by the letter of transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by USABancShares
and the Trust, proper evidence satisfactory to USABancShares and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the exchange offer.
Resale of Exchange Capital Securities
The Trust is making the exchange offer for the Exchange Capital
Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither USABancShares nor USA Capital Trust I sought its own
interpretive letter and there can be no assurance that the staff of the Division
of Corporation Finance of the Securities and Exchange Commission would make a
similar determination with respect to the exchange offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the Securities and Exchange
Commission, and subject to the two immediately following sentences,
USABancShares and USA Capital Trust I believe that Exchange Capital Securities
issued pursuant to this exchange offer in exchange for Original Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities are acquired in
the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such Exchange Capital Securities. However, any holder of Original Capital
Securities who is an Affiliate of USABancShares or USA Capital Trust I or who
intends to participate in the exchange offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased Original Capital
Securities from USA Capital Trust I to resell pursuant to Rule 144A or any other
available exemption under the Securities Act (i) will not be able to rely on the
interpretations of the staff of the Division of Corporation Finance of the
Securities and Exchange Commission set forth in the above-mentioned interpretive
letters, (ii) will not be permitted or entitled to tender such Original Capital
Securities in the exchange offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Original Capital Securities, unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
below, Participating Broker-Dealers must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of Exchange
Capital Securities.
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Each holder of Original Capital Securities who wishes to exchange
Original Capital Securities for Exchange Capital Securities in the exchange
offer will be required to represent that (i) it is not an Affiliate of
USABancShares or the Trust, (ii) any Exchange Capital Securities to be received
by it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. The letter of transmittal
contains the foregoing representations. In addition, USABancShares and USA
Capital Trust I may require such holder, as a condition to such holder's
eligibility to participate in the exchange offer, to furnish to USABancShares
and USA Capital Trust I (or an agent thereof) in writing information as to the
number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Exchange Act) on behalf of whom such holder holds the Capital Securities to be
exchanged in the exchange offer. Each Participating Broker-Dealer will be deemed
to have acknowledged by execution of the letter of transmittal or delivery of an
Agent's Message that it acquired the Original Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Securities and Exchange Commission in the interpretive letters referred
to above, USABancShares and USA Capital Trust I believe that Participating
Broker-Dealers who acquired Original Capital Securities for their own accounts
as a result of market-making activities or other trading activities may fulfill
their prospectus delivery requirements with respect to the Exchange Capital
Securities received upon exchange of such Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
original sale of the Original Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of distribution
with respect to the resale of such Exchange Capital Securities. Accordingly,
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer during the period referred to below in
connection with resales of Exchange Capital Securities received in exchange for
Original Capital Securities where such Original Capital Securities were acquired
by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, USABancShares and USA Capital Trust
I have agreed that this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer in connection with
resales of such Exchange Capital Securities for a period ending 90-days after
the expiration date (subject to extension under certain limited circumstances
described below) or, if earlier, when all such Exchange Capital Securities have
been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Capital Securities received
in exchange for Original Capital Securities pursuant to the exchange offer must
notify USABancShares or the Trust, or cause USABancShares or USA Capital Trust I
to be notified, on or prior to the expiration date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the letter of transmittal or may be delivered to the exchange agent at one of
the addresses set forth herein under "--Exchange Agent." Any person, including
any Participating Broker-Dealer, who is an Affiliate of USABancShares or USA
Capital Trust I may not rely on such interpretive letters and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders
Original Capital Securities pursuant to the exchange offer will be deemed to
have agreed, by execution of the letter of transmittal or delivery of an Agent's
Message in lieu thereof, that, upon receipt of notice from USABancShares or USA
Capital Trust I of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
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applicable) pursuant to this Prospectus until USABancShares or USA Capital Trust
I has amended or supplemented this Prospectus to correct such misstatement or
omission and has furnished copies of the amended or supplemented Prospectus to
such Participating Broker-Dealer or USABancShares or USA Capital Trust I has
given notice that the sale of the Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be. If USABancShares or USA Capital Trust I gives such
notice to suspend the sale of the Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Junior Subordinated Debentures, as applicable), it
shall extend the 90-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection with the resale
of Exchange Capital Securities by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the Exchange Capital
Securities or to and including the date on which USABancShares or USA Capital
Trust I has given notice that the sale of Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Original Capital
Securities may be withdrawn at any time on or prior to the expiration date. In
order for a withdrawal to be effective a written or facsimile transmission of
such notice of withdrawal must be timely received by the exchange agent at one
of its addresses set forth under "-- Exchange Agent" on or prior to the
expiration date. Any such notice of withdrawal must specify the name of the
person who tendered the Original Capital Securities to be withdrawn, the
aggregate principal amount of Original Capital Securities to be withdrawn, and
(if certificates for such Original Capital Securities have been tendered) the
name of the registered holder of the Original Capital Securities as set forth on
the Original Capital Securities, if different from that of the person who
tendered such Original Capital Securities. If Original Capital Securities have
been delivered or otherwise identified to the exchange agent, then prior to the
physical release of such Original Capital Securities, the tendering holder must
submit the certificate numbers shown on the particular Original Capital
Securities to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Original Capital
Securities tendered for the account of an Eligible Institution. If Original
Capital Securities have been tendered pursuant to the procedures for book-entry
transfer set forth in "--Procedures for Tendering Original Capital Securities,"
the notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawal of Original Capital Securities, in which case
a notice of withdrawal will be effective if delivered to the exchange agent by
written or facsimile transmission. Withdrawals of tenders of Original Capital
Securities may not be rescinded. Original Capital Securities properly withdrawn
will not be deemed validly tendered for purposes of the exchange offer, but may
be retendered at any subsequent time on or prior to the expiration date by
following any of the procedures described above under "--Procedures for
Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by USABancShares and
the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. None of USABancShares, the Trust, any affiliates or
assigns of USABancShares or the Trust, the exchange agent or any other person
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Original Capital Securities which have been tendered but which
are withdrawn will be returned to the holder thereof promptly after withdrawal.
Distributions on Exchange Capital Securities
Holders of Original Capital Securities as of August 31, 1999, the
record date for the initial Distribution on September 15, 1999, including such
holders who tender their Original Capital Securities pursuant to the exchange
offer, will be entitled to receive such Distribution. Distributions on the
Exchange Capital Securities are payable semi-annually in arrears on March 15 and
September 15 of each year, commencing September 15, 1999, at the annual rate of
9.50% of the liquidation amount to the holders of the Exchange Capital
Securities on the relevant record dates. Distributions on the Exchange Capital
Securities will accumulate from September 15, 1999, the date of the initial
Distribution on the Original Capital Securities.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the exchange offer, or any
extension of the exchange offer, USABancShares and USA Capital Trust I will not
be required to accept for exchange, or to exchange, any Original Capital
Securities for any Exchange Capital Securities, and, as described below, may
terminate the exchange offer (whether or not any Original Capital Securities
have theretofore been accepted for exchange) or may waive any conditions to or
amend the exchange offer, if any of the following conditions have occurred or
exist:
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(a) there shall occur a change in the current interpretation by the
staff of the Securities and Exchange Commission which permits the Exchange
Capital Securities issued pursuant to the exchange offer in exchange for
Original Capital Securities to be offered for resale, resold and otherwise
transferred by holders thereof (other than broker-dealers and any such holder
which is an Affiliate of USABancShares or the Trust) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Capital Securities are acquired in the ordinary course of
such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such Exchange Capital
Securities; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of USABancShares or the Trust, would reasonably
be expected to impair its ability to proceed with the exchange offer;
(c) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect to the
exchange offer which, in USABancShares' and the Trust's judgment, would
reasonably be expected to impair the ability of USA Capital Trust I or
USABancShares to proceed with the exchange offer;
(d) a banking moratorium shall have been declared by United States
federal or Pennsylvania or New York state authorities which, in USABancShares'
and the Trust's judgment, would reasonably be expected to impair the ability of
USA Capital Trust I or USABancShares to proceed with the exchange offer;
(e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Securities and Exchange Commission or any other governmental authority which, in
USABancShares' and the Trust's judgment, would reasonably be expected to impair
the ability of the Issuer or USABancShares to proceed with the exchange offer;
or
(f) a stop order shall have been issued by the Securities and Exchange
Commission or any state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been initiated or, to the
knowledge of USABancShares or the Trust, threatened for that purpose, or any
governmental approval which either USABancShares or USA Capital Trust I shall,
in its sole discretion, deem necessary for the consummation of the exchange
offer as contemplated hereby has not been obtained.
If USABancShares and USA Capital Trust I determine in their sole and
absolute discretion that any of the foregoing events or conditions has occurred
or exists, USABancShares and USA Capital Trust I may, subject to applicable law,
terminate the exchange offer (whether or not any Original Capital Securities
have theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the exchange offer in any respect. If such waiver
or amendment constitutes a material change to the exchange offer, USABancShares
and USA Capital Trust I will promptly disclose such waiver or amendment by means
of a Prospectus supplement that will be distributed to the registered holders of
the Original Capital Securities and will extend the exchange offer to the extent
required by Rule 14e-1 under the Exchange Act.
Exchange Agent
Wilmington Trust Company has been appointed as exchange agent for the
exchange offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the letter of transmittal should be directed to
the exchange agent as follows:
By Registered or By Hand or
Certified Mail Overnight Delivery
---------------- ------------------
Wilmington Trust Company Wilmington Trust Company
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, DE 19890-0001 Wilmington, DE 19890-0001
Attn: Kristen Long, Attn: Kristen Long,
Corporate Trust Operations Corporate Trust Operations
Confirm by telephone or for
information call:
(302) 651-1562
Facsimile Transmission
(Eligible Institutions Only):
(302) 651-1079
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
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Fees and Expenses
USABancShares has agreed to pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. USABancShares will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Original Capital Securities,
and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will
not be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original Capital Securities in connection with the exchange
offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
Neither USABancShares nor USA Capital Trust I will make any payment to
brokers, dealers or other nominees soliciting acceptances of the exchange offer.
DESCRIPTION OF EXCHANGE SECURITIES
The terms of the Exchange Securities are identical in all material
respects to the terms of the Original Securities, except that (i) the Original
Securities have not been registered under the Securities Act, are subject to
restrictions on transfer under federal and state securities laws and are
entitled to certain rights under the Registration Rights Agreement (which rights
will terminate upon consummation of the exchange offer), (ii) the Exchange
Capital Securities will not provide for any increase in the distribution rate
thereon and (iii) the Exchange Junior Subordinated Debentures will not provide
for any increase in the interest rate thereon. Except where otherwise indicated,
the following description applies to both the Exchange Securities and the
Original Securities.
Description of Capital Securities
The Capital Securities represent beneficial interests in the Trust, and
the holders thereof are entitled to a preference over the Common Securities in
certain circumstances with respect to distributions and amounts payable on
redemption of USA Capital Trust I Securities or liquidation of the Trust. See
"--Subordination of Common Securities." Upon consummation of the exchange offer,
the Trust Agreement will be subject to and governed by the Trust Indenture Act
of 1939. This summary of certain provisions of the Capital Securities, the
Common Securities and the Trust Agreement does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Trust Agreement, including the definitions therein of certain terms.
General
The Capital Securities are limited to $10.0 million aggregate
liquidation amount at any one time outstanding. The Capital Securities rank pari
passu with the Common Securities, and payments will be made pro rata thereon,
except as described under "--Subordination of Common Securities." Legal title to
the Junior Subordinated Debentures is held by the Property Trustee in trust for
the benefit of the holders of the Trust Securities. The Guarantee does not
guarantee payment of distributions or amounts payable on redemption of the
Capital Securities or liquidation of USA Capital Trust I when USA Capital Trust
I does not have funds on hand legally available for such payments. See
"Description of Exchange Securities--Description of Guarantee."
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Distributions
Distributions on the Capital Securities will be cumulative, will
accumulate from March 15, 1999 and will be payable semi-annually in arrears on
March 15 and September 15 of each year, commencing September 15, 1999, at the
annual rate of 9.50% of the liquidation amount to the holders of the Capital
Securities on the relevant record dates. The record dates will be the last
Business Day (as hereinafter defined) of the month immediately preceding the
month in which the relevant payment occurs. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months and, for any period of less than a full calendar month, the number of
days elapsed in such month. In the event that any date on which distributions
are payable on the Capital Securities is not a Business Day, payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect to any
such delay), except that if such next succeeding Business Day falls in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date (each date on which distributions are payable in accordance with
the foregoing, a "Distribution Date"). A "Business Day" shall mean any day other
than a Saturday or a Sunday or a day on which banking institutions in New York,
New York, Wilmington, Delaware or Philadelphia, Pennsylvania are authorized or
required by law or executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing and no amounts remain in the reserve account, USABancShares has the
right under the Indenture to elect to defer the payment of interest on the
Junior Subordinated Debentures, at any time or from time to time, for a period
not exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period shall end on a date other than an
Interest Payment Date (as defined under the heading "Description of Exchange
Securities--Description of Junior Subordinated Debentures--General"), or extend
beyond the Stated Maturity Date. Upon any such election, semi-annual
distributions on the Capital Securities will be deferred by USA Capital Trust I
during such Extension Period. Distributions to which holders of the Capital
Securities are entitled during any such Extension Period will accumulate
additional distributions thereon at the rate per annum of 9.50% thereof,
compounded semi-annually from the relevant Distribution Date, but not exceeding
the interest rate then accruing on the Junior Subordinated Debentures.
Prior to the termination of any such Extension Period, USABancShares
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, to end
on a date other than an Interest Payment Date or to extend beyond the Stated
Maturity Date. Upon the termination of any such Extension Period and the payment
of all amounts then due on any Interest Payment Date, USABancShares may elect to
begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
USABancShares must give the Property Trustee, the Administrative Trustees and
the Debenture Trustee notice of its election of any such Extension Period (or an
extension thereof) at least five Business Days prior to the earlier of: (i) the
date the distributions on the Capital Securities would have been payable except
for the election to begin such Extension Period; and (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or automated quotation system or to holders of such Capital Securities on the
record date or the date such distributions are payable, but in any event not
less than five Business Days prior to such record date. There is no limitation
on the number of times that USABancShares may elect to begin an Extension
Period. See "Description of Exchange Securities --Description of Junior
Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Consequences--Original Issue Discount and Interest Income."
During any such Extension Period, USABancShares 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 USABancShares' capital stock; (ii)
make any payment of principal of or premium, if any, on or repay, repurchase or
redeem any debt securities of USABancShares (including any other junior
subordinated debentures to be issued by USABancShares) that rank pari passu with
or junior in right of payment to the Junior Subordinated Debentures; or (iii)
make any guarantee payments with respect to any guarantee by USABancShares of
the debt securities of any subsidiary of USABancShares (including all other
guarantees to be issued by USABancShares) if such guarantee ranks pari passu
with or junior in right of payment to the Junior Subordinated Debentures (other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of USABancShares, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of the exchange or conversion of
one class or series of USABancShares' capital stock for another class or series
of USABancShares' capital stock, (e) the purchase of fractional interests in
shares of USABancShares' capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock related to the issuance of common stock or
rights under any of USABancShares' benefit plans for its directors, officers or
employees or any of USABancShares' dividend reinvestment plans). USABancShares
has no current intention to exercise its option to defer payments of interest on
the Junior Subordinated Debentures.
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The revenue of USA Capital Trust I available for distribution to
holders of the Capital Securities is limited to payments under the Junior
Subordinated Debentures in which USA Capital Trust I invested the proceeds from
the issuance and sale of the Trust Securities. See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--General." If
USABancShares does not make interest payments on the Junior Subordinated
Debentures, the Property Trustee will not have funds available to pay
distributions on the Capital Securities. The payment of distributions (if and to
the extent USA Capital Trust I has funds on hand legally available for the
payment of such distributions) is guaranteed by USABancShares on a limited basis
as set forth herein under "Description of Guarantee."
USABancShares has established the reserve account in which
USABancShares deposited $1.9 million from the net proceeds of the sale of the
Junior Subordinated Debentures (an amount equal to two years of interest
payments on the Junior Subordinated Debentures) and is required to maintain the
reserve account for two years from the date of issuance of the Junior
Subordinated Debentures. Thereafter, interest payments on the Junior
Subordinated Debentures will be made from the reserve account until the reserve
account is exhausted. The holders of Junior Subordinated Debentures have a
perfected security interest in the reserve account. See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Reserve Account."
Redemption
Upon the repayment on the Stated Maturity Date or prepayment, in whole
or in part, prior to the Stated Maturity Date of the Junior Subordinated
Debentures (other than following the distribution of the Junior Subordinated
Debentures to the holders of the Trust Securities), the proceeds from such
repayment or prepayment shall be applied by the Property Trustee (subject to the
Property Trustee having received written notice no later than 45 days prior to
such repayment) to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"), at the applicable "Redemption Price", which
shall be equal to: (i) in the case of the repayment of the Junior Subordinated
Debentures on the Stated Maturity Date, the "Maturity Redemption Price" (equal
to the principal of, and accrued and unpaid interest on, the Junior Subordinated
Debentures); (ii) in the case of the optional prepayment of the Junior
Subordinated Debentures before March 15, 2009 (the "Initial Optional Redemption
Date,") upon the occurrence and continuation of a Special Event, the "Special
Event Redemption Price" equal to the corresponding Special Event Prepayment
Price (as defined under "Description of Exchange Securities--Description of
Junior subordinated Debentures--Special Event Prepayment"); and (iii) in the
case of the optional prepayment of the Junior Subordinated Debentures on or
after the Initial Optional Redemption Date, the "Optional Redemption Price"
equal to the corresponding Optional Prepayment Price (as defined under
"Description of Exchange Securities--Description of Junior Subordinated
Debentures--Optional Prepayment"). See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Optional Prepayment"
and "--Special Event Prepayment." If less than all of the Junior Subordinated
Debentures are to be prepaid, the Junior Subordinated Debentures to be prepaid
shall be selected by such method as the Debenture Trustee shall deem fair and
appropriate.
"Like Amount" means: (i) with respect to a redemption of the Trust
Securities, Trust Securities having a liquidation amount equal to the principal
amount of Junior Subordinated Debentures to be paid in accordance with their
terms; and (ii) with respect to a distribution of Junior Subordinated Debentures
upon the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the liquidation amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
USABancShares has the option to prepay the Junior Subordinated
Debentures: (i) in whole or in part, on or after the Initial Optional Redemption
Date, at the applicable Optional Prepayment Price; and (ii) in whole but not in
part, at any time prior to the Initial Optional Redemption Date, upon the
occurrence of a Special Event, at the Special Event Prepayment Price, in each
case subject to the receipt of any required regulatory approval. See
"Description of Exchange Securities--Description of Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
Liquidation of USA Capital Trust I and Distribution of Junior Subordinated
Debentures
USABancShares has the right at any time to dissolve USA Capital Trust I
and, after satisfaction of liabilities to creditors of USA Capital Trust I as
required by applicable law, to cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the Trust.
Such right is subject to: (i) USABancShares having received an opinion of
counsel to the effect that such distribution will not be a taxable event to
holders of Capital Securities; and (ii) receipt of any required regulatory
approval.
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The Trust shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of USABancShares ; (ii)
the distribution of a Like Amount of the Junior Subordinated Debentures to the
holders of the Trust Securities, if USABancShares, as Sponsor, has given written
direction to the Property Trustee to dissolve USA Capital Trust I (which
direction is optional and, except as described above, wholly within the
discretion of USABancShares, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "--Redemption;" (iv) expiration of the term of the
Trust; and (v) the entry of an order for the dissolution of USA Capital Trust I
by a court of competent jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v)
above, USA Capital Trust I shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of USA Capital Trust I as
provided by applicable law, to the holders of the Trust Securities a Like Amount
of the Junior 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 USA Capital Trust I legally available
for distribution to holders, after satisfaction of liabilities to creditors of
USA Capital Trust I as provided by applicable law, an amount equal to the
aggregate of the liquidation amount plus accumulated 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 USA Capital Trust I has insufficient assets on hand legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by USA Capital Trust I on the Trust Securities shall be paid on a pro
rata basis, except that if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities. See "--Subordination of Common Securities."
If USABancShares elects not to prepay the Junior Subordinated
Debentures prior to maturity in accordance with their terms and either elects
not to or is unable to liquidate USA Capital Trust I and distribute the Junior
Subordinated Debentures to holders of the Trust Securities, the Trust Securities
will remain outstanding until the repayment of the Junior Subordinated
Debentures on the Stated Maturity Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities: (i) the Trust
Securities will no longer be deemed to be outstanding; (ii) DTC or its nominee
will receive, in respect of each registered global certificate, if any,
representing Trust Securities held by it, a registered global certificate or
certificates representing the Junior Subordinated Debentures to be delivered
upon such distribution; and (iii) any certificates representing Trust Securities
not held by DTC or its nominee will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the liquidation amount of such
Trust Securities, and bearing accrued and unpaid interest in an amount equal to
the accumulated and unpaid distributions on such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon USABancShares will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such Junior
Subordinated Debentures.
There can be no assurance as to the market prices for the Capital
Securities, or for the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Securities if a dissolution and liquidation of USA
Capital Trust I were to occur. Accordingly, the Capital Securities or the Junior
Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Capital Securities.
Redemption Procedures
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Junior Subordinated Debentures. Any redemption of Trust
Securities shall be made and the applicable Redemption Price shall be payable on
the Redemption Date only to the extent that USA Capital Trust I has funds
legally available for the payment of such applicable Redemption Price. See
"--Subordination of Common Securities."
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If USA Capital Trust I gives a notice of redemption in respect of the
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are legally available, with respect to the Capital
Securities held by DTC or its nominees, the Property Trustee will deposit or
cause the Paying Agent (as defined herein) to deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price. See "--Form, Denomination,
Book-Entry Procedures and Transfer." With respect to the Capital Securities held
in certificated form, the Property Trustee, to the extent funds are legally
available, will irrevocably deposit with the Paying Agent for the Capital
Securities funds sufficient to pay the applicable Redemption Price and will give
such paying agent irrevocable instructions and authority to pay the applicable
Redemption Price to the holders thereof upon surrender of their certificates
evidencing the Capital Securities. See "--Payment and Paying Agency."
Notwithstanding the foregoing, distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Capital Securities on
the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of the holders of the Capital Securities called
for redemption will cease, except the right of the holders of such Capital
Securities to receive the applicable Redemption Price, but without interest on
such Redemption Price, and such Capital Securities will cease to be outstanding.
In the event that any Redemption Date of Capital Securities is not a Business
Day, then the applicable Redemption Price payable on such date will be paid on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such next
succeeding Business Day falls in the next calendar year, such payment shall be
made on the immediately preceding Business Day. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by USA Capital Trust I or by USABancShares pursuant to the Guarantee as
described under "Description of Exchange Securities--Description of Guarantee":
(i) distributions on Capital Securities will continue to accumulate at the then
applicable rate, from the Redemption Date originally established by USA Capital
Trust I to the date such applicable Redemption Price is actually paid; and (ii)
the actual payment date will be the Redemption Date for purposes of calculating
the applicable Redemption Price.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days prior to the Redemption Date to each holder of Trust Securities at
its registered address. Unless USA Capital Trust I defaults in payment of the
applicable Redemption Price on the Trust Securities, or USABancShares defaults
in the repayment of the Junior Subordinated Debentures, on and after the
Redemption Date, distributions will cease to accrue on the Trust Securities
called for redemption.
Subject to applicable law (including, without limitation, United States
federal securities laws), USABancShares or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the open
market or by private agreement.
Subordination of Common Securities
Payment of distributions on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made pro rata based on the liquidation
amount of the Trust Securities; provided, however, that if on any Distribution
Date or Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall be
made unless a cash payment in full of all accumulated and unpaid distributions
on all of the outstanding Capital Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the applicable
Redemption Price the full amount of such Redemption Price, shall have been made
or provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all distributions on, or Redemption
Price of, the Capital Securities then due and payable.
In the case of any Event of Default, USABancShares as holder of the
Common Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of
USABancShares as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
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Events of Default; Notice
The occurrence of a Debenture Event of Default constitutes an "Event of
Default" under the Trust Agreement. See "Description of Exchange
Securities--Description of Junior Subordinated Debentures--Debenture Events of
Default."
Within 10 Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and USABancShares, as Sponsor, unless such Event of
Default shall have been cured or waived. USABancShares, as Sponsor, 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
Capital Securities shall have a preference over the Common Securities as
described under "--Liquidation of USA Capital Trust I and Distribution of Junior
Subordinated Debentures" and "--Subordination of Common Securities."
Removal of Trustees
Unless a Debenture Event of Default shall have occurred and be
continuing, any Issuer 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
Capital Securities. In no event will the holders of the Capital Securities have
the right to vote to appoint, remove or replace the Administrative Trustees,
which voting rights are vested exclusively in USABancShares as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
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 Issuer Trustee shall be a party, or
any Person succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Trust Agreement, provided such Person shall be otherwise qualified and eligible.
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Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other Person,
except as described below or as otherwise described under "--Liquidation of USA
Capital Trust I and Distribution of Junior Subordinated Debentures." USA Capital
Trust I may, at the request of USABancShares, as Sponsor, with the consent of
the Administrative Trustees, but without the consent of the holders of the
Capital Securities, merge with or into, consolidate, amalgamate or be replaced
by or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that: (i) such successor entity either (a) expressly assumes
all of the obligations of USA Capital Trust I with respect to the Trust
Securities or (b) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise; (ii) USABancShares expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee with respect to the Junior 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 Trust Securities are then listed or quoted, if any;
(iv) if the Capital Securities (including any Successor Securities) are rated by
any nationally recognized statistical rating organization prior to such
transaction, such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Capital Securities (including any Successor
Securities) or, if the Junior Subordinated Debentures are so rated, the Junior
Subordinated Debentures, to be downgraded by any such nationally recognized
statistical rating organization; (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect; (vi) such successor entity has a
purpose substantially identical to that of the Trust; (vii) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
USABancShares has received an opinion from independent counsel to USA Capital
Trust I experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect
(other than any dilution of such holders' interests in the new entity), and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither USA Capital Trust I nor such successor entity will be
required to register as an investment company under the Investment Company Act;
and (viii) USABancShares or any permitted successor or assignee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee and the Common Guarantee. Notwithstanding the
foregoing, USA Capital Trust I shall not, except with the consent of holders of
100% in liquidation amount of the Trust Securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to, any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause USA Capital Trust I or the successor
entity not to be classified as a grantor trust for United States federal income
tax purposes. In addition, the Property Trustee is required pursuant to the
Indenture to exchange, as part of the exchange offer, the Junior Subordinated
Debentures for the Exchange Debentures, which will have terms substantially
identical to the Junior Subordinated Debentures.
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Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of Exchange
Securities--Description of Guarantee--Amendments and Assignment" and as
otherwise required by law and the Trust Agreement, the holders of the Capital
Securities have no voting rights.
The Trust Agreement may be amended from time to time by USABancShares,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities: (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement; (ii) to modify, eliminate or
add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that USA Capital Trust I 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 USA Capital Trust I will not
be required to register as an "investment company" under the Investment Company
Act or (iii) to modify, eliminate or add any provisions of the Trust Agreement
to such extent as shall be necessary to enable USA Capital Trust I or
USABancShares to conduct an exchange offer in the manner contemplated by the
Registration Rights Agreement; provided, however, that in the case of clause (i)
such action shall not adversely affect in any material respect the interests of
the holders of the Trust Securities. Any amendments of the Trust Agreement
pursuant to the foregoing shall become effective when notice thereof is given to
the holders of the Trust Securities. The Trust Agreement may be amended by the
Issuer Trustees and USABancShares : (i) with the consent of holders representing
a majority (based upon liquidation amount) of the outstanding Trust Securities;
and (ii) upon receipt by the Issuer Trustees of an opinion of counsel
experienced in such matters to the effect that such amendment or the exercise of
any power granted to the Issuer Trustees in accordance with such amendment will
not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an "investment
company" under the Investment Company Act, provided that, without the consent of
each holder of Trust Securities, the Trust Agreement may not be amended to: (i)
change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made in
respect of the Trust Securities as of a specified date; or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not: (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Debenture Trustee with respect to
the Junior Subordinated Debentures; (ii) waive certain past defaults under the
Indenture; (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures; or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in liquidation amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of the Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Capital Securities, prior to taking
any of the foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that USA Capital Trust I 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 Capital Securities may be given at
a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders has been taken, to be given to each
holder of record of Capital Securities in the manner set forth in the Trust
Agreement.
No vote or consent of the holders of Capital Securities will be
required for USA Capital Trust I to redeem and cancel the Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by USABancShares, the Issuer Trustees or any
affiliate of USABancShares or any Issuer Trustee, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
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Form, Denomination, Book-Entry Procedures and Transfer
The Exchange Capital Securities may be issued in certificated form or
as one or more Capital Securities in registered, global form (collectively, the
"Global Capital Securities").
In the event that Capital Securities are issued in certificated form,
the Capital Securities will be issued in blocks having a liquidation amount of
not less than $100,000 (100 Capital Securities) and may be transferred or
exchanged only in such blocks in the manner and at the offices described below.
The Global Capital Securities will be deposited upon issuance with the Property
Trustee as custodian for DTC, in New York, New York, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 Capital Securities. Beneficial interests in the
Global Capital Securities may not be exchanged for Capital Securities in
certificated form, except in the limited circumstances described below. See
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
Other Capital Securities may be issued in registered, certificated
(i.e., non-global) form. Other Capital Securities may not be exchanged for
beneficial interests in any Global Capital Securities, except in the limited
circumstances described below. See "--Exchange of Certificated Capital
Securities for Book-Entry Capital Securities."
Transfer of beneficial interests in the Global Capital Securities will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
Depositary Procedures
DTC has advised USA Capital Trust I and USABancShares that DTC is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
Indirect access to DTC's system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised USA Capital Trust I and USABancShares that,
pursuant to procedures established by it, (i) upon deposit of the Global Capital
Securities representing Exchange Capital Securities, DTC will credit the
accounts of Participants exchanging Original Capital Securities represented by
Global Capital Securities with portions of the liquidation amount of the Global
Capital Securities representing Exchange Capital Securities and (ii) ownership
of such interests in the Global Capital Securities will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC if they are Participants, or indirectly through
organizations that are Participants. All interests in a Global Capital Security
will be subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in certificated form
of securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Capital Security to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Capital Security to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Capital Securities, see "--Exchange
of Book-Entry Capital Securities for Certificated Capital Securities" and
"--Exchange of Certificated Capital Securities for Book-Entry Capital
Securities."
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Trust
Agreement for any purpose.
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Payments in respect of the Global Capital Security registered in the
name of DTC, or its nominee, will be payable by the Property Trustee to DTC in
its capacity as the registered holder under the Trust Agreement. Under the terms
of the Trust Agreement, the Property Trustee will treat the persons in whose
names the Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will have any responsibility or liability
for: (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Capital Securities, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Capital Securities; or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised USA Capital Trust I and USABancShares that its current practice, upon
receipt of any payment in respect of securities such as the Capital Securities,
is to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in
liquidation amount of beneficial interests in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the Participants and the Indirect Participants
to the beneficial owners of Capital Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Property Trustee, USA Capital Trust I or USABancShares. None of the
Trust, USABancShares or the Property Trustee will be liable for any delay by DTC
or any of its Participants in identifying the beneficial owners of the Capital
Securities, and USA Capital Trust I or USABancShares and the Property Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised USA Capital Trust I and USABancShares that it will take
any action permitted to be taken by a holder of Capital Securities (including,
without limitation, the presentation of Capital Securities for exchange as
described below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Capital Securities are credited and
only in respect of such portion of the liquidation amount of the Capital
Securities as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Trust Agreement,
DTC reserves the right to exchange the Global Capital Securities for legended
Capital Securities in certificated form and to distribute such Capital
Securities to its Participants.
The information in this section concerning DTC and its book-entry
system has been obtained from sources that USA Capital Trust I and USABancShares
believe to be reliable, but neither USA Capital Trust I nor USABancShares takes
responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Capital Securities among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Trust, USABancShares or the Property Trustee will have any responsibility for
the performance by DTC or its Participants or Indirect Participants of its
obligations under the rules and procedures governing its operations.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if: (i) DTC (x) notifies USA Capital Trust I that
it is unwilling or unable to continue as Depositary for the Global Capital
Security and USA Capital Trust I thereupon fails to appoint a successor
Depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act and USA Capital Trust I thereupon fails to appoint a
successor Depositary within 90 days; (ii) USABancShares in its sole discretion
elects to cause the issuance of the Capital Securities in certificated form; or
(iii) there shall have occurred and be continuing an Event of Default or any
event which after notice or lapse of time or both would be an Event of Default
under the Trust Agreement. In addition, beneficial interests in a Global Capital
Security may be exchanged by or on behalf of DTC for certificated Capital
Securities upon request by DTC, but only upon at least 20 days prior written
notice given to the Property Trustee in accordance with DTC's customary
procedures. In all cases, certificated Capital Securities delivered in exchange
for any Global Capital Security or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of the Depositary (in accordance with its customary procedures) and
will bear the restrictive legend referred to in "Notice to Investors," unless
the Property Trustee determines otherwise in compliance with applicable law.
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Exchange of Certificated Capital Securities for Book-Entry Capital Securities
Other Capital Securities, which will be issued in certificated form,
may not be exchanged for beneficial interests in any Global Capital Security,
unless such exchange occurs in connection with a transfer of such Other Capital
Securities and the transferor first delivers to the Property Trustee a written
certificate (in the form provided in the Trust Agreement) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Capital Securities.
Payment and Paying Agency
Payments in respect of the Capital Securities held in global form shall
be made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates, or in respect of the Capital
Securities that are not held by the Depositary, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address shall
appear on the register. The paying agent (the "Paying Agent") shall initially be
the Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and USABancShares. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days notice to the Property
Trustee, the Administrative Trustees and USABancShares. In the event that the
Property Trustee shall no longer be the Paying Agent, the Administrative
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and USABancShares) to act as Paying
Agent.
Restrictions on Transfer
The Capital Securities may be transferred, only in blocks having a
liquidation amount of not less than $100,000 (100 Capital Securities) and
multiples of $1,000 in excess thereof. Any attempted sale, transfer or other
disposition of Capital Securities in a block having a liquidation amount of less
than $100,000 shall be deemed to be void and of no legal effect whatsoever. Any
such purported transferee shall be deemed not to be the holder of such Capital
Securities for any purpose, including but not limited to the receipt of
distributions on such Capital Securities, and such purported transferee shall be
deemed to have no interest whatsoever in such Capital Securities.
Registrar and Transfer Agent
The Property Trustee acts as registrar, transfer agent and exchange
agent for the Capital Securities.
Registration of transfers of the Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. USA Capital Trust I will not be required to register or cause to be
registered the transfer of the Capital Securities after they have been called
for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, will undertake to perform only such duties as are
specifically set forth in the Trust Agreement and, during the existence of an
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 Trust 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 courses of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Capital
Securities or the Common Securities are entitled under the Trust Agreement to
vote, then the Property Trustee shall take such action as is directed by
USABancShares and, if not so directed, shall take such action as it deems
advisable and in the best interests of the holders of the Trust Securities and
will have no liability, except for its own bad faith, negligence or willful
misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate USA Capital Trust I in such a way that: (i) USA
Capital Trust I will not be deemed to be an "investment company" required to be
registered under the Investment Company Act; (ii) USA Capital Trust I will be
classified as a grantor trust for United States federal income tax purposes; and
(iii) the Junior Subordinated Debentures will be treated as indebtedness of
USABancShares for United States federal income tax purposes. USABancShares and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of USA Capital Trust I or the
Trust Agreement, that USABancShares and the Administrative Trustees determine in
their discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Trust Securities.
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The Trust Agreement provides that (i) holders of the Trust Securities
have no preemptive or similar rights to subscribe for any additional Trust
Securities and (ii) the issuance of Trust Securities is not subject to
preemptive rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge
any of its assets.
Description of Junior Subordinated Debentures
The Original Junior Subordinated Debentures were, and the Exchange
Junior Subordinated Debentures will be, issued under an Indenture, as
supplemented from time to time, between USABancShares and the Debenture Trustee.
Upon effectiveness of the exchange offer Registration Statement, the Indenture
will be qualified under the Trust Indenture Act. This summary of certain terms
and provisions of the Junior Subordinated Debentures and the Indenture does not
purport to be complete, and, where reference is made to particular provisions of
the Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act.
General
Concurrently with the issuance of the Capital Securities, USA Capital
Trust I invested the proceeds thereof, together with the consideration paid by
USABancShares for the Common Securities, in Junior Subordinated Debentures
issued by USABancShares. The Junior Subordinated Debentures bear interest from
March 15, 1999 at the annual rate of 9.50% of the principal amount thereof,
payable semi-annually in arrears on March 15 and September 15 of each year
(each, an "Interest Payment Date"), commencing September 15, 1999. The record
dates will be the last Business Day of the month immediately preceding the month
in which the relevant payment occurs. It is anticipated that, until the
liquidation, if any, of the Trust, the Junior Subordinated Debentures will be
held in the name of the Property Trustee in trust for the benefit of the holders
of the Trust 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 and, for any
period of less than a full calendar month, the number of days elapsed in such
month. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that if such next succeeding Business Day falls in the next succeeding
calendar year, then such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. 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 9.50% thereof, compounded semi-annually. The term
"interest," as used herein, shall include semi-annual interest payments,
interest on semi-annual interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined under "--Special Event
Prepayment"), as applicable.
The Junior Subordinated Debentures will mature on March 15, 2029 (the
"Stated Maturity Date").
The Junior Subordinated Debentures rank pari passu with all other
junior subordinated debentures to be issued by USABancShares and are unsecured
and rank subordinate and junior in right of payment to all Senior Indebtedness
to the extent and in the manner set forth in the Indenture. See
"--Subordination."
USABancShares is a bank holding company regulated by the Board of
Governors of the Federal Reserve System, and almost all of the operating assets
of USABancShares are owned by BankPhiladelphia. USABancShares is a legal entity
separate and distinct from BankPhiladelphia and its other subsidiaries. Holders
of Junior Subordinated Debentures should look only to USABancShares for payments
on the Junior Subordinated Debentures. The principal sources of USABancShares'
income are dividends, interest and fees from BankPhiladelphia and USACapital, as
its operating subsidiaries. USABancShares relies primarily on dividends from
BankPhiladelphia to meet its obligations for payment of obligations and
corporate expenses. There are regulatory limitations, discussed in more detail
above, on the payment of dividends directly or indirectly to USABancShares from
BankPhiladelphia. In addition to restrictions on the payment of dividends,
BankPhiladelphia is subject to certain restrictions imposed by federal law on
any extensions of credit to, and certain other transactions with, USABancShares
and certain other affiliates, and on investments in stock or other securities
thereof. Such restrictions prevent USABancShares and such other affiliates from
borrowing from BankPhiladelphia unless the loans are secured by various types of
collateral. Furthermore, such secured loans, other transactions and investments
by BankPhiladelphia are generally limited in amount as to USABancShares and as
to each of such other affiliates to 10% of BankPhiladelphia's capital and
surplus and as to USABancShares and all of such other affiliates to an aggregate
of 20% of BankPhiladelphia's capital and surplus.
Under Board of Governors of the Federal Reserve System policy,
USABancShares is expected to act as a source of financial strength to
BankPhiladelphia and to commit resources to support BankPhiladelphia. This
support may be required at times when, absent such policy, USABancShares might
not otherwise provide such support. Any capital loans
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by USABancShares to BankPhiladelphia are subordinate in right of payment to
deposits and to certain other indebtedness of BankPhiladelphia. In the event of
USABancShares' bankruptcy, any commitment by USABancShares to a federal bank
regulatory agency to maintain the capital of BankPhiladelphia will be assumed by
the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act, insured depository
institutions such as BankPhiladelphia are prohibited from making capital
distributions, including the payment of dividends, if, after making any such
distribution, the institution would become "undercapitalized" (as such term is
used in the statute). Under the Federal Deposit Insurance Act, no dividends may
be paid by an insured bank if the bank is in arrears in the payment of any
insurance assessment due to the Federal Deposit Insurance Corporation. Dividend
payments by BankPhiladelphia are subject to the Pennsylvania Banking Code. Under
the Pennsylvania Banking Code, no dividends may be paid except from "accumulated
net earnings" (generally, undivided profits). State and federal regulatory
authorities have adopted standards for the maintenance of adequate levels of
capital by banks. Adherence to such standards further limits the ability of
BankPhiladelphia to pay dividends. In addition, Bank regulatory agencies have
authority to prohibit BankPhiladelphia or USABancShares from engaging in an
unsafe or unsound practice in conducting their business. The payment of
dividends, depending upon the financial condition of BankPhiladelphia or
USABancShares, could be deemed to constitute such an unsafe or unsound practice.
USABancShares has established the reserve account in which
USABancShares deposited $1.9 million (an amount equal to two years of interest
payments on the Junior Subordinated Debentures). See "--Reserve Account."
Because USABancShares is a holding company, the right of USABancShares
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution),
is subject to the prior claims of creditors of that subsidiary (including
depositors, in the case of BankPhiladelphia), except to the extent USABancShares
may itself be recognized as a creditor of that subsidiary. At December 31, 1998,
the subsidiaries of USABancShares had total liabilities (excluding liabilities
owed to USABancShares) of $146.3 million. Accordingly, the Junior Subordinated
Debentures are effectively subordinated to all existing and future liabilities
of USABancShares' subsidiaries (including BankPhiladelphia's deposit
liabilities) and all liabilities of any future subsidiaries of USABancShares.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of USABancShares or any subsidiary, including Senior
Indebtedness. See "--Subordination."
Reserve Account
USABancShares has established the reserve account in which it deposited
$1.9 million from the net proceeds of the sale of the Junior Subordinated
Debentures (an amount equal to two years of interest payments on the Junior
Subordinated Debentures). The amount so deposited in the reserve account is
invested in marketable securities. USABancShares is required to maintain the
reserve account for two years from the date of issuance of the Junior
Subordinated Debentures. Thereafter, funds in the reserve account will be
applied to make interest payments on the Junior Subordinated Debentures until
the reserve account is exhausted. USABancShares may not defer payments of
interest on the Junior Subordinated Debentures during any period where funds are
maintained or required to be maintained in the reserve account. Holders of the
Junior Subordinated Debentures have a perfected security interest in the reserve
account.
Form, Registration Transfer
If the Junior Subordinated Debentures are distributed to the holders of
the Trust Securities, the Junior Subordinated Debentures may be represented by
one or more global certificates registered in the name of Cede & Co., as the
nominee of DTC. The depositary arrangements for such Junior Subordinated
Debentures are expected to be substantially similar to those in effect for the
Capital Securities.
Payment and Paying Agents
Payment of principal of (and premium, if any) and interest (including
Additional Sums as defined under "--Special Event Prepayment") and compounded
interest, if any) on the Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in Wilmington, Delaware or at the office of such
Paying Agent or Paying Agents as USABancShares may designate from time to time,
except that at the option of USABancShares payment of any interest may be made,
except in the case of Junior Subordinated Debentures in global form: (i) by
check mailed to the address of the Person entitled thereto as such address shall
appear in the register for Junior Subordinated Debentures; or (ii) by transfer
to an account maintained by the Person entitled thereto as specified in such
register, provided that proper transfer instructions have been received by the
relevant record date. Payment of any interest on any Junior Subordinated
Debenture will be made to the Person in whose name such Junior Subordinated
Debenture is registered at the close of business on the record date for such
interest, except in the case of defaulted interest. USABancShares may at any
time designate additional Paying Agents or rescind the
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designation of any Paying Agent; however, USABancShares will at all times be
required to maintain a Paying Agent in each place of payment for the Junior
Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by USABancShares in trust, for the payment of the principal of (and
premium, if any) or interest (including Additional Sums and compounded interest,
if any) on any Junior Subordinated Debenture and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall, at the request of USABancShares, be repaid to USABancShares and
the holder of such Junior Subordinated Debenture shall thereafter look, as a
general unsecured creditor, only to USABancShares for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is
continuing, USABancShares will have the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures, at any time and from
time to time, for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period shall end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. USABancShares may not defer payments of interest on the Junior
Subordinated Debentures during any period where funds are maintained or required
to be maintained in the reserve account. At the end of such Extension Period,
USABancShares must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of 9.50%, compounded semi-annually, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and, if the Junior Subordinated Debentures have been
distributed to holders of the Trust Securities, holders of Junior Subordinated
Debentures (or holders of the Trust Securities while Trust Securities are
outstanding) will be required to accrue such deferred interest income for United
States federal income tax purposes prior to the receipt of cash attributable to
such income. See "Certain Federal Income Tax Consequences--Original Issue
Discount and Interest Income."
During any such Extension Period, USABancShares 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 USABancShares' capital stock; (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of USABancShares (including any other
junior subordinated debentures to be issued by USABancShares) that rank pari
passu with or junior in right of payment to the Junior Subordinated Debentures;
or (iii) make any guarantee payments with respect to any guarantee by
USABancShares of the debt securities of any subsidiary of USABancShares
(including any other guarantees to be issued by USABancShares) if such guarantee
ranks pari passu with or junior in right of payment to the Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, common stock of
USABancShares, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of USABancShares' capital stock or the exchange or conversion
of one class or series of USABancShares' capital stock for another class or
series of USABancShares' capital stock, (e) the purchase of fractional interests
in shares of USABancShares' capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock of USABancShares related to the issuance of
common stock or rights under any of USABancShares' benefit plans for its
directors, officers or employees or any of USABancShares' dividend reinvestment
plans). USABancShares has no current intention to exercise its option to defer
payments of interest on the Junior Subordinated Debentures.
Prior to the termination of any such Extension Period, USABancShares
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods, end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due, USABancShares may elect to begin a new Extension Period,
subject to the requirements set forth herein. No interest shall be due and
payable during an Extension Period, except at the end thereof. USABancShares
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of any Extension Period (or an extension thereof)
at least five Business Days prior to the earlier of: (i) the date the
distributions on the Trust Securities would have been payable except for the
election to begin or extend such Extension Period; or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or to holders of Capital Securities of the record date or the date such
distributions are payable, but in any event not less than five Business Days
prior to such record date. The Debenture Trustee shall give notice of
USABancShares' election to begin or extend a new Extension Period to the holders
of the Capital Securities. There is no limitation on the number of times that
USABancShares may elect to begin an Extension Period.
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Optional Prepayment
The Junior Subordinated Debentures will be prepayable, in whole or in
part, at the option of USABancShares on or after the Initial Optional Redemption
Date, subject to USABancShares having received any required regulatory approval,
at a price (the "Optional Prepayment Price") equal to the percentage of the
outstanding principal amount of the Junior Subordinated Debentures specified
below, plus, in each case, accrued and unpaid interest thereon to the date of
prepayment if prepaid during the 12-month period beginning March 15 of the years
indicated below:
Year Percentage
- ------- ------------
2009............................................................. 104.750%
2010 ............................................................ 104.275%
2011 ............................................................ 103.800%
2012 ............................................................ 103.325%
2013 ............................................................ 102.850%
2014 ............................................................ 102.375%
2015 ............................................................ 101.900%
2016 ............................................................ 101.425%
2017 ............................................................ 100.950%
2018 ............................................................ 100.475%
2019 and thereafter ............................................. 100.000%
Special Event Prepayment
Prior to the Initial Optional Redemption Date, if a Special Event has
occurred and is continuing, USABancShares may, at its option and subject to
receipt of any required regulatory approval, prepay the Junior Subordinated
Debentures, in whole but not in part, at any time within 60 days of the
occurrence of such Special Event, at a prepayment price (the "Special Event
Prepayment Price") equal to the Make-Whole Amount. The "Make-Whole Amount" shall
be an amount equal to the greater of (x) 100% of the principal amount of the
Junior Subordinated Debentures or (y) the sum, as determined by a Quotation
Agent, of the present values of the remaining scheduled payments of principal
and interest on the Junior Subordinated Debentures from the prepayment date to
the Stated Maturity Date, discounted to the prepayment date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined below), plus, in the case of each of clauses
(x) and (y), accrued and unpaid interest thereon, if any, to the date of
prepayment. If, following the occurrence of a Special Event, USABancShares
exercises its option to prepay the Junior Subordinated Debentures, then the
proceeds of that prepayment must be applied to redeem a Like Amount of Trust
Securities at the Special Event Redemption Price. See "Description of Exchange
Securities--Description of Capital Securities--Redemption."
A "Special Event" means an Investment Company Event, a Regulatory
Capital Event or a Tax Event, as the case may be.
An "Investment Company Event" means the receipt by USABancShares and
USA Capital Trust I of an opinion of independent securities counsel experienced
in such matters to the effect that as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws or any
regulation thereunder of the United States or any rules, guidelines or policies
of any applicable regulatory authority for USABancShares or (b) any official
administrative 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 original issuance of the Trust
Securities, USA Capital Trust I is, or within 90 days of the date of such
opinion will be, considered an Investment Company that is required to be
registered under the Investment Company Act.
A "Regulatory Capital Event" means the receipt by USABancShares and USA
Capital Trust I of an opinion of independent bank regulatory counsel experienced
in such matters to the effect that, as a result of (i) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any rules, guidelines or
policies of an applicable regulatory agency for USABancShares or
BankPhiladelphia or (ii) 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 original issuance of the Trust Securities, the Capital Securities do
not constitute, or within 90 days of such opinion will not constitute, Tier 1
Capital (or its then equivalent) for purposes of the capital adequacy guidelines
of the Board of Governors of the Federal Reserve System (or any successor
regulatory authority with jurisdiction over bank holding companies), or any
capital adequacy guidelines as then in effect and applicable to USABancShares;
provided, however, that the distribution of the
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Junior Subordinated Debentures in connection with the liquidation of USA Capital
Trust I by USABancShares shall not in and of itself constitute a Regulatory
Capital Event, unless such liquidation shall have occurred in connection with a
Tax Event.
A "Tax Event" means the receipt by USABancShares and USA Capital Trust
I of an opinion of independent tax 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 original issuance of the Trust Securities, there is more than an
insubstantial risk that: (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures; (ii) the
interest payable by USABancShares on the Junior Subordinated Debentures is not,
or within 90 days of the date of such opinion will not be, deductible by
USABancShares, in whole or in part, for United States federal income tax
purposes; or (iii) the Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Adjusted Treasury Rate" means, with respect to a prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication which
is published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Remaining Life, as defined below (if no
maturity is within three months before or three months after the maturity
corresponding to the Remaining Life, yields for the two published maturities
most closely corresponding to the Remaining Life shall be determined, and the
Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month), or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity to the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date, plus 325 basis points.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life of the Junior Subordinated Debentures that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after the Remaining Life, the
two most closely corresponding United States Treasury securities, as selected by
the Quotation Agent, shall be used as the Comparable Treasury Issue, and the
Adjusted Treasury Rate shall be interpolated or extrapolated on a straight-line
basis, rounding to the nearest month, using such securities.
"Comparable Treasury Price" means, with respect to a prepayment date:
(i) the average of three Reference Treasury Dealer Quotations for such
prepayment date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (ii) if the Debenture Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by
USABancShares. "Reference Treasury Dealer" means a nationally recognized U.S.
Government securities dealer in New York, New York selected by USABancShares.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York time, on the third Business Day preceding such prepayment date.
"Remaining Life" means the term of the Junior Subordinated Debentures
from the prepayment date to the Stated Maturity Date.
Notice of any prepayment will be mailed at least 30 days but not more
than 60 days before the prepayment date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless USABancShares
defaults in payment of the prepayment price, on the prepayment date interest
shall cease to accrue on such Junior Subordinated Debentures called for
prepayment.
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If USA Capital Trust I is required to pay any additional taxes, duties
or other governmental charges as a result of a Tax Event, USABancShares will pay
as additional amounts on the Junior Subordinated Debentures such amounts as may
be necessary in order that the amount of distributions then due and payable by
USA Capital Trust I on the outstanding Trust Securities shall not be reduced as
a result of any additional taxes, duties or other governmental charges to which
USA Capital Trust I has become subject as a result of a Tax Event ("Additional
Sums").
Certain Covenants of USABancShares
USABancShares has also covenanted that it will not: (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of USABancShares' capital stock; (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of USABancShares (including any other
junior subordinated debentures to be issued by USABancShares) that rank pari
passu with or junior in right of payment to the Junior Subordinated Debentures;
or (iii) make any guarantee payments with respect to any guarantee by
USABancShares of the debt securities of any subsidiary of USABancShares
(including any other guarantees to be issued by USABancShares) if such guarantee
ranks pari passu with or junior in right of payment to the Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, common stock of
USABancShares, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of USABancShares' capital stock or the exchange or conversion
of one class or series of USABancShares' capital stock for another class or
series of USABancShares' capital stock, (e) the purchase of fractional interests
in shares of USABancShares' capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock of USABancShares related to the issuance of
common stock or rights under any of USABancShares' benefit plans for its
directors, officers or employees or any of USABancShares' dividend reinvestment
plans), if at such time: (A) there shall have occurred any event of which
USABancShares has actual knowledge that (1) is, or with the giving of notice or
the lapse of time, or both, would be, a Debenture Event of Default and (2) in
respect of which USABancShares shall not have taken reasonable steps to cure;
(B) USABancShares shall be in default with respect to its payment of any
obligations under the Guarantee; or (C) USABancShares shall have given notice of
its election to exercise its right to commence an Extension Period as provided
in the Indenture and such Extension Period, or any extension thereof, shall have
commenced and be continuing.
So long as the Trust Securities remain outstanding, USABancShares has
also covenanted: (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities, provided, however, that any permitted
successor of USABancShares under the Indenture may succeed to USABancShares'
ownership of such Common Securities; (ii) to use commercially reasonable efforts
to cause USA Capital Trust I (a) to remain a business trust, except in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities in liquidation of the Trust, the redemption of all
of the Trust Securities, or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement, and (b) to otherwise continue to be
classified as a grantor trust and not an association taxable as a corporation
for United States federal income tax purposes; (iii) to use commercially
reasonable efforts to cause each holder of Trust Securities to be treated as
owning an undivided beneficial interest in the Junior Subordinated Debentures;
and (iv) to not cause, as sponsor of the Trust, or permit, as holder of the
Common Securities, the dissolution, winding up or liquidation of the Trust,
except as provided in the Trust Agreement.
Modification of Indenture
From time to time USABancShares and the Debenture Trustee may, without
the consent of the holders of Junior Subordinated Debentures, amend the
Indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, provided that any such action does not
materially adversely affect the interest of the holders of Junior Subordinated
Debentures, and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act. The Indenture contains provisions permitting
USABancShares and the Debenture Trustee, with the consent of the holders of a
majority in aggregate principal amount of Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected, (i) change the Stated Maturity Date, or reduce the principal amount of
the Junior Subordinated Debentures or reduce the amount payable on prepayment
thereof or reduce the rate or extend the time of payment of interest thereon
except pursuant to USABancShares' right under the Indenture to defer the payment
of interest as provided therein (see "--Option to Extend Interest Payment Date")
or make the principal of, or interest or premium on, the Junior Subordinated
Debentures payable in any coin or currency other than that provided in the
Junior Subordinated Debentures, or impair or affect the right of any holder of
Junior Subordinated Debentures to institute suit for the payment thereof, or
(ii) reduce the percentage of principal amount of Junior Subordinated
Debentures, the holders of which are required to consent to any such
modification of the Indenture.
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Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) failure for 30 days to pay any interest (including
compounded interest and Additional Sums, if any) or Liquidated Damages,
if any, on the Junior Subordinated Debentures or all other junior
subordinated debentures to be issued by USABancShares when due (subject
to the deferral of any due date in the case of an Extension Period with
respect to the Junior Subordinated Debentures or all other junior
subordinated debentures to be issued by USABancShares as the case may
be); or
(ii) failure to pay any principal or premium, if any, on the
Junior Subordinated Debentures or all other junior subordinated
debentures to be issued by USABancShares when due whether at maturity,
upon prepayment, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform any other covenant
contained in the Indenture for 90 days after written notice to
USABancShares from the Debenture Trustee or to USABancShares and the
Debenture Trustee from the holders of at least 25% in aggregate
outstanding principal amount of Junior Subordinated Debentures; or
(iv) certain events related to bankruptcy, insolvency or
reorganization of USABancShares.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures have, subject to certain exceptions, 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 Junior
Subordinated Debentures may declare the principal due and payable immediately
upon a Debenture Event of Default. The holders of a majority in aggregate
outstanding principal amount of the Junior Subordinated Debentures may annul
such declaration and waive the default if the default (other than the
non-payment of the principal of the Junior Subordinated Debentures which has
become due solely by such acceleration) has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal (or premium, if any) or interest
(including Additional Sums and compounded interest, if any) (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
(and premium, if any) and principal due otherwise than by acceleration has been
deposited with the Debenture Trustee) or a default in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Junior Subordinated Debenture.
The Indenture requires the annual filing by USABancShares with the
Debenture Trustee of a certificate as to the absence of certain defaults under
the Indenture.
The Indenture provides that the Debenture Trustee may withhold notice
of a Debenture Event of Default from the holders of the Junior Subordinated
Debentures if the Debenture Trustee considers it in the interest of such holders
to do so.
Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default shall have occurred and be continuing
and shall be attributable to the failure of USABancShares to pay the principal
of (or premium, if any), or interest (including Additional Sums and compounded
interest, if any) or Liquidated Damages, if any, on the Junior Subordinated
Debentures on the due date, a holder of Capital Securities may, to the extent
permitted by applicable law, institute a direct action. USABancShares 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 Capital
Securities. Notwithstanding any payments made to a holder of Capital Securities
by USABancShares in connection with a direct action, USABancShares shall remain
obligated to pay the principal of (or premium, if any) or interest (including
Additional Sums and compounded interest, if any) or Liquidated Damages, if any,
on the Junior Subordinated Debentures, and USABancShares shall be subrogated to
the rights of the holder of such Capital Securities with respect to payments on
the Capital Securities to the extent of any payments made by USABancShares to
such holder in any direct action.
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The holders of the Capital 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 Junior Subordinated Debentures, unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of Exchange Securities--Description of Capital Securities--Events of Default;
Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that USABancShares shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties as an
entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into USABancShares or convey, transfer or lease its
properties as an entirety or substantially as an entirety to USABancShares,
unless: (i) in case USABancShares consolidates with or merges into another
Person or conveys or transfers its properties as an entirety or 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 USABancShares' obligations under the Indenture with
respect to the Junior Subordinated Debentures; (ii) immediately after giving
effect thereto, no Debenture Event of Default, and no event which, after notice
or lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as prescribed in
the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving USABancShares that may adversely affect holders of
the Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at maturity or called for prepayment within one year, and USABancShares deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal (and premium, if any) and interest
(including Additional Sums and compounded interest, if any) to the date of the
prepayment or to the Stated Maturity Date, as the case may be, then the
Indenture will cease to be of further effect (except as to USABancShares'
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and
USABancShares will be deemed to have satisfied and discharged the Indenture.
Subordination
In the Indenture, USABancShares has covenanted and agreed that any
Junior Subordinated Debentures issued thereunder will be subordinate and junior
in right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of USABancShares, all Senior Indebtedness must be paid in
full before the holders of Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect thereof, including any payment from the
reserve account.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of such
Senior Indebtedness before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of the Junior Subordinated
Debentures.
No payments on account of principal (or premium, if any) or interest
(including Additional Sums and compounded interest, if any) in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Indebtedness, or an
event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Indebtedness" shall mean: (i) every obligation of USABancShares for
money borrowed; (ii) every obligation of USABancShares 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 USABancShares with respect to letters of
credit, banker's acceptances or similar facilities issued for the account of
USABancShares; (iv) every obligation of USABancShares issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of USABancShares; (vi) all indebtedness of
USABancShares whether incurred on or prior to the date of the
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Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all dividends
of another Person the payment of which, in either case, USABancShares has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.
"Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures" shall mean (i) Indebtedness, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, to the
extent such Indebtedness by its terms ranks equally with and not prior to the
Junior Subordinated Debentures in the right of payment upon the happening of the
dissolution, winding-up, liquidation or reorganization of USABancShares and (ii)
all other debt securities, and guarantees in respect of those debt securities,
issued to any trust other than the Trust, or a trustee of such trust,
partnership or other entity affiliated with USABancShares that is a financing
vehicle of USABancShares (a "financing entity") in connection with the issuance
by such financing entity of equity securities or other securities guaranteed by
USABancShares pursuant to an instrument that ranks pari passu with or junior in
right of payment to the Guarantee. The securing of any Indebtedness, otherwise
constituting Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures, shall not be deemed to prevent such Indebtedness from constituting
Indebtedness Ranking on a Parity with the Junior Subordinated Debentures.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures"
shall mean any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, to the extent such
Indebtedness by its terms ranks junior to and not equally with or prior to the
Junior Subordinated Debentures (and any other Indebtedness Ranking on a Parity
with the Junior Subordinated Debentures) in right of payment upon the happening
of the dissolution, winding-up, liquidation or reorganization of USABancShares.
The securing of any Indebtedness, otherwise constituting Indebtedness Ranking
Junior to the Junior Subordinated Debentures, shall not be deemed to prevent
such Indebtedness from constituting Indebtedness Ranking Junior to the Junior
Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding
on the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated Debentures,
and any deferrals, renewals or extensions of such Senior Indebtedness.
USABancShares is a bank holding company and almost all of the operating
assets of USABancShares are owned by BankPhiladelphia and USACapital.
USABancShares relies primarily on dividends from BankPhiladelphia to meet its
obligations for payment of principal and interest on its outstanding debt
obligations and corporate expenses. USABancShares is a legal entity separate and
distinct from BankPhiladelphia. Holders of Junior Subordinated Debentures should
look only to USABancShares for payments on the Junior Subordinated Debentures.
There are regulatory limitations on the payment of dividends directly or
indirectly to USABancShares from its subsidiaries. See "--General." In addition,
BankPhiladelphia is subject to certain restrictions imposed by federal law on
any extensions of credit to, and certain other transactions with, USABancShares
and certain other affiliates, and on investments in stock or other securities
thereof. Such restrictions prevent USABancShares and such other affiliates from
borrowing from BankPhiladelphia unless the loans are secured by various types of
collateral. Further, such secured loans, other transactions and investments by
BankPhiladelphia are generally limited in amount as to USABancShares and as to
each of such other affiliates to 10% of BankPhiladelphia's capital and surplus
and as to USABancShares and all of such other affiliates to an aggregate of 20%
of BankPhiladelphia's capital and surplus. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of USABancShares' subsidiaries.
Because USABancShares is a bank holding company, the right of
USABancShares to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary
(including depositors, in the case of BankPhiladelphia), except to the extent
USABancShares may itself be recognized as a creditor of that subsidiary. At
December 31, 1998, BankPhiladelphia had total liabilities (excluding liabilities
owed to USABancShares) of $203,000. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of USABancShares' subsidiary (including BankPhiladelphia's deposit
liabilities) and all liabilities of any future subsidiaries of USABancShares.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of USABancShares or any subsidiary, including Senior
Indebtedness.
Restrictions on Transfer
The Junior Subordinated Debentures will be issued and may be
transferred only in blocks having an aggregate principal amount of not less than
$100,000 (100 Junior Subordinated Debentures) and multiples of $1,000 in excess
thereof. Any attempted transfer of Junior Subordinated Debentures in a block
having an aggregate principal amount of less than $100,000 shall be deemed to be
void and of no legal effect whatsoever. Any such purported transferee shall be
deemed not to be the holder of such Junior Subordinated Debentures for any
purpose, including but not limited to the receipt of payments
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on such Junior Subordinated Debentures, and such purported transferee shall be
deemed to have no interest whatsoever in such Junior Subordinated Debentures.
Governing Law
The Indenture and the Junior Subordinated Debentures are governed by
and will be construed in accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee
Following the exchange offer and the qualification of the Indenture
under the Trust Indenture Act, the Debenture Trustee shall have and be subject
to all the duties and responsibilities specified with respect to an indenture
trustee under the Trust Indenture Act. Subject to such provisions, the 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 Junior 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 under the Indenture.
Description of Guarantee
The Guarantee was executed and delivered by USABancShares concurrently
with the issuance by USA Capital Trust I of the Capital Securities for the
benefit of the holders from time to time of the Capital Securities. Wilmington
Trust Company will act as Guarantee Trustee under the Guarantee. The Guarantee
will be qualified under the Trust Indenture Act upon effectiveness of the
exchange offer Registration Statement. This summary of certain provisions of the
Guarantee does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Guarantee, including
the definitions therein of certain terms, and the Trust Indenture Act. The
Guarantee Trustee holds the Guarantee for the benefit of the holders of the
Capital Securities.
General
USABancShares has irrevocably agreed to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that USA Capital Trust I may have or
assert other than the defense of payment. The following payments with respect to
the Capital Securities, to the extent not paid by or on behalf of USA Capital
Trust I (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid distributions required to be paid on the Capital
Securities, to the extent that USA Capital Trust I has funds on hand legally
available therefor at such time; (ii) the applicable Redemption Price with
respect to the Capital Securities called for redemption, to the extent that USA
Capital Trust I has funds on hand legally available therefor at such time; and
(iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of
USA Capital Trust I (other than in connection with the distribution of the
Junior Subordinated Debentures to holders of the Capital Securities or the
redemption of all Capital Securities), the lesser of (a) the Liquidation
Distribution, to the extent USA Capital Trust I has funds legally available
therefor at the time, and (b) the amount of assets of USA Capital Trust I
remaining available for distribution to holders of Capital Securities after
satisfaction of liabilities to creditors of USA Capital Trust I as required by
applicable law. USABancShares' obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by USABancShares to the
holders of the Capital Securities or by causing USA Capital Trust I to pay such
amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis
of the Trust's obligations under the Capital Securities, but will apply only to
the extent that USA Capital Trust I has funds sufficient to make such payments.
If USABancShares does not make interest payments on the Junior Subordinated
Debentures held by the Trust, USA Capital Trust I will not be able to pay the
distributions on the Capital Securities and will not have funds legally
available therefor. See "Relationship Among the Capital Securities, the Junior
Subordinated Debentures and the Guarantee."
The Guarantee ranks subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided therein. See "--Status of the
Guarantee." Because USABancShares is a holding company, the right of
USABancShares to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise is subject to
the prior claims of creditors of that subsidiary, except to the extent
USABancShares may itself be recognized as a creditor of that subsidiary.
Accordingly, USABancShares' obligations under the Guarantee effectively are
subordinated to all existing and future liabilities of USABancShares'
subsidiaries, including BankPhiladelphia's deposit liabilities, and all
liabilities of any future subsidiaries of USABancShares. Claimants should look
only to the assets of USABancShares for payments under the Guarantee. See
"Description of Exchange Securities--Description of the Junior Subordinated
Debentures--General." The Guarantee does not limit the incurrence or issuance of
other secured or unsecured debt of
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USABancShares, including Senior Indebtedness, whether under the Indenture, any
other indenture that USABancShares may enter into in the future or otherwise.
USABancShares has, through the Guarantee, the Trust Agreement, the
Junior Subordinated Debentures and the Indenture, taken together, fully,
irrevocably and unconditionally guaranteed all of the Trust's obligations under
the Capital 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
Trust's obligations under the Capital Securities. See "Relationship Among the
Capital Securities, the Junior Subordinated Debentures and the Guarantee."
Status of the Guarantee
The Guarantee constitutes an unsecured obligation of USABancShares and
ranks subordinate and junior in right of payment to all Senior Indebtedness in
the same manner as the Junior Subordinated Debentures. See "Description of
Exchange Securities--Description of Junior Subordinated
Debentures--Subordination." In addition, because USABancShares is a holding
company, the right of USABancShares to participate in any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of such subsidiary
(including depositors of BankPhiladelphia), except to the extent USABancShares
may itself be recognized as a creditor of such subsidiary. Accordingly,
USABancShares' obligations under the Guarantee effectively are subordinated to
all existing and future liabilities of USABancShares' present and future
subsidiaries (including the depositors of BankPhiladelphia). As a result,
claimants should look only to the assets of USABancShares for payments under the
Guarantee. See "Description of Exchange Securities--Description of Junior
Subordinated Debentures--General." The Guarantee ranks pari passu with all other
Guarantees issued by USABancShares with respect to preferred beneficial
interests (if any) issued by other trusts to be established by USABancShares
similar to the Trust.
The Guarantee does not limit the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by USABancShares or any of
its subsidiaries. USABancShares expects from time to time that it will incur
additional indebtedness and that its subsidiaries will also incur additional
liabilities.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against USABancShares to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee is held for the benefit of the holders of the Capital Securities. The
Guarantee will not be discharged, except by payment of the Guarantee Payments in
full to the extent not paid by USA Capital Trust I or upon distribution to the
holders of the Capital Securities of the Junior Subordinated Debentures.
Events of Default
An event of default under the Guarantee will occur upon the failure of
USABancShares to perform any of its payment or other obligations thereunder;
provided, however, that except with respect to a default in payment of any
Guarantee Payment, USABancShares shall have received notice of default and shall
not have cured such default within 60 days after receipt of such notice. The
holders of not less than a majority in liquidation amount of the Capital
Securities will 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 the Capital Securities may institute a legal proceeding
directly against USABancShares to enforce its rights to payment of principal and
interest under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity.
USABancShares, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not USABancShares is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Capital Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of a majority of the liquidation amount of such outstanding
Capital Securities. The manner of obtaining any such approval will be as set
forth under "Description of Exchange Securities--Description of Capital
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees and
agreements contained in the Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of USABancShares and shall
inure to the benefit of the holders of the Capital Securities then outstanding.
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Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the applicable Redemption Price of all outstanding Capital
Securities, upon full payment of the liquidation amount payable upon liquidation
of USA Capital Trust I or upon distribution of Junior Subordinated Debentures to
the holders of the Capital 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 Capital Securities must restore payment of any sums paid under the
Capital Securities or the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by USABancShares in performance of the Guarantee, will undertake to
perform only such duties as are specifically set forth in the Guarantee and, in
case a default with respect to the Guarantee has occurred, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee will be under no obligation to exercise any of the powers vested in it
by the Guarantee at the request of any holder of the Capital Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
Governing Law
The Guarantee is governed by and will be construed in accordance with
the laws of the State of New York.
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DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all material
respects to the terms of the Exchange Securities, except that (i) the Original
Securities have not been registered under the Securities Act, are subject to
restrictions on transfer under federal and state securities laws and are
entitled to certain rights under the Registration Rights Agreement (which rights
will terminate upon consummation of the exchange offer), (ii) the Exchange
Capital Securities will not provide for any increase in the distribution rate
thereon and (iii) the Exchange Junior Subordinated Debentures will not provide
for any increase in the interest rate thereon. The Original Securities provide
that, in the event that a registration statement relating to the exchange offer
has not been filed by August 6, 1999 and declared effective by September 6,
1999, or, in certain limited circumstances, in the event a shelf registration
statement with respect to the resale of the Original Capital Securities is not
declared effective by September 6, 1999, then interest will accrue (in addition
to the stated interest rate on the Original Junior Subordinated Debentures) at
the rate of 0.25% per annum on the principal amount of the Original Junior
Subordinated Debentures and distributions will accrue (in addition to the stated
distribution rate on the Original Capital Securities) at the rate of 0.25% per
annum on the liquidation amount of the Original Capital Securities, for the
period from the occurrence of such event until such time as such required
exchange offer is consummated or any required shelf registration statement is
effective. The Exchange Securities are not, and upon consummation of the
exchange offer the Original Securities will not be, entitled to any such
additional interest or distributions. Accordingly, holders of Original Capital
Securities should review the information set forth under "Risk Factors--Risks
Related to the Capital Securities and the Junior Subordinated
Debentures--Consequences of a Failure to Exchange Original Capital Securities"
and "Description of Exchange Securities."
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of distributions and other amounts due on the Capital
Securities (to the extent USA Capital Trust I has funds on hand legally
available for the payment of such distributions) are irrevocably guaranteed by
USABancShares as and to the extent set forth under "Description of Exchange
Securities--Description of Guarantee." Taken together, USABancShares'
obligations under the Junior Subordinated Debentures, the Indenture, the Trust
Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the Capital 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
Trust's obligations under the Capital Securities. If and to the extent that
USABancShares does not make the required payments on the Junior Subordinated
Debentures, USA Capital Trust I will not have sufficient funds to make the
related payments, including distributions, on the Capital Securities. The
Guarantee does not cover any such payment when USA Capital Trust I does not have
sufficient funds on hand legally available therefor. In such event, the remedy
of a holder of Capital Securities is to institute a direct action. The
obligations of USABancShares under the Guarantee are subordinate and junior in
right of payment to all Senior Indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Capital Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the Junior
Subordinated Debentures is equal to the sum of the liquidation amount or
Redemption Price, as applicable, of the Trust Securities, (ii) the interest rate
and interest and other payment dates on the Junior Subordinated Debentures match
the distribution rate and Distribution and other payment dates for the Trust
Securities; (iii) USABancShares, as Sponsor, shall pay for all and any costs,
expenses and liabilities of USA Capital Trust I except USA Capital Trust I's
obligations to holders of Trust Securities under such Trust Securities; and (iv)
the Trust Agreement provides that USA Capital Trust I is not authorized to
engage in any activity that is not consistent with the limited purposes thereof.
Enforcement Rights of Holders of Capital Securities
A holder of any Capital Security may institute a legal proceeding
directly against USABancShares to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, USA Capital
Trust I or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or an Event of Default under the Trust Agreement. However,
in the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived.
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Failure to make required payments on Junior Subordinated Debentures would
constitute an Event of Default under the Trust Agreement.
Limited Purpose of the Trust
The Trust exists for the sole purpose of issuing and selling the Trust
Securities, using the proceeds from the sale of the Trust Securities to acquire
the Junior Subordinated Debentures and engaging in only those other activities
necessary, advisable or incidental thereto. The Capital Securities represent
beneficial ownership interests in the Trust. A principal difference between the
rights of a holder of Capital Securities and a holder of Junior Subordinated
Debentures is that a holder of Junior Subordinated Debentures is entitled to
receive from USABancShares the principal amount of (and premium, if any) and
interest on Junior Subordinated Debentures held, while a holder of Capital
Securities is entitled to receive distributions from USA Capital Trust I (or, in
certain circumstances, from USABancShares under the Guarantee) if and to the
extent USA Capital Trust I has funds on hand legally available for the payment
of such distributions.
Rights Upon Termination
Unless the Junior Subordinated Debentures are distributed to holders of
the Trust Securities, upon any voluntary or involuntary termination, winding-up
or liquidation of the Trust, after satisfaction of the liabilities of creditors
of USA Capital Trust I as required by applicable law, the holders of the Trust
Securities will be entitled to receive, out of assets held by the Trust, the
Liquidation Distribution in cash. See "Description of Exchange
Securities--Description of Capital Securities--Liquidation of USA Capital Trust
I and Distribution of Junior Subordinated Debentures." Upon any voluntary or
involuntary liquidation or bankruptcy of USABancShares, the Property Trustee, as
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of USABancShares, subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of principal
(and premium, if any) and interest, before any stockholders of USABancShares
receive payments or distributions. Since USABancShares is the guarantor under
the Guarantee and has agreed to pay for all costs, expenses and liabilities of
USA Capital Trust I (other than the Trust's obligations to the holders of its
Trust Securities), the positions of a holder of Capital Securities and a holder
of Junior Subordinated Debentures relative to other creditors and to
stockholders of USABancShares in the event of liquidation or bankruptcy of
USABancShares are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a summary of certain of the material United States
federal income tax consequences of the purchase, ownership and disposition of
Capital Securities held as capital assets by a holder who purchases such Capital
Securities upon initial issuance. The statements of law and legal conclusions
set forth in the summary regarding the tax consequences to the beneficial owners
of Capital Securities represent the opinion of Klehr, Harrison, Harvey,
Branzburg & Ellers LLP, special federal income tax counsel to USABancShares and
USA Capital Trust I ("Special Tax Counsel"). This summary and the tax opinion of
Special Tax Counsel only address the tax consequences to a person that acquires
Capital Securities on their original issue at their original offering price. The
summary does not address all tax consequences that may be applicable to
beneficial owners of the Capital Securities and does address the tax
consequences to special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, Non-U.S. Holders (as defined
below) engaged in a U.S. trade or business or persons that hold the Capital
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. This summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of Capital 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 Capital
Securities. This summary is based on the Internal Revenue Code of 1986 (the
"Code"), the Treasury regulations promulgated thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis. The authorities on which
this summary is based are subject to various interpretations and the opinions of
Special Tax Counsel are not binding on the IRS or the courts, either of which
could take a contrary position. Moreover, no rulings are expected to be sought
from the IRS with respect to the transactions described herein. Accordingly,
there can be no assurance that the IRS will not challenge the opinions expressed
herein or that a court would not sustain such a challenge.
Exchange of Capital Securities
The exchange of Original Capital Securities for Exchange Capital
Securities should not be a taxable event to holders for United States federal
income tax purposes. The exchange of Original Capital Securities for Exchange
Capital Securities pursuant to the exchange offer should not be treated as an
"exchange" for United States federal income tax
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purposes because the Exchange Capital Securities should not be considered to
differ materially in kind or extent from the Original Capital Securities and
because the exchange will occur by operation of the terms of the Original
Capital Securities. If, however, the exchange of the Original Capital Securities
for the Exchange Capital Securities were treated as an exchange for United
States federal income tax purposes, such exchange should constitute a
recapitalization for federal income tax purposes. Accordingly, the Exchange
Capital Securities should have the same issue price as the Original Capital
Securities, and a holder should have the same adjusted tax basis and holding
period in the Exchange Capital Securities as the holder had in the Original
Capital Securities immediately before the exchange.
Classification of the Junior Subordinated Debentures
USABancShares has taken the position that the Junior Subordinated
Debentures should be classified for United States federal income tax purposes as
indebtedness of USABancShares. USABancShares, USA Capital Trust I and the
holders of the Capital Securities (by acceptance of a beneficial interest in a
Capital Security) have agreed to treat the Junior Subordinated Debentures as
indebtedness of USABancShares for all United States federal income tax purposes.
No assurance can be given, however, that such position will not be challenged by
the IRS or, if challenged, that such a challenge will not be successful. The
remainder of this discussion assumes that the Junior Subordinated Debentures
will be classified as indebtedness of USABancShares for United States federal
income tax purposes.
Classification of the Trust
In connection with the issuance of the Original Capital
Securities, Special Tax Counsel rendered an opinion generally to the effect
that, under then current law and assuming full compliance with the terms of the
Trust Agreement and the Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, USA Capital Trust I
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 Capital Securities
generally will be considered the owner of an undivided beneficial interest in
the Junior Subordinated Debentures, and thus, each holder is required to include
in its gross income its pro rata share of interest income or original issue
discount that is paid or accrued on the Junior Subordinated Debentures.
Original Issue Discount and Interest Income
Under the Indenture, so long as no Event of Default exists and no funds
are on deposit in the reserve account, USABancShares has the right to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time, for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period shall end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. Under federal income tax regulations, all interest payable on the Junior
Subordinated Debentures will be treated as original issue discount ("OID"),
unless the Indenture or Junior Subordinated Debentures contain terms or
conditions that make the exercise of the deferral option remote. Although in
recent years, USABancShares has paid stock dividends on its common stock, it has
not paid cash dividends and it does not have a policy of continuing to pay
dividends on its common stock. Accordingly, the covenant in the Indenture
prohibiting USABancShares from paying cash dividends during an Extension Period
does not provide an effective deterrent to USABancShares' exercise of the
deferral option. In addition, USABancShares is not prohibited from exercising
its deferral option after the reserve account is exhausted. As a result, Special
Tax Counsel is unable to conclude that the Indenture or the Junior Subordinated
Debentures contain terms or conditions that make the exercise of the deferral
option remote. Accordingly, a holder will recognize income (in the form of OID)
on a daily basis under a constant yield method over the term of the Junior
Subordinated Debentures (including during any Extension Period, during which
USABancShares would not make actual cash payments), regardless of the receipt of
cash with respect to the period to which such income is attributable. Actual
distributions of stated interest would not be includable in income. (Subsequent
use of the term "interest" shall include income in the form of OID). The amount
of OID that accrues in any semi-annual period (other than an Extension Period)
will equal approximately the amount of the interest that accrues on the Junior
Subordinated Debentures in that semi-annual period at the stated interest rate.
One of the potential consequences of including in income OID on the Junior
Subordinated Debentures is that, if the interest payment period is extended,
holders will include OID in gross income in advance of the receipt of cash, and
any holders who dispose of the Capital Securities prior to the record date for
the payment of distributions following such Extension Period will have included
the OID in gross income, but will not have received any cash related thereto
from USABancShares and the amount the holder received on such disposition may or
may not appropriately reflect the amount of accrued OID. See "-- Sales of
Capital Securities.".
Because income on the Capital Securities will constitute OID, corporate
holders of the Capital Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Capital
Securities.
90
<PAGE>
Distribution of Junior Subordinated Debentures or Cash upon Liquidation of the
Trust
USABancShares has the right at any time to liquidate USA Capital Trust
I and cause the Junior Subordinated Debentures to be distributed to the holders
of the Trust Securities. Under current law, such a distribution, for United
States federal income tax purposes, would be nontaxable and would result in the
holder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust, with a holding period
and aggregate tax basis equal to the holding period and aggregate tax basis such
holder had in its Capital Securities before such distribution. If, however, the
liquidation of USA Capital Trust I were to occur because USA Capital Trust I is
subject to United States federal income tax with respect to income accrued or
received on the Junior Subordinated Debentures, the distribution of the Junior
Subordinated Debentures to holders by USA Capital Trust I would be a taxable
event to USA Capital Trust I and each holder, and the holder would recognize
gain or loss as if the holder had exchanged its Capital Securities for the
Junior Subordinated Debentures it received upon liquidation of the Trust. A
holder will include interest in income in respect of the Junior Subordinated
Debentures received from USA Capital Trust I in the manner described above under
"--Original Issue Discount and Interest Income."
Under certain circumstances described herein (see "Description of
Exchange Securities--Description of Capital Securities"), the Junior
Subordinated Debentures may be prepaid for cash and the proceeds of such
prepayment distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Capital Securities,
and a holder could recognize gain or loss as if it sold such redeemed Capital
Securities for cash. See "--Sales of Capital Securities."
Sales of Capital Securities
A holder that sells Capital Securities (including a redemption of the
Capital Securities by USABancShares for cash) will recognize gain or loss equal
to the difference between its adjusted tax basis in the Capital Securities and
the amount realized on the sale of such Capital Securities (other than with
respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax basis
in the Capital Securities generally will be its initial purchase price increased
by OID previously includable in such holder's gross income to the date of
disposition and decreased by payments (if any) received on the Capital
Securities in respect of OID. Such gain or loss generally will be a capital gain
or loss. Capital Securities constituting a capital asset which are acquired by
an individual and held for more than 12 months are accorded a maximum United
States federal capital gains tax rate of 20% (or rate of 10% if the individual
taxpayer is in the 15% tax bracket). In tax years beginning after December 31,
2000, the 20% rate drops to 18% (and the 10% drops to 8%) for capital assets
acquired after December 31, 2000 and held more than five years; however, the
requirement that the capital asset be acquired after December 31, 2000 does not
apply to the 8% rate.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who disposes of his Capital Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid OID on the Junior Subordinated Debentures through the
date of disposition in income as ordinary income, and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include all accrued but unpaid OID) 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.
Non-U.S. Holders
For purposes of this discussion, a "Non-U.S. Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, a corporation or
partnership (except in the case of a partnership to the extent provided in
Regulations) created or organized in or under the laws of the United States or
any political subdivision thereof, or an estate the income of which is
includable in its gross income for federal income tax purposes without regard to
its source; or a trust if, and only if, (i) a court within the United States is
able to exercise primary supervision over the administration of the trust and
(ii) one or more United States trustees have the authority to control all
substantial decisions of the trust.
Under present United States federal income tax laws: (i) payments by
USA Capital Trust I or any of its paying agents to any holder of a Capital
Security who or which is a Non-U.S. Holder will not be subject to United States
federal withholding tax; provided that (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of USABancShares entitled to vote,
(b) the beneficial owner of the Capital Security is not a controlled foreign
corporation that is related to USABancShares through
91
<PAGE>
stock ownership, and (c) either (A) the beneficial owner of the Capital Security
certifies to USA Capital Trust I or its agent, under penalties of perjury, that
it is not a U.S. Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of business (a "Financial Institution"), and
holds the Capital Security in such capacity, certifies to USA Capital Trust I or
its agent, under penalties of perjury, that such statement has been received
from the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes USA Capital Trust I or its agent with a copy
thereof; and (ii) a Non-U.S. Holder of a Capital Security will not be subject to
United States federal withholding tax on any gain realized upon the sale or
other disposition of a Capital Security. Final Treasury Regulations (the
"Withholding Regulations") would provide alternative methods for satisfying the
certification requirements described in clause (i)(c) above. The Withholding
Regulations are to be effective for certain payments made to Non-U.S. Holders
after December 31, 1999.
Information Reporting to Holders
Generally, income on the Capital Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Capital Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided the
required information is provided to the IRS.
The United States federal income tax discussion set forth above is
included for general information only and may not be applicable depending upon a
holder's particular situation. Holders should consult their tax advisors with
respect to the tax consequences to them of the purchase, ownership and
disposition of the Capital 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
Each of USABancShares (the obligor with respect to the Junior
Subordinated Debentures held by the Trust), and its affiliates and the Property
Trustee 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 many Plans that are subject to ERISA and certain employee
benefit-related provisions of the Code. The purchase and/or holding of Capital
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975 of the Code
(including individual retirement arrangements and other plans described in
Section 4975(e)(1) of the Code) and with respect to which USABancShares, the
Property Trustee or any affiliate is a service provider (or otherwise is 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 Capital
Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving banks' collective investment funds), PTCE 90-1 (an exemption for
certain transactions involving insurance company pooled separate accounts), PTCE
95-60 (an exemption for transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exemption for certain transactions determined by an
in-house asset manager). Accordingly, each purchaser of Capital Securities, by
its acceptance thereof, shall be deemed to have represented to USABancShares,
Trust and the Initial Purchaser either (a) that it is not a Plan, a trustee or
other person acting on behalf of a Plan or any other person or entity using the
assets of any Plan to finance such purchase, or (b) that such purchase will not
result in a prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code for which there is no applicable statutory or administrative exemption.
In addition, a Plan fiduciary considering the purchase of Capital Securities
should be aware that the assets of USA Capital Trust I may be considered "plan
assets" for ERISA purposes. In such event, any persons exercising discretion
with respect to the Junior Subordinated Debentures may become fiduciaries
parties in interest or disqualified persons with respect to investing Plans.
Accordingly, each investing Plan, by purchasing the Capital Securities, will be
deemed to have directed USA Capital Trust I to invest in the Junior Subordinated
Debentures and to have consented to the appointment of the Property Trustee. In
this regard, it should be noted that, in an Event of Default, USABancShares may
not remove the Property Trustee without the approval of a majority of the
holders of the Capital Securities.
A Plan fiduciary should consider whether the purchase of Capital
Securities could result in a delegation of fiduciary authority to the Property
Trustee, and, if so, whether such a delegation of authority is consistent with
the terms of the Plan's governing instrument or any investment management
agreement with the Plan. Further, prior to an Event of Default with respect to
the Junior Subordinated Debentures, the Property Trustee will have only limited
custodial and ministerial authority with respect to Trust assets.
92
<PAGE>
The sale of investments to Plans is in no respect a representation by
the Trust, USABancShares, the Property Trustee, the Initial Purchaser or any
other person associated with the sale of the Capital Securities that such
securities meet all relevant legal requirements with respect to investments by
Plans generally or any particular Plan, or that such securities are otherwise
appropriate for Plans generally or any particular Plan. Any purchaser proposing
to acquire Capital Securities with assets of any Plan should consult with its
counsel.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its
own account in connection with the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by Participating Broker-Dealers during the period referred to
below in connection with resales of Exchange Capital Securities received in
exchange for Original Capital Securities if such Original Capital Securities
were acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. USABancShares
and USA Capital Trust I have agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of such Exchange Capital Securities for a period
ending 90 days after the expiration date (subject to extension under certain
limited circumstances described herein) or, if earlier, when all such Exchange
Capital Securities have been disposed of by such Participating Broker-Dealer.
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of Exchange Capital Securities received in exchange
for Original Capital Securities pursuant to the exchange offer must notify
USABancShares or the Trust, or cause USABancShares or USA Capital Trust I to be
notified, on or prior to the expiration date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the letter of transmittal or may be delivered to the exchange agent at one of
the addresses set forth herein under "The Exchange Offer--Exchange Agent." See
"The Exchange Offer--Resales of Exchange Capital Securities."
USABancShares or USA Capital Trust I will not receive any cash proceeds
from the issuance of the Exchange Capital Securities offered hereby. Exchange
Capital Securities received by broker-dealers for their own accounts in
connection with the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Capital Securities or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Exchange Capital
Securities.
Any broker-dealer that resells Exchange Capital Securities that were
received by it for its own account in connection with the exchange offer and any
broker or dealer that participates in a distribution of such Exchange Capital
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of Exchange Capital Securities
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
Certain matters of Delaware law relating to the validity of the
Exchange Capital Securities and the creation of USA Capital Trust I will be
passed upon on behalf of USA Capital Trust I by Richards, Layton & Finger,
special Delaware counsel to USA Capital Trust I and USABancShares. The validity
of the Exchange Guarantee and the Exchange Junior Subordinated Debentures will
be passed upon for USABancShares by Klehr, Harrison, Harvey, Branzburg & Ellers
LLP. Certain matters relating to United States federal income tax considerations
will be passed upon for USABancShares by Klehr, Harrison, Harvey, Branzburg &
Ellers LLP.
93
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
USABANCSHARES, INC. and SUBSIDIARIES
December 31, 1998 and 1997
F-1
<PAGE>
C O N T E N T S
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-4
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS) F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
F-2
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors
USABancShares, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
USABancShares, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and comprehensive income (loss) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
USABancShares, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
March 22, 1999
F-3
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
(in thousands
except share
data)
-------------------------
ASSETS 1998 1997
-------- ---------
<S> <C> <C>
Cash and due from banks $ 1,335 $ 833
Interest bearing deposit with banks 7,706 3,975
Investment securities available for sale 28,389 9,035
Investment securities held to maturity (fair market value of $15,951 and
$15,644 in 1998 and 1997, respectively) 15,755 15,419
FHLB Stock 3,523 900
Loans receivable, net 102,138 56,002
Premises and equipment, net 2,023 1,153
Accrued interest receivable 1,633 847
Other real estate 66 -
Goodwill, net 69 80
Deferred income taxes 573 163
Other assets 1,896 919
-------- ---------
Total assets $165,106 $ 89,326
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand $ 1,439 $ 257
Now 846 688
Money Market 2,345 4,802
Savings and Passbook 5,281 2,019
Time 104,476 62,708
-------- ---------
Total deposits 114,387 70,474
Borrowings 35,305 12,638
Accrued interest payable 399 75
Accrued expenses and other liabilities 1,418 773
-------- ---------
Total liabilities 151,509 83,960
-------- ---------
STOCKHOLDERS' EQUITY
Preferred stock $1.00 par value, 5,000,000 shares authorized, no shares issued
and outstanding in 1998 and 1997
Common stock $1.00 par value, 10,000,000 shares authorized, 2,007,392 shares
issued and outstanding in 1998; 813,807 shares issued and outstanding in
1997, and 108,230 shares of converted and unissued Class B common stock in
1998; 81,381 converted and unissued 1997 2,116 814
Additional paid-in capital 10,683 4,828
Accumulated (deficit) earnings 1,112 (378)
Accumulated other comprehensive income (314) 102
-------- ---------
Total stockholders' equity 13,597 5,366
-------- -------
Total liabilities and stockholders' equity $165,106 $ 89,326
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1998 1997
------- -------
(in thousands,
except per share data)
<S> <C> <C>
INTEREST INCOME
Loans $ 9,028 $ 3,090
Investment securities 3,015 1,637
Interest bearing deposits with banks and other 309 152
------- -------
Total interest income 12,352 4,879
------- -------
INTEREST EXPENSE
Deposits 5,266 2,285
Other borrowings 1,188 245
------ -------
Total interest expense 6,454 2,530
------ ------
Net interest income 5,898 2,349
PROVISION FOR POSSIBLE LOAN LOSSES 510 415
------- -------
Net interest income after provision for
possible loan losses 5,388 1,934
------- ------
OTHER INCOME
Service charges on deposit accounts 94 26
Gain on sale of securities 378 127
Brokerage operations 141 102
Other income 146 59
------- ------
Total other income 759 314
------- -------
OTHER EXPENSES
Salaries and employee benefits 1,539 1,345
Net occupancy expense 523 202
Professional fees 275 175
Office expenses 270 120
Data processing fees 199 115
Advertising expense 177 62
Goodwill amortization 10 8
Other operating expenses 707 430
------- ------
Total other expense 3,700 2,457
------ ------
Income (loss) before income tax expense 2,447 (209)
INCOME TAX EXPENSE 957 17
------- -------
Net income (loss) $ 1,490 $ (226)
======= =======
NET INCOME (LOSS) PER SHARE - BASIC (1) $ 0.75 $ (0.21)
======= =======
NET INCOME (LOSS) PER SHARE - DILUTED (1) $ 0.70 $ (0.21)
======= =======
</TABLE>
(1) 1997 per share amounts have been restated to reflect a 33% stock dividend
paid August 17, 1998.
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity and
Comprehensive Income (Loss)
<TABLE>
<CAPTION>
Unearned Accumulated
Additional Accumulated compensation other Total
Common paid-in (deficit) Class B comprehensive stockholders' Comprehensive
stock capital earnings Common Stock income equity income (loss)
------ ---------- ----------- ------------ ------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 597 $ 4,878 $ (152) $(425) $ (2) $ 4,896
Net loss - - (226) - - (226) $ (226)
Other comprehensive income,
net of reclassification adjustments
and taxes - - - - 104 104 104
------
Total comprehensive loss $ (122)
======
Stock issued to acquire Knox Financial 8 67 - - - 75
33% common stock dividend 200 (200) - - - -
Conversion of Class B common stock 9 83 - - - 92
Amortization of unearned compensation
Class B common stock - - - 425 - 425
------ ------- ------ ----- ----- -------
Balance, December 31, 1997 814 4,828 (378) - 102 5,366
Net income - - 1,490 - - 1,490 $1,490
Other comprehensive loss,
net of reclassification adjustments
and taxes - - - - (416) (416) (416)
------
Total comprehensive income $1,074
======
Private placement offering 769 6,341 - - - 7,110
Exercise of stock options 9 38 - - - 47
33% stock dividend 524 (524) - - - -
------ ------- ------ ----- ----- -------
Balance, December 31, 1998 $2,116 $10,683 $1,112 $ - $(314) $13,597
====== ======= ====== ===== ===== =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
------------------------
(In Thousands) 1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,490 $ (226)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities
Provision for possible loan losses 510 415
Depreciation and amortization 219 60
Decrease in goodwill 11 49
Accretion of discounts on purchased loan portfolio (1,306) (691)
(Accretion) amortization of securities (discount) premium, net (9) (5)
Amortization of Class B common stock - 425
Class B common stock conversion - 92
Gain on sale of securities (378) (127)
Increase in accrued interest receivable (786) (540)
Decrease (increase) in deferred tax asset (166) (216)
Increase in other assets (977) (621)
Increase in accrued interest payable 324 56
Increase in accrued expenses and other liabilities 645 565
-------- -------
Net cash used in operating activities (423) (764)
-------- -------
INVESTING ACTIVITIES
Investment securities available for sale
Purchases (29,512) (11,433)
Sales 9,286 4,524
Maturities and principal repayments 1,250 4,218
Investment securities held to maturity
Purchases (8,012) (9,131)
Sales 1,444 2,001
Maturities and principal repayments 5,580 1,959
Purchases of FHLB Stock (2,622) (650)
(Increase) decrease in interest bearing deposits with banks (3,731) 41
Net increase in loans (45,340) (39,196)
Increase in other real estate, net (66) -
Cash of entity acquired - 45
Purchase of premises and equipment (1,089) (1,067)
-------- -------
Net cash used in investing activities (72,812) (48,689)
-------- ------
FINANCING ACTIVITIES
Net increase in deposits 43,913 42,500
Net increase in borrowings 22,667 7,588
Private placement proceeds 7,110 --
Exercise of stock options 47 --
------ ------
Net cash provided by financing activities 73,737 50,088
------ ------
Net increase in cash and cash equivalents 502 635
Cash and cash equivalents, beginning of year 833 198
------- --------
Cash and cash equivalents, end of year $ 1,335 $ 833
======= ========
Supplemental disclosure of cash flow information
Cash paid during the year for
Interest $ 6,137 $ 2,231
======= =======
Income taxes $ 975 $ 237
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE A - ORGANIZATION
USABancShares, Inc. (the Corporation), through its subsidiaries,
BankPhiladelphia (the "Bank"), USACapital, Inc. ("USACapital") and
USACredit, Inc. ("USACredit"), provides a full range of banking and
non-depository services to individual and corporate customers located in the
greater Delaware Valley region.
The Corporation was organized in November 1995 in order to facilitate the
acquisition of People's Thrift Savings Bank, which changed its name to
"BankPhiladelphia" in July 1998.
The Bank is a Pennsylvania chartered stock savings institution which
competes with other banking and financial institutions in its primary market
communities, including financial institutions with resources substantially
greater than its own. Commercial banks, savings banks, savings and loan
associations, and credit unions actively compete for savings and time
deposits and for types of loans. Such institutions, as well as consumer
finance, insurance, and brokerage firms, may be considered competitors of
the Bank with respect to one or more of the services it provides.
The Bank is subject to regulations of certain state and federal agencies
and, accordingly, is periodically examined by those regulatory authorities.
As a consequence of the extensive regulation of commercial banking
activities, the Bank's business is particularly susceptible to being
affected by state and federal legislation and regulations.
USACapital is a broker dealer registered with the Securities and Exchange
Commission (SEC) and the National Association of Securities Dealers (NASD).
USACapital conducts business through its clearing brokers for its
proprietary accounts. USACapital also introduces customer accounts on a
fully disclosed basis to the clearing brokers and earns revenues and incurs
expenses from activities on those accounts. The clearing and depository
operations for USACapital's customer accounts and proprietary accounts are
performed by its clearing brokers pursuant to clearance agreements.
USACredit is a minority owner of a Delaware limited liability company in the
business of purchasing judgements, deficiencies, and claims, and pursuing
collections on such claims.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Financial Statement Presentation
The accounting and reporting policies of the Corporation and its
subsidiaries conform with generally accepted accounting principles and
predominant practices within the banking industry. All significant
intercompany balances and transactions have been eliminated.
(Continued)
F-8
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. These estimates and assumptions also affect reported amounts of
revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
The principal estimates particularly susceptible to significant change in
the near term relates to the allowance for loan losses. The evaluation of
the adequacy of the allowance for loan losses includes an analysis of the
individual loans and overall risk characteristics and size of the different
loan portfolios, and takes into consideration current economic and market
conditions, the capability of specific borrowers to pay specific loan
obligations, and current loan collateral values. However, actual losses on
specific loans, which also are encompassed in the analysis, may vary from
estimated losses.
In 1998, the Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 redefines how operating segments are determined
and requires disclosures of certain financial and descriptive information
about the Corporation and its subsidiaries operating segments. Management
has determined the Corporation operates in one business segment, namely
community banking.
2. Investment Securities
The Corporation accounts for its investment securities in accordance SFAS
No. 115, Accounting for Certain Investments in Debt and Equity Securities.
The Corporation classifies its securities as held for investment purposes
(held to maturity) and available for sale. Investment securities for which
the Corporation has the ability and intent to hold until maturity are
classified as held to maturity. These investment securities are carried at
cost, adjusted for amortization of premiums and accretion of discounts on a
straight-line basis, which is not materially different from the effective
interest method.
Investment securities which are held for indefinite periods of time, which
management intends to use as part of its asset/liability strategy, or which
may be sold in response to changes in interest rates, changes in prepayment
risk, increases in capital requirements or other similar factors, are
classified as available for sale and are carried at fair value. Differences
between a security's amortized cost and fair value is charged/credited
directly to shareholders' equity, net of income taxes. The cost of
securities sold is determined on a specific identification basis. Gains and
losses on sales of securities are recognized in the consolidated statements
of income upon sale. The Corporation had no securities held for trading
purposes at December 31, 1998 and 1997.
(Continued)
F-9
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activity. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments imbedded in other
contracts, and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge.
The accounting for changes in the fair value of a derivative (gains and
losses) depends on the intended use of the derivative and resulting
designation. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Earlier application is permitted only
as of the beginning of any fiscal quarter. The adoption of SFAS No. 133 is
not anticipated to have a material impact on the Corporation's consolidated
financial position or results of operations.
3. Loans and Allowance for Possible Loan Losses
Loans receivable, which management has the intent and ability to hold for
the foreseeable future or until maturity or payoff are reported at their
outstanding principal, adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans. The
Corporation's management maintains the allowance for possible loan losses at
a level considered adequate to provide for potential loan losses. The
allowance is increased by provisions charged to expense and reduced by net
charge-offs. Loans are charged against the allowance for possible loan
losses when management believes that the collectibility of the principal is
unlikely. The level of the allowance is based on management's evaluation of
potential losses in the loan portfolio after consideration of appraised
collateral values, financial condition of the borrowers, and prevailing and
anticipated economic conditions. Credit reviews of the loan portfolio,
designed to identify potential charges to the allowance, are made on a
periodic basis during the year by senior management.
Interest on loans is credited to operations primarily based upon the
principal amount outstanding. When management believes there is sufficient
doubt as to the ultimate collectibility of interest on any loan, the accrual
of applicable interest is discontinued. Interest income is subsequently
recognized only to the extent cash payments are received. Net loan
origination fees and loan discounts on purchased loan pools are deferred and
amortized over the life of the related loan using the level yield method.
The net loan originations fees recognized as yield adjustments are reflected
in total interest income in the consolidated statement of operations. The
unamortized balance of loan origination net fees is reported in the
consolidated balance sheet as part of unearned income; the unamortized
portion of discounts on purchased loans reduces the carrying value of loans
receivable on the consolidated balance sheet.
(Continued)
F-10
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
The Corporation accounts for its impaired loans in accordance with SFAS No.
114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS
No. 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures. This standard requires that a creditor measure
impairment based on the present value of expected future cash flows
discounted at the loan's effective interest rate, except that as a practical
expedient, a creditor may measure impairment based on a loan's observable
market price, or the fair value of the collateral if the loan is collateral
dependent. Regardless of the measurement method, a creditor must measure
impairment based on the fair value of the collateral when the creditor
determines that foreclosure is probable.
4. Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
The Corporation accounts for its transfers and servicing financial assets in
accordance with SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, as amended by SFAS No.
127, Deferral of the Effective Date of Certain Provisions of SFAS No. 125.
This standard provides accounting guidance on transfers of financial assets,
servicing of financial assets, and extinguishments of liabilities.
5. Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Building and leasehold improvements are amortized over the
term of the lease or estimated useful life, whichever is shorter.
Depreciation and amortization is computed primarily on the straight-line
method over the estimated useful lives of the assets.
6. Goodwill
Goodwill is stated at cost less accumulated amortization, and is being
amortized on the straight-line method over 15 years. On an ongoing basis,
management reviews the valuation and amortization of goodwill. As part of
this review, the Corporation estimates the value of and the estimated
undiscounted future net income expected to be generated by the related
subsidiaries to determine that no impairment has occurred.
The Corporation accounts for impairment under SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of.
This standard provides accounting guidance on when to recognize and how to
measure impairment losses of long-lived assets and certain identifiable
intangibles and how to value long-lived assets to be disposed of.
(Continued)
F-11
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
7. Other Real Estate
Properties acquired by foreclosure are other real estate (ORE) and recorded
at the lower of recorded investment in the related loan or fair value based
on appraised value at the date actually or constructively received. Loan
losses arising from the acquisition of such properties are charged against
the allowance for possible loan losses. Subsequent adjustments to the
carrying values of ORE properties are charged to operating expense. ORE is
stated at the lower of cost or fair value less estimated cost to sell.
8. Income Taxes
The Corporation recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Bank's financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on their difference between the
financial statement carrying amounts and the tax basis of assets and
liabilities. The Corporation files a consolidated federal income tax return
and the amount of income tax expense or benefit is computed and allocated on
a separate return basis.
9. Per Share Amounts
On January 1, 1997, the Corporation adopted the provisions of SFAS No. 128,
Earnings Per Share. SFAS No. 128 eliminated primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings
per share in conjunction with the disclosure of the methodology used in
computing such earnings per share. Basic earnings per share excludes
dilution and is computed by dividing income available to common shareholders
by the weighted average common shares outstanding during the period. Diluted
earnings per share takes into account the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
and converted into common stock. All weighted average actual shares or per
share information in the financial statements have been adjusted
retroactively for the effect of a stock dividend.
10. Comprehensive Income
On January 1, 1998, the Bank adopted SFAS No. 130, Reporting Comprehensive
Income. This standard establishes new standards for reporting comprehensive
income which includes net income as well as certain other items which result
in a change to equity during the period. These financial statements have
been reclassified to reflect the provisions of SFAS No. 130.
(Continued)
F-12
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
The income tax effects allocated to comprehensive income (loss) is as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------------------ -----------------------------------
Tax Net of Net of
Before tax expense tax Before tax Tax tax
amount (benefit) amount amount expense amount
---------- --------- ------ ---------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains (losses)
on securities
Unrealized holding gains
(losses) arising during period $(282) $ 100 $(182) $296 $(113) $183
Less reclassification
adjustment for gains
realized in net income 378 (144) 234 127 (48) 79
----- ----- ---- --- ----- ----
Other comprehensive income
(loss), net $(660) $ 244 $(416) $169 $ (65) $104
==== ==== ==== === ===== ===
</TABLE>
11. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and amounts due from banks.
12. Advertising Costs
The Corporation expenses advertising costs as incurred.
13. Restrictions on Cash and Due from Banks
As of December 31, 1998, the Corporation did not maintain reserves (in the
form of deposits with the Federal Home Loan Bank ("FHLB")) to satisfy
federal regulatory requirements. As of December 31, 1998, USACapital has
segregated $130,000 in special reserve bank accounts for the benefit of
customers as required by the clearing organizations.
14. Reclassifications
Certain reclassifications have been made to the 1997 financial statements to
conform with the 1998 presentation.
(Continued)
F-13
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE C - PRIVATE PLACEMENT
On February 18, 1998, the Company issued 769,231 shares of its Class A
common stock in conjunction with a private placement offering (the
"offering"). Total cash received was $7.1 million, net of offering cost of
$390,000.
In connection with the offering, the Company granted warrants convertible
for a period of five years into 3.25% of the Corporation's common stock on
the date of conversion. The number of warrants will be adjusted for stock
splits, stock dividends and the issuance of additional shares so as to
maintain the holder's ownership of the fully diluted common stock at 3.25%
for a period of three years from the close of the offering.
NOTE D - ACQUISITION
In 1997, the Corporation acquired Knox Financial Services Group, Inc. The
Corporation distributed 14,000 (1) shares of common stock of its parent to
effect the combination. The purchase method of accounting was used to
account for this business combination. Subsequent to the acquisition, Knox
Financial Services Group, Inc. was renamed USACapital, Inc. The results of
operations of USACapital are included in the accompanying financial
statements since the date of acquisition.
(1) Adjusted for 33% stock dividends paid by the Corporation in July 18,
1997 and August 17, 1998.
NOTE E - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses, and fair market value
of the Corporation's investment securities available for sale and held to
maturity are as follows:
<TABLE>
<CAPTION>
1998
--------------------------------------------------
(in thousands)
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Available for sale
Mortgage-backed securities $ 2,628 $ -- $ (8) $ 2,620
Corporate obligations 1,322 13 (89) 1,246
Trust preferred securities
and other securities 24,944 243 (664) 24,523
------- ---- ----- -------
$28,894 $256 $(761) $28,389
======= ==== ===== =======
Held to maturity
U.S. Government and agency
securities $ 1,201 $ 1 $ -- $ 1,202
Mortgage-backed securities 5,650 104 (1) 5,753
Municipal securities 3,166 69 -- 3,235
Trust preferred securities
and other securities 5,738 79 (56) 5,761
------- ---- ----- -------
$15,755 $253 $ (57) $15,951
===== ===== ===== =======
</TABLE>
(Continued)
F-14
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE E - INVESTMENT SECURITIES - Continued
<TABLE>
<CAPTION>
1997
-------------------------------------------------------------
(in thousands)
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Available for sale
U.S. Government and agency
securities $ 1,243 $ 16 $ - $ 1,259
Trust preferred securities 7,637 150 (11) 7,776
------- ---- ----- -------
$ 8,880 $166 $(11) $ 9,035
======= ==== ==== =======
Held to maturity
U.S. Government and agency
securities $ 3,557 $ - $(10) $ 3,547
Mortgage-backed securities of 6,306 50 - 6,356
Municipal securities 3,163 101 - 3,264
Trust preferred securities
and other securities 2,393 84 - 2,477
------- ---- ---- -------
$15,419 $235 $(10) $15,644
====== ==== ==== =======
</TABLE>
The amortized cost and fair market value of investment securities, by
contractual maturity, as of December 31, 1998, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
repayment penalties.
<TABLE>
<CAPTION>
(Dollars in Thousands) Available-for-Sale Held-to-Maturity
------------------------------------- -------------------------------------
Weighted Weighted
Amortized Approximate Average Amortized Approximate Average
Cost Fair Value Yield Cost Fair Value Yield
---------- ----------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Due after one year through five years...... $ 1,246 $ 1,170 11.92% $ 2,001 $ 2,015 7.31%
Due after five years through ten years..... 816 770 9.88 2,635 2,581 7.90
Due after ten years........................ 22,312 21,996 9.61 5,479 5,613 7.06
Mortgage-backed securities................. 2,628 2,620 7.00 5,640 5,742 6.59
Equity securities.......................... 1,892 1,833 -- -- -- --
------- ------- ------- -------
$28,894 $28,389 $15,755 $15,951
======= ======== ======= =======
</TABLE>
(Continued)
F-15
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE E - INVESTMENT SECURITIES - Continued
Expected maturities will differ from contractual maturities because
borrowers have the right to call or prepay obligations with or without call
or prepayment penalties. In 1998, the Corporation sold securities which were
classified as held-to-maturity due to unforeseen circumstances that could
not have been anticipated.
Proceeds on the sale of investment securities classified as held-to-maturity
were $1.4 million and $2.0 million in 1998 and 1997, respectively. Proceeds
on the sale of investment securities classified as available-for-sale were
$9.3 million and $4.5 million in 1998 and 1997, respectively. Gross gains of
$393,000 and gross losses of $15,000 were realized on 1998 sales.
NOTE F - LOANS RECEIVABLE
Loans outstanding by classification are as follows:
1998 1997
---- ----
(in thousands)
Real estate $102,076 $54,262
Commercial and industrial loans 986 1,091
Other 243 1,694
-------- -------
103,305 57,047
Loans in process - (260)
Unearned income (116) (217)
Allowance for possible loan losses (1,051) (568)
-------- -------
$102,138 $56,002
======== =======
At December 31, 1998 and 1997, loans outstanding to certain officers and
directors of the Bank and their affiliated interests amounted to $2.5
million and $233,000, respectively. An analysis of activity in loans to
related parties at December 31, 1998 and 1997, resulted in new loans of $2.7
million and $122,000, respectively, and reductions of $483,000 and $504,000,
respectively, representing payments.
An analysis of the allowance for possible loan losses is as follows:
1998 1997
---- ----
(in thousands)
Balance, beginning of year $ 568 $182
Provision charged to expense 510 415
Charge-offs, net of recoveries (27) (29)
------ ----
Balance, end of year $1,051 $568
====== ====
(Continued)
F-16
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE F - LOANS RECEIVABLE - Continued
Included in loans receivable are nonaccrual loans of $1.8 million and
$287,000 at December 31, 1998 and 1997, respectively. Interest income that
would have been recorded in the financial statements had the nonaccrual
loans been performing in accordance with their terms would have been
$140,000 in 1998.
Also included in loans receivable are loans past due 90 days or more and
accruing in the amount of $152,000 and $165,000 at December 31, 1998 and
1997, respectively, which have not been classified as nonaccrual due to
management's belief that the loans are well-secured and in the process of
collection.
NOTE G - PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
Estimated
useful lives 1998 1997
------------ ---- ----
(in thousands)
<S> <C> <C> <C>
Building 31.5 years $ 754 $ 754
Premises and improvements 5 to 20 years 726 135
Furniture and equipment 5 to 7 years 969 367
------ ------
2,449 1,256
Less accumulated depreciation and amortization (426) (103)
------ ------
$2,023 $1,153
====== ======
</TABLE>
Depreciation and amortization charged to operations was $219,000 and $60,000
for the years ended December 31, 1998 and 1997, respectively.
NOTE H - DEPOSITS
The aggregate amount of jumbo certificates of deposit, each with a minimum
denomination of $100,000, was approximately $34.7 million and $9.3 million
at December 31, 1998 and 1997, respectively.
At December 31, 1998, the schedule of maturities of certificates of deposit
is as follows (in thousands):
1999 $ 47,067
2000 28,399
2001 14,769
2002 5,663
2003 7,670
Thereafter 908
--------
$104,476
========
F-17
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE I - BORROWINGS
At December 31, 1998, the Bank had five callable fixed-rate advances
outstanding with the FHLB. The callable advances mature within five to ten
years with call options ranging from 18 months to five years. The interest
rates on the callable advances range from 4.83% to 5.63% with a weighted
average interest rate of 5.31% at December 31, 1998.
The following table sets forth certain information regarding the Bank's FHLB
advances, at or for the period ended December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Balance outstanding, December 31 $30,000 $ 9,000
Average balance outstanding during year $22,482 $ 7,000
Weighted average interest rate for the period 5.29% 5.87%
Maximum outstanding balance at any month end $31,000 $12,700
</TABLE>
The Bank also has $4.2 million in collateralized borrowings that represent
participations by other banks in certain loans; such amounts are
non-interest bearing.
The Corporation has three line of credit facilities with local financial
institutions totaling $2.0 million. The aggregate outstanding balance on the
lines of credit at December 31, 1998 was $1.1 million. The interest rates
paid on these advances are floating, prime based rates, ranging from prime
to prime plus one percentage point, with the average interest rate at
December 31, 1998 equaling 8.21%.
NOTE J - STOCKHOLDERS' EQUITY
In connection with the formation of the Corporation , the President & CEO
purchased 10,000 shares, par value $.01, of Class B Common Stock for $500.
These shares mandatorily convert into ten percent of the then issued shares
of Class A Common Stock on January 1, 2001. Unearned compensation of
$543,000 was recorded at the close of the offering on November 30, 1995,
based on the offering price of $10.00 per share. As a result of the
mandatory conversion provision, the Class B Common Stock was deemed
converted on November 30, 1995 for financial statement purposes.
Unearned compensation, which is shown as a separate component of
Stockholders' equity, was being amortized over five years. In connection
with the offering (Note 2), the President & CEO agreed to cap the amount of
Class A common stock into which the Class B common stock could be converted,
into an amount equal to 10% of the Class A common stock outstanding at
December 31, 1997, adjusted for any future stock dividends, or stock splits.
In conjunction with this agreement, the Corporation fully recognized the
remaining unearned compensation as compensation expense in 1997.
(Continued)
F-18
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE J - STOCKHOLDERS' EQUITY - Continued
On July 18, 1997, the Corporation paid a 33% stock dividend on its common
stock to stockholders' of record as of July 1, 1997.
On August 17, 1998, the Corporation paid a 33% stock dividend on its common
stock to stockholders' of record as of August 3, 1998.
NOTE K - EMPLOYEE BENEFIT PLANS
The Bank had a defined contribution plan, 401(k), covering eligible
employees, as defined under the plan document. Employees could contribute
upto 10% of compensation, as defined under the plan document. The Bank could
make discretionary contributions. The Bank did not make any contributions
into the plan during the period ended December 31, 1998 or 1997. The plan
was terminated in 1998, and all funds were distributed to the employees.
NOTE L - INCOME TAXES
The components of income taxes (benefit) are as follows:
1998 1997
---- ----
Federal (in thousands)
Current $ 935 $ 193
Deferred (165) (216)
Benefit applied to reduce goodwill - 22
----- -----
770 (1)
State
Current 187 9
Benefit applied to reduce goodwill - 9
----- -----
187 18
----- -----
Income taxes $ 957 $ 17
===== =====
(Continued)
F-19
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE L - INCOME TAXES - Continued
The reconciliation of the tax computed at the statutory federal rate was as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Tax at statutory rate $832 $ (71)
Increase (decrease) in taxes resulting from
Tax-exempt income (76) -
Nondeductible compensation - 144
Nondeductible expenses, including goodwill and
meals and entertainment 31 16
Increase (decrease) in valuation allowance - (103)
State income taxes, net of federal income
tax benefit 124 12
Other, net 46 19
---- -----
Income tax expense $957 $ 17
==== =====
</TABLE>
Deferred income taxes are provided for the temporary difference between the
financial reporting basis and the tax basis of the Corporation's assets and
liabilities. Cumulative temporary differences are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Deferred tax assets
Allowance for possible loan losses $346 $184
Deferred loan fees 7 9
Deferred compensation 24 23
Fixed asset 5 -
Unrealized losses on securities available for sale 191 -
---- ----
573 216
Deferred tax liabilities
Fixed assets - (1)
Unrealized gains on securities available-for-sale - (52)
---- ----
- (53)
---- ----
Net deferred tax asset $573 $163
==== ====
</TABLE>
During 1997, the Corporation realized a tax benefit related to the net
operating loss carryovers from the acquisition of the Bank that was treated
as a reduction to goodwill in accordance with SFAS No. 109. The Corporation
believes it is more likely than not to realize the net deferred tax asset,
and accordingly, no valuation allowance has been provided at December 31,
1997.
F-20
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE M - EARNINGS PER SHARE
The following table illustrates the reconciliation of the basic and diluted
EPS computations, (in thousands, except per share data).
<TABLE>
<CAPTION>
For the year ended December 31, 1998
-----------------------------------------------
Weighted
average
Income shares Per share
(numerator) (denominator) amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share
Net income available to common stockholders $1,490 1,986 $0.75
Effect of dilutive securities
Options - 133 -
------ ------ -----
Diluted earnings per share
Net income available to common stockholders
plus assumed conversions $1,490 2,119 $0.70
====== ===== =====
</TABLE>
Options to purchase 62,000 shares of common stock at exercise prices ranging
from $11.28 to $30.00 per share were outstanding during 1998 and are not
included in the computation of diluted EPS because the options exercise
price were greater than the average market price of the common shares.
<TABLE>
<CAPTION>
For the year ended December 31, 1997 (1)
--------------------------------------------
Weighted
average
Income shares Per share
(numerator) (denominator) amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share
Net loss available to common stockholders $(226) 1,082 $(0.21)
Effect of dilutive securities
Options - - -
----- ----- ------
Diluted earnings per share
Net loss available to common stockholders
plus assumed conversions $(226) 1,082 $(0.21)
====== ===== ======
</TABLE>
Options to purchase 322,820 shares of common stock at $5.65 per share were
outstanding during 1997 and are not included in the computation of diluted
EPS because the options were anti-dilutive.
(1) Adjusted for 33% stock dividends paid by the Corporation in August 1998.
F-21
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE N - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable. Those instruments involve, to varying
degrees, elements of credit and interest rate risks in excess of the amount
recognized in the consolidated balance sheets. The contract or notional
amounts of those instruments reflect the extent of involvement the Bank has
in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual or notional
amount of those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Unless noted otherwise, the Bank does not require collateral or other
security to support financial instruments with credit risk. The approximate
contract amounts are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk
Commitments to extend credit $1,070 $1,322
Standby letters of credit and financial guarantees written 1,098 -
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's credit evaluation.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
The Bank's originated loan portfolio primarily consists of loans secured by
real estate in the greater Delaware Valley region. The Bank's acquired loan
portfolio consist of individual loans and loan pools throughout the domestic
United States purchased at sales conducted by governmental agencies. The
Bank, as with any lending institution, is subject to the risk that
residential real estate values in the primary lending area will deteriorate,
thereby potentially impairing collateral values in the primary lending area.
However, management believes that real estate values are presently stable in
its primary lending area and that loan loss allowances have been provided in
amounts commensurate with its current perception of the foregoing risks of
the portfolio.
F-22
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE O - COMMITMENTS AND CONTINGENCIES
1. Leases
The Bank and the Corporation have entered into operating lease arrangement
for branch facilities. Both the Bank and the Corporation are responsible for
pro-rate operating expense escalations.
As of December 31, 1998, future approximate minimum rental payments are as
follows, (in thousands):
1999 $ 91
2000 96
2001 104
2002 106
2003 108
Thereafter 386
----
$891
====
The above amount represents minimum rentals not adjusted for possible future
increases due to escalation provisions and assumes that all option periods
will be exercised by the Bank or the Corporation.
Rent expense for the years ended December 31, 1998 and 1997, amounted to
$147,000 and $125,000, respectively.
2. Employee Agreements
The Corporation has employment agreements with certain key executives that
provide severance pay benefits if there is a change in control of the
Corporation. The agreements will continue in effect on a year-to-year basis
until terminated or not renewed by the Corporation or key executives. Upon a
change in control, the Corporation shall continue to pay the key executives'
salaries per the agreements and certain benefits for the agreed upon time
periods. The maximum contingent liability under the agreements at December
31, 1998 was $1.2 million.
In addition, in connection with the private placement offering (Note C), the
Corporation and the President & CEO have entered into an agreement whereby
the Corporation has the option to pay $150,000 per year for each of the
three years beginning in 1998 in exchange for the President agreeing to
waive any future exercise of the non-dilutive feature of the Class B common
stock. If the Corporation does not make the optional payment on January 2nd
of each year, the President will be entitled to implement the anti-dilutive
feature for 10% of any shares of Class A common stock issued during the year
of non-payment. The Corporation exercised its option for 1998 upon the close
of the offering, and has also exercised its option for 1999.
(Continued)
F-23
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE O - COMMITMENTS AND CONTINGENCIES
3. Other
The Corporation may, in the ordinary course of business, become a party to
litigation involving collection matters, contract claims and other legal
proceedings relating to the conduct of its business. In management's
judgment, the financial position of the Corporation will not be materially
affected by the final outcome of any present legal proceedings.
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure of the estimated fair value of an entity's
assets and liabilities considered to be financial instruments. For the
Corporation, as for most financial institutions, the majority of its assets
and liabilities are considered financial instruments. However, many such
instruments lack an available trading market, as characterized by a willing
buyer and seller engaging in an exchange transaction. Also, it is the
Corporation's general practice and intent to hold its financial instruments
to maturity and not to engage in trading or sales activities, except for
certain loans. Therefore, the Corporation had to use significant estimations
and present value calculations to prepare this disclosure.
Changes in the assumptions or methodologies used to estimate fair values may
materially affect the estimated amounts. Also, management is concerned that
there may not be reasonable comparability between institutions due to the
wide range of permitted assumptions and methodologies in the absence of
active markets. This lack of uniformity gives rise to a high degree of
subjectivity in estimating financial instrument fair values.
Estimated fair values have been determined by the Corporation using the best
available data and an estimation methodology suitable for each category of
financial instruments. The estimation methodologies used, the estimated fair
values, and recorded book balances at December 31, 1998 and 1997, are
outlined below.
For cash and cash equivalents, including cash and due from banks and
interest bearing deposits with banks, the recorded book values of $1.3
million and $7.7 million respectively, as of December 31, 1998 and $833,000
and $4.0 million, respectively, at December 31, 1997, approximate fair
values. The estimated fair values of investment securities, including FHLB
stock, are based on quoted market prices, if available. Estimated fair
values are based on quoted market prices of comparable instruments if quoted
market prices are not available.
The net loan portfolio at December 31, 1998 and 1997, has been valued using
a present value discounted cash flow where market prices were not available.
The discount rate used in these calculations is the estimated current market
rate adjusted for credit risk. The carrying value of accrued interest
approximates fair value.
(Continued)
F-24
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
The estimated fair values of demand deposits (i.e., interest- and
noninterest-bearing checking accounts, savings, and certain types of money
market accounts) are, by definition, equal to the amount payable on demand
at the reporting date (i.e., their carrying amounts). The fair values of
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered to a
schedule of aggregated expected monthly time deposit maturities. The
carrying amount of accrued interest payable approximates its fair value.
<TABLE>
<CAPTION>
1998 1997
-------------------------- ------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Investment securities $ 47,667 $ 47,862 $24,454 $24,678
Loans receivable 103,189 110,242 56,570 57,647
Deposits 114,387 114,777 70,474 70,645
</TABLE>
The fair values of borrowings totaling $35.3 million and $12.7 million are
estimated to approximate their recorded book balances at December 31, 1998
and 1997, respectively.
There was no material difference between the notional amount and the
estimated fair value of off-balance-sheet items, which totalled
approximately $2.2 million and $1.3 million at December 31, 1998 and 1997,
respectively, and primarily comprise unfunded loan commitments, which are
generally priced at market at the time of funding.
NOTE Q - STOCK OPTION PLAN
The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, which
contains a fair value-based method for valuing stock-based compensation that
entities may use, which measures compensation cost at the grant date based
on the fair value of the award. Compensation is then recognized over the
service period, which is usually the vesting period. Alternatively, the
standard permits entities to continue accounting for employee stock options
and similar equity instruments under APB Opinion No. 25, Accounting for
Stock Issued to Employees. Entities that continue to account for stock
options using APB Opinion No. 25 are required to make pro forma disclosures
of net income and earnings per share, as if the fair value-based method of
accounting defined in SFAS No. 123 had been applied. The Corporation has
determined it will follow APB Opinion No. 25.
(Continued)
F-25
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE Q - STOCK OPTION PLAN - Continued
The Corporation has a Stock Option Plan (the Plan) for the benefit of key
officers and employees of the Corporation. The Plan was designed to attract
and retain qualified personnel in key positions, provide officers and key
employees with a proprietary interest in the Corporation as an incentive to
contribute to the success of the Corporation, and reward key employees for
outstanding performance and the attainment of targeted goals. The Plan was
also designed to retain qualified directors for the Corporation, and will
provide for the grant of non-qualified stock options and incentive options
intended to comply with the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended.
The Plan is administered and interpreted by a Committee of the Board of
Directors, and unless terminated earlier, will be in effect for a period of
ten years from the Effective Date. A total of 531,000 shares have been
reserved for issuance under the Plan. The options, which have a term of
between 4 and 10 years when issued, vest either immediately or over a period
specified by the Corporation's compensation committee. The exercise price of
each option is equal to or above the market value on the date of grant.
Accordingly, no compensation cost has been recognized for the Plan. Had
compensation cost for the Plan been determined based on the fair value of
options at the grant dates consistent with the method of SFAS No. 123,
Accounting for Stock-Based Compensation, the Corporation's results of
operations and per share amounts would have been reduced to the pro forma
amounts indicated below, (in thousands, except per share data).
1998 1997
---- ----
Net income (loss)
As reported $1,490 $ (226)
Pro forma 1,180 (226)
Basic earnings (loss) per share
As reported 0.75 (0.21)
Pro forma 0.59 (0.21)
Diluted earnings (loss) per share
As reported 0.70 (0.21)
Pro forma 0.56 (0.21)
These pro forma amounts may not be representative of future disclosures
because they do not take into effect the pro forma compensation expense
related to grants before 1995.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998: no dividend yield for all years;
expected volatility of 20%, risk-free interest rate of 5.55%, and an
expected lives of ten years for all options. No options were granted in
1997.
(Continued)
F-26
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE Q - STOCK OPTION PLAN - Continued
A summary of the status of the Corporation's fixed stock option plans as of
December 31, 1998, and changes for each of the years in the two-year period
then ended was as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- -------------------------
Weighted Weighted
average average
Number exercise Number exercise
of price per of price per
shares share shares share
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 323,000 $5.65 333,000 $5.65
Options granted 152,000 9.78 - -
Options exercised (9,000) 5.65 - -
Options forfeited (28,000) 5.65 (10,000) 5.65
------- -------
Outstanding at end of year 438,000 $7.20 323,000 $5.65
======= =======
Options exercisable at year-end 343,000 323,000
======= =======
Weighted average fair value of
options granted during year $3.58 $ -
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------------------- --------------------------
Weighted
Number average Weighted Number Weighted
outstanding at remaining average exercisable at average
Range of exercise December 31, contractual exercise December 31, exercise
prices 1998 life (years) price 1998 price
----------------- -------------- ------------ -------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 5.65 to $ 8.48 365,000 5.92 years $ 6.05 340,000 $ 6.10
$ 8.66 to $12.99 60,000 9.42 years 10.80 - -
$15.04 to $22.56 11,000 9.67 years 17.10 3,000 20.00
$25.00 to $30.00 2,000 9.67 years 27.50 - -
</TABLE>
F-27
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE R - REGULATORY CAPITAL REQUIREMENTS
The Corporation and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Corporation's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation must meet specific capital guidelines
that involve quantitative measures of the Corporation's assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Corporation's and the Bank's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and the Bank to maintain minimum amounts and ratios
(set forth in the following table) of total and Tier I capital (as defined
in the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management believes, as
of December 31, 1998, that the Corporation and the Bank meet all capital
adequacy requirements to which it is subject.
As of December 31, 1998, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Corporation as adequately
capitalized under the regulatory framework for prompt corrective action. To
be categorized as adequately capitalized, the Corporation must maintain
minimum total risk-based, Tier I risk- based and Tier I leverage ratios as
set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
The Corporation's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
For capital
Actual adequacy purposes
------------------ -------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C>
As of December 31, 1998
Total capital (to risk-weighted assets) $15,566 12.1% $10,317 8.00%
Tier I capital (to risk-weighted assets) 13,782 10.7 5,159 4.00
Tier I capital (to average assets) 13,782 8.7 6,319 4.00
As of December 31, 1997
Total capital (to risk-weighted assets) 5,752 8.5 5,431 8.00
Tier I capital (to risk-weighted assets) 5,184 7.6 2,715 4.00
Tier I capital (to average assets) 5,184 5.8 3,570 4.00
</TABLE>
(Continued)
F-28
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE R - REGULATORY CAPITAL REQUIREMENTS - Continued
The Bank's actual capital amounts and ratios are presented in the following
table.
<TABLE>
<CAPTION>
To be well
capitalized under
For capital prompt corrective
Actual adequacy purposes action provisions
---------------- ----------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998
Total capital (to risk-weighted assets) $13,930 11.2% $9,987 8.0% $12,483 10.0%
Tier I capital (to risk-weighted assets) 12,879 10.3 4,994 4.0 7,490 6.0
Tier I capital (to average assets) 12,879 8.5 6,068 4.0 7,585 5.0
As of December 31, 1997
Total capital (to risk-weighted assets) 5,315 7.9 5,400 8.0 6,750 10.0
Tier I capital (to risk-weighted assets) 4,747 7.0 2,700 4.0 4,050 6.0
Tier I capital (to average assets) 4,747 5.4 3,548 4.0 4,435 5.0
</TABLE>
At December 31, 1997, the Bank's Total capital ratio of 7.90% did not meet
the minimum requirement of 8.0% in order to consider the Bank adequately
capitalized. However, upon completion of the offering (Note 2) the
Corporation raised $7.1 million, of which $6.9 million was contributed to
the Bank. As a result, the Bank's Total capital ratio increased to 17.8%.
State Banking statutes restrict the amount of dividends paid on capital
stock. Accordingly, no dividends shall be paid by the Bank on its capital
stock unless, following the payment of such dividends, the capital stock of
the Bank will be unimpaired, and (1) the Bank will have surplus of not less
than 50% of its capital, or, if not (2) the payment of such dividend will
not reduce the surplus of the Bank.
Additionally, banking regulations limit the amount of investment, loans,
extensions of credit and advances that one subsidiary bank can make to the
Corporation at any time to 10% and in the aggregate 20% of the Bank's
capital stock and surplus. These regulations also require that any such
investment, loan, extension of credit or advance be secured by securities
having a market value in excess of the amounts thereof. At December 31,
1998, loans from the Bank to the Corporation amounted, in aggregate, to
$976,000, or 7.50%, of the Bank's capital stock and surplus. There were no
investments, extensions of credits or advances at December 31, 1998. At
December 31, 1997, there were no investments, loans, extensions of credit or
advances from the Bank to the Corporation.
F-29
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE S - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
Condensed financial information for USABancShares, Inc. (parent company
only) follows:
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
ASSETS (in thousands)
<S> <C> <C>
Cash and Due from banks $ 23 $ 254
Securities available-for sale 1,931 328
Investment in subsidiaries 13,281 5,088
Other assets 708 211
------- ------
Total assets $15,943 $5,881
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Other borrowed money $ 1,957 $ 340
Other liabilities 389 175
------- ------
Total liabilities 2,346 515
Stockholders' equity 13,597 5,366
------- ------
Total liabilities and stockholders' equity $15,943 $5,881
======= ======
</TABLE>
(Continued)
F-30
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE S - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY - Continued
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
ar Ended December 31,
---------------------
1998 1997
---- ----
(in thousands)
<S> <C> <C>
INCOME
Interest income $ 49 $ -
Other income 19 77
------ -----
Total income 68 77
------ -----
EXPENSES
Compensation 150 517
Interest 89 14
Other 10 29
------ -----
Total expenses 249 560
------ -----
Loss before undistributed earnings
of subsidiaries (181) (483)
Provision (benefit) for income taxes 1 (16)
------- -----
Loss before undistributed earnings
of subsidiaries (182) (467)
Undistributed earnings of subsidiaries 1,672 241
------ -----
NET INCOME (LOSS) $1,490 $(226)
====== =====
</TABLE>
(Continued)
F-31
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE S - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY - Continued
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,490 $(226)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Undistributed earnings (loss) from subsidiaries (1,672) 241
(Gain) loss on sale of investments 5 (28)
Net change in assets and liabilities (146) 99
------- -----
Net cash provided by (used in) operating activities (323) 86
------- -----
Cash flows from investing activities
Capital distribution (to) from subsidiaries (7,078) -
Purchase of investment securities available-for-sale (1,603) (135)
------- -----
Net cash used in investing activities (8,681) (135)
------ -----
Cash flows from financing activities
Net increase in borrowings 1,616 290
Proceeds from issuance of common stock 7,157 -
------- -----
Net cash provided by financing activities 8,773 290
------- -----
NET INCREASE (DECREASE) IN CASH (231) 241
Cash at beginning of year 254 13
------- -----
Cash at end of year $ 23 $ 254
======= =====
Supplemental disclosure of cash flow information
Cash paid during the year for income taxes $ 1 $ -
======= =====
</TABLE>
F-32
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
NOTE T - SUBSEQUENT EVENT
In March 1999, the Corporation issued $10 million of 9.50% junior
subordinated debentures ( the "trust preferred offering") to USA Capital
Trust 1, a Delaware Business Trust, in which the Corporation owns all of the
common equity. The trust issued $10 million of Preferred Securities to
investors, secured by the junior subordinated debentures and the guarantee
of the Corporation, The junior subordinated debentures mature in 2029. Had
the trust preferred offering occurred as of December 31, 1998, the
Corporation's condensed balance sheet would have been as follows:
<TABLE>
<CAPTION>
ASSETS Actual Pro-Forma
------------- ------------
(in thousands
except share
data)
<S> <C> <C>
Cash and due from banks (1) $ 1,335 $ 10,435
Interest bearing deposit with banks 7,706 7,706
Investment securities 47,667 47,667
Loans receivable, net 102,138 102,138
Premises and equipment, net 2,023 2,023
Other assets (2) 4,237 5,137
-------- --------
Total assets $165,106 $175,106
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 114,387 $114,387
Borrowings 35,305 35,305
Guaranteed preferred beneficial interest in subordinated debt - 10,000
Accrued expenses and other liabilities 1,817 1,817
-------- --------
Total liabilities 151,509 161,509
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock $1.00 par value, 5,000,000 shares authorized, no shares issued
and outstanding in 1998 and 1997
Common stock $1.00 par value, 10,000,000 shares authorized, 2,007,386 shares
issued and outstanding in 1998; 813,807 shares issued and outstanding in
1997, and 108,236 shares of converted and unissued Class B common stock in
1998; 81,381 converted and unissued 1997 2,116 2,116
Additional paid-in capital 10,683 10,683
Accumulated (deficit) earnings 1,112 1,112
Accumulated other comprehensive income (314) (314)
-------- --------
Total stockholders' equity 13,597 13,597
-------- --------
Total liabilities and stockholders' equity $165,106 $175,106
======== ========
</TABLE>
(1) Total cash received was $9.1 million, net of trust preferred offering cost
of $900,000.
(2) $900,000 of trust preferred offering costs will be amortized over the life
of the related junior subordinated debentures.
(Continued)
F-33
<PAGE>
USABANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1998 and 1997
NOTE T - SUBSEQUENT EVENT - Continued
Although the junior subordinated debentures will be treated as debt of the
Corporation, they currently qualify for Tier I capital investments, subject
to the 25% limitation under risk-based capital guidelines of the Federal
Reserve. The portion of the Trust Preferred Securities that exceeds this
limitation qualifies as Tier II capital of the Corporation. Had the trust
preferred offering occurred as of December 31, 1998, the Corporation's Total
Capital, Tier 1 Capital, and Tier 1 Leverage capital ratios would have been
19.82%, 13.36% and 10.91%, respectively.
F-34
<PAGE>
================================================================================
You should rely only on the information contained in this Prospectus or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. The information in this Prospectus may to be
accurate beyond the date indicated below, regardless of when this Prospectus is
delivered or when the securities described in this Prospectus are sold. This
Prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
------------------------
TABLE OF CONTENTS
Page
----
Where You Can Find More Information........................................ 1
Forward-looking Statements................................................. 1
Summary.................................................................... 2
Selected Financial and Other Data.......................................... 9
Risk Factors............................................................... 11
Accounting Treatment....................................................... 21
Capitalization............................................................. 22
Pro Forma Regulatory Capital............................................... 23
Use of Proceeds............................................................ 24
Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 25
Business................................................................... 34
Management of USABancShares ............................................... 49
Regulation of USABancShares and BankPhiladelphia........................... 54
USA Capital Trust I........................................................ 58
The Exchange Offer......................................................... 59
Description of Exchange Securities......................................... 67
Description of Original Securities......................................... 88
Relationship Among the Capital Securities, the
Junior Subordinated Debentures and the
Guarantee............................................................. 88
Certain Federal Income Tax Considerations.................................. 89
ERISA Considerations....................................................... 92
Plan of Distribution....................................................... 93
Validity of Exchange Securities............................................ 93
Financial Statements....................................................... F-1
================================================================================
================================================================================
$10,000,000
USA CAPITAL TRUST I
9.50% Exchange Capital Securities
for any and all of its outstanding
9.50% Original Capital Securities
fully and unconditionally
guaranteed, as described herein, by
USA BancShares, Inc.
------------------------
PROSPECTUS
------------------------
May ___, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
USABancShares' charter and by-laws provide that USABancShares will
indemnify every person who is or was a director or executive officer of
USABancShares to the fullest extent permitted by law. This indemnification
applies to all expenses and liabilities reasonably incurred in connection with
any proceeding to which the director or executor officer may become involved by
reason of being or having been a director or executive officer of USABancShares.
Pennsylvania law, under which USABancShares is incorporated, allows
USABancShares to indemnify its directors and officers if the indemnified person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interest of USABancShares and, with respect to any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. USABancShares maintains a director and officer liability insurance
policy covering each of USABancShares' directors and executive officers.
Under the Declaration of Trust of USA Capital Trust I, USABancShares
has agreed to indemnify each of the Trustees of USA Capital Trust I, and to hold
each Trustee harmless against any loss, damage, claim, liability or expense
incurred without negligence or bad faith on its part, arising out of, or in
connection with, the acceptance or administration of the Declaration of Trust,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties under the Declaration of Trust.
Item 21. Exhibits.
The following exhibits are filed as part of this Registration
Statement. Exhibit numbers correspond to the exhibits required by Item 601 of
Regulation S-B.
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Articles of Incorporation of USABancShares,
as amended*
3.2 Bylaws of USABancShares *
4.1 Indenture of USABancShares relating to the Junior Subordinated
Debentures
4.2 Form of Certificate of Exchange Junior Subordinated Debenture
4.3 Form of Certificate of Original Junior Subordinated Debenture
4.4 Certificate of Trust of USA Capital Trust I
4.5 Amended and Restated Declaration of Trust of USA Capital Trust I
4.6 Form of Common Security
4.7 Form of Exchange Capital Security Certificate
4.8 Form of Certificate of Original Capital Security
4.9 Form of Exchange Guarantee of USABancShares relating to the
Exchange Capital Securities
4.10 Registration Rights Agreement among USABancShares, USA Capital
Trust I and Sandler O'Neill & Partners, L.P.
5.1 Opinion and consent of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP as to legality of the Exchange Junior Subordinated
Debentures and the Exchange Guarantee to be issued by
USABancShares
5.2 Opinion and consent of Richards, Layton & Finger as to the
legality of the Exchange Capital Securities to be issued by USA
Capital Trust I
8 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP as to
certain federal income tax matters
10.1 Stock Option Plan*
10.2 Employment agreement between USABancShares and Kenneth L.
Tepper*
10.3 Employment agreement between USABancShares and Brian M.
Hartline***
10.4 Agreement by and between Kenneth L. Tepper and USABancShares
dated January 2, 1998**
10.5 Warrant Agreement between USABancShares and Sandler O'Neill
dated February 13, 1998**
10.6 Registration Rights Agreement between USABancShares and certain
shareholders dated February 13, 1998**
II-1
<PAGE>
11 Computation of Per Share Earnings (Included in Financial
Statements on Pages F-12 and F-21)
21 Subsidiaries of USABancShares
23.1 Consent of Grant Thornton LLP
23.2 Consent of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
(included in Exhibit 5.1)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)
24 Power of Attorney of certain officers and directors of
USABancShares and the Administrative Trustees of USA Capital
Trust I (included on the signature pages hereto)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Declaration of Trust of USA Capital
Trust I
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company
under the Exchange Guarantee for the benefit of the holders of
Exchange Capital Securities of USA Capital Trust I
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
- --------------------
* Incorporated by reference from the Registration Statement on Form SB-2 of
USABancShares, as amended, Registration No. 33-92506.
** Incorporated by reference from USABancShares' Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997.
*** Incorporated by reference from USABancShares' Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1998.
Item 22. Undertakings
Each of the undersigned Registrants hereby undertakes:
(1) to file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
this Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement; and
(iii) include any additional or changed material information on
the plan of distribution;
(2) that, for determining liability under the Securities Act of 1933,
to treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering;
(3) to file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering; and
(4) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired or involved therein,
that was not the subject of and included in the Registration Statement when it
became effective.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
undersigned Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
undersigned Registrants of expenses incurred or paid by a director, officer of
controlling person of the Registrants 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 Registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by the Registrants is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, USABancShares, Inc.
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on April 30, 1999.
USABancShares, Inc.
By: /s/ Kenneth L. Tepper
--------------------------------
Kenneth L. Tepper, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated. Each of the directors and/or officers of USABancShares,
Inc. whose signature appears below hereby appoints Brian M. Hartline, as his or
her attorney-in-fact to sign in his or her name and behalf, in any and all
capacities stated below and to file with the Securities and Exchange Commission
any and all amendments, including post-effective amendments, to this
Registration Statement on Form S-4, making such changes in the Registration
Statement as appropriate, and generally to do all such things on their behalf in
their capacities as directors and/or officers to enable USABancShares, Inc. to
comply with the provisions of the Securities Act, and all requirements of the
Securities and Exchange Commission.
April 30, 1999 /s/ Kenneth L. Tepper
-----------------------------------------------
Kenneth L. Tepper
President, Chief Executive Officer and Director
(Principal Executive Officer)
April 30, 1999 /s/ Brian M. Hartline
-----------------------------------------------
Brian M. Hartline, Chief Financial Officer
(Principal Accounting and Financial Officer)
April 30, 1999 /s/ George M. Laughlin
-----------------------------------------------
George M. Laughlin
Chairman of the Board
-----------------------------------------------
Zeev Shenkman
Vice Chairman of the Board
-----------------------------------------------
Jeffrey A. D'Ambrosio
Director
April 30, 1999 /s/ George C. Fogwell, III
-----------------------------------------------
George C. Fogwell, III
Director
-----------------------------------------------
John A. Gambone
Director
April 30, 1999 /s/ Carol J. Kauffman
-----------------------------------------------
Carol J. Kauffman
Director
<PAGE>
April 30, 1999 /s/ Wayne O. Leevy
-----------------------------------------------
Wayne O. Leevy
Director
April 30, 1999 /s/ Clarence L. Rader
-----------------------------------------------
Clarence L. Rader
Director
Pursuant to the requirements of the Securities Act, USA Capital Trust I
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania, on April 30, 1999. Each of the Administrative
Trustees of USA Capital Trust I whose signature appears below hereby appoints
Brian M. Hartline, as his or her attorney-in-fact to sign in his or her name and
behalf, in any and all capacities stated below and to file with the Securities
and Exchange Commission any and all amendments, including post-effective
amendments, to this Registration Statement on Form S-4, making such changes in
the Registration Statement as appropriate, and generally to do all such things
on their behalf in their capacities as Administrative Trustees to enable USA
Capital Trust I to comply with the provisions of the Securities Act, and all
requirements of the Securities and Exchange Commission.
USA Capital Trust I
By: /s/ Kenneth L. Tepper
-------------------------------------------
Kenneth L. Tepper
Administrative Trustee
By: /s/ Brian M. Hartline
-------------------------------------------
Brian M. Hartline
Administrative Trustee
By: /s/ Craig J. Scher
-------------------------------------------
Craig J. Scher
Administrative Trustee
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Indenture of the Corporation relating to the Junior Subordinated
Debentures
4.2 Form of Certificate of Exchange Junior Subordinated Debenture
4.3 Form of Certificate of Original Junior Subordinated Debenture
4.4 Certificate of Trust of USA Capital Trust I
4.5 Amended and Restated Declaration of Trust of USA Capital Trust I
4.6 Form of Common Security
4.7 Form of Exchange Capital Security Certificate
4.8 Form of Certificate of Original Capital Security
4.9 Form of Exchange Guarantee of the Corporation relating to the
Exchange Capital Securities
4.10 Registration Rights Agreement among the Corporation, the Trust
and Sandler O'Neill & Partners, L.P.
5.1 Opinion and consent of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP as to legality of the Exchange Junior Subordinated
Debentures and the Exchange Guarantee to be issued by the
Corporation
5.2 Opinion and consent of Richards, Layton & Finger as to the
legality of the Exchange Capital Securities to be issued by USA
Capital Trust I
8 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP as to
certain federal income tax matters
21 Subsidiaries of the Corporation
23.1 Consent of Grant Thornton LLP
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Declaration of Trust of USA Capital
Trust I
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company
under the Exchange Guarantee for the benefit of the holders of
Exchange Capital Securities of USA Capital Trust I
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
<PAGE>
Exhibit 4.1
- -------------------------------------------------------------------------------
USABANCSHARES, INC.
-----------------------------------------------------
-----------------------------------------------------
INDENTURE
Dated as of March 9, 1999
-----------------------------------------------------
WILMINGTON TRUST COMPANY
as Debenture Trustee
-----------------------------------------------------
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
- -------------------------------------------------------------------------------
<PAGE>
Tie Sheet of provisions of Trust Indenture Act of 1939 with Indenture
dated as of March 9, 1999, between USABancShares, Inc. and Wilmington Trust
Company, as Debenture Trustee:
ACT SECTION INDENTURE SECTION
310(a)(1) 6.09
(a)(2) 6.09
310(a)(3) N/A
(a)(4) N/A
310(a)(5) 6.09
310(b) 6.08
310(c) N/A
311(a) and (b) 6.13
311(c) N/A
312(a) 4.01, 4.02(a)
312(b) and (c) 4.02(b), 4.02(c)
313(a) 4.04(a)
313(b) 4.04(a)
313(c) 4.04(a)
313(d) 4.04(b)
314(a)(1), (2) and (3) 4.03
314(a)(4) 3.06
314(b) N/A
314(c)(1) and (2) 13.06
314(c)(3) N/A
314(d) N/A
314(e) 13.06
314(f) N/A
315(a),(c) and (d) 6.01
315(b) 5.08
315(e) 5.09
316(a)(1) 5.07
316(a)(2) N/A
316(a) last sentence 7.04
316(b) 7.03
316(c) 7.01
317(a) 7.03
317(b) 6.05
318 13.08
- ----------------
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
SECTION 1.01 Definitions.......................................................................................-1-
-----------
SECTION 1.02 Business Day Certificate.........................................................................-12-
------------------------
ARTICLE II
SECURITIESSECTION 2.01 Forms Generally-12-
---------------
SECTION 2.02 Execution and Authentication.....................................................................-13-
----------------------------
SECTION 2.03 Form and Payment.................................................................................-13-
----------------
SECTION 2.04 Legends..........................................................................................-14-
-------
SECTION 2.05 Global Security..................................................................................-14-
---------------
SECTION 2.06 Interest.........................................................................................-15-
--------
SECTION 2.07 Transfer and Exchange............................................................................-16-
---------------------
SECTION 2.08 Replacement Securities...........................................................................-18-
----------------------
SECTION 2.09 Temporary Securities.............................................................................-18-
--------------------
SECTION 2.10 Cancellation.....................................................................................-19-
------------
SECTION 2.11 Defaulted Interest...............................................................................-19-
------------------
SECTION 2.12 CUSIP Numbers....................................................................................-20-
-------------
ARTICLE III
PARTICULAR COVENANTS OF THE CORPORATION
SECTION 3.01 Payment of Principal, Premium and Interest.......................................................-20-
------------------------------------------
SECTION 3.02 Reserve Account..................................................................................-20-
---------------
SECTION 3.03 Offices for Notices and Payments, etc............................................................-22-
-------------------------------------
SECTION 3.04 Appointments to Fill Vacancies in Debenture Trustee's Office.....................................-23-
------------------------------------------------------------
SECTION 3.05 Provision as to Paying Agent.....................................................................-23-
----------------------------
SECTION 3.06 Certificate to Debenture Trustee.................................................................-23-
--------------------------------
SECTION 3.07 Compliance with Consolidation Provisions.........................................................-24-
----------------------------------------
SECTION 3.08 Limitation on Dividends..........................................................................-24-
-----------------------
SECTION 3.09 Covenants as to the Trust........................................................................-25-
-------------------------
SECTION 3.10 Payment of Expenses..............................................................................-25-
-------------------
SECTION 3.11 Payment Upon Resignation or Removal..............................................................-26-
-----------------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
CORPORATION AND THE DEBENTURE TRUSTEE
<S> <C>
SECTION 4.01 Securityholders' Lists...........................................................................-26-
----------------------
SECTION 4.02 Preservation and Disclosure of Lists.............................................................-26-
------------------------------------
SECTION 4.03 Reports by the Corporation.......................................................................-28-
--------------------------
SECTION 4.04 Reports by the Debenture Trustee.................................................................-28-
--------------------------------
ARTICLE V
REMEDIES OF THE DEBENTURE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 5.01 Events of Default................................................................................-29-
-----------------
SECTION 5.02 Payment of Securities on Default; Suit Therefor..................................................-31-
-----------------------------------------------
SECTION 5.03 Application of Moneys Collected by Debenture Trustee.............................................-32-
----------------------------------------------------
SECTION 5.04 Proceedings by Securityholders...................................................................-33-
------------------------------
SECTION 5.05 Proceedings by Debenture Trustee.................................................................-34-
--------------------------------
SECTION 5.06 Remedies Cumulative and Continuing...............................................................-34-
----------------------------------
SECTION 5.07 Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------
Majority of Securityholders........................................................-34-
---------------------------
SECTION 5.08 Notice of Defaults...............................................................................-35-
------------------
SECTION 5.09 Undertaking to Pay Costs.........................................................................-36-
------------------------
ARTICLE VI
CONCERNING THE DEBENTURE TRUSTEE
SECTION 6.01 Duties and Responsibilities of Debenture Trustee.................................................-36-
------------------------------------------------
SECTION 6.02 Reliance on Documents, Opinions, etc.............................................................-37-
------------------------------------
SECTION 6.03 No Responsibility for Recitals, etc..............................................................-39-
-----------------------------------
SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents, Transfer
----------------------------------------------------------------
Agents or Registrar May Own Securities............................................-39-
--------------------------------------
SECTION 6.05 Moneys to be Held in Trust.......................................................................-39-
--------------------------
SECTION 6.06 Compensation and Expenses of Debenture Trustee...................................................-40-
----------------------------------------------
SECTION 6.07 Officers' Certificate as Evidence................................................................-40-
---------------------------------
SECTION 6.08 Conflicting Interest of Debenture Trustee........................................................-41-
-----------------------------------------
SECTION 6.09 Eligibility of Debenture Trustee.................................................................-41-
--------------------------------
SECTION 6.10 Resignation or Removal of Debenture Trustee......................................................-41-
-------------------------------------------
SECTION 6.11 Acceptance by Successor Debenture Trustee........................................................-42-
-----------------------------------------
SECTION 6.12 Succession by Merger, etc........................................................................-43-
-------------------------
SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor..........................................-43-
-------------------------------------------------------
SECTION 6.14 Authenticating Agents............................................................................-44-
---------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
<S> <C>
SECTION 7.01 Action by Securityholders........................................................................-45-
-------------------------
SECTION 7.02 Proof of Execution by Securityholders............................................................-45-
-------------------------------------
SECTION 7.03 Who Are Deemed Absolute Owners...................................................................-46-
------------------------------
SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding...........................................-46-
------------------------------------------------------
SECTION 7.05 Revocation of Consents; Future Holders Bound.....................................................-46-
--------------------------------------------
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01 Purposes of Meetings.............................................................................-47-
--------------------
SECTION 8.02 Call of Meetings by Debenture Trustee............................................................-47-
-------------------------------------
SECTION 8.03 Call of Meetings by Corporation or Securityholders...............................................-48-
--------------------------------------------------
SECTION 8.04 Qualifications for Voting........................................................................-48-
-------------------------
SECTION 8.05 Regulations......................................................................................-48-
-----------
SECTION 8.06 Voting...........................................................................................-49-
------
ARTICLE IX
AMENDMENTS
SECTION 9.01 Without Consent of Securityholders...............................................................-49-
----------------------------------
SECTION 9.02 With Consent of Securityholders..................................................................-51-
-------------------------------
SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental Indentures...........................-51-
----------------------------------------------------------------------
SECTION 9.04 Notation on Securities...........................................................................-52-
----------------------
SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be Furnished
----------------------------------------------------------------
to Debenture Trustee................................................................-52-
--------------------
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE
SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms.............................................-52-
---------------------------------------------------
SECTION 10.02 Successor Person to be Substituted for Corporation..............................................-53-
--------------------------------------------------
SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee................................................-53-
------------------------------------------------
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01 Discharge of Indenture..........................................................................-54-
----------------------
SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be
------------------------------------------------------
Held in Trust by Debenture Trustee..................................................-54-
----------------------------------
SECTION 11.03 Paying Agent to Repay Moneys Held...............................................................-55-
---------------------------------
SECTION 11.04 Return of Unclaimed Moneys......................................................................-55-
--------------------------
SECTION 11.05 Defeasance Upon Deposit of Moneys or U.S. Government Obligations................................-55-
----------------------------------------------------------------
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
<S> <C>
SECTION 12.01 Indenture and Securities Solely Corporate Obligations...........................................-57-
-----------------------------------------------------
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01 Successors......................................................................................-57-
----------
SECTION 13.02 Official Acts by Successor Person...............................................................-57-
---------------------------------
SECTION 13.03 Surrender of Corporation Powers.................................................................-57-
-------------------------------
SECTION 13.04 Addresses for Notices, etc......................................................................-58-
--------------------------
SECTION 13.05 Governing Law...................................................................................-58-
-------------
SECTION 13.06 Evidence of Compliance with Conditions Precedent................................................-58-
------------------------------------------------
SECTION 13.07 Business Days...................................................................................-59-
-------------
SECTION 13.08 Trust Indenture Act to Control..................................................................-59-
------------------------------
SECTION 13.09 Table of Contents, Headings, etc................................................................-59-
--------------------------------
SECTION 13.10 Execution in Counterparts.......................................................................-59-
-------------------------
SECTION 13.11 Separability....................................................................................-59-
------------
SECTION 13.12 Assignment......................................................................................-59-
----------
SECTION 13.13 Acknowledgment of Rights........................................................................-60-
------------------------
ARTICLE XIV
REDEMPTION OF SECURITIES; MANDATORY AND
OPTIONAL SINKING FUND
SECTION 14.01 Special Event Redemption........................................................................-60-
------------------------
SECTION 14.02 Optional Redemption by Corporation..............................................................-60-
----------------------------------
SECTION 14.03 [Omitted].......................................................................................-61-
---------
SECTION 14.04 No Sinking Fund.................................................................................-62-
---------------
SECTION 14.05 Notice of Redemption; Selection of Securities...................................................-62-
---------------------------------------------
SECTION 14.06 Payment of Securities Called for Redemption.....................................................-62-
-------------------------------------------
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01 Agreement to Subordinate........................................................................-63-
------------------------
SECTION 15.02 Default on Senior Indebtedness..................................................................-63-
------------------------------
SECTION 15.03 Liquidation; Dissolution; Bankruptcy............................................................-64-
------------------------------------
SECTION 15.04 Subrogation.....................................................................................-65-
-----------
SECTION 15.05 Debenture Trustee to Effectuate Subordination...................................................-66-
---------------------------------------------
SECTION 15.06 Notice by the Corporation.......................................................................-66-
-------------------------
SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior Indebtedness.................................-67-
---------------------------------------------------------------
SECTION 15.08 Subordination May Not Be Impaired...............................................................-68-
---------------------------------
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
<S> <C>
SECTION 16.01 Extension of Interest Payment Period............................................................-69-
------------------------------------
SECTION 16.02 Notice of Extension.............................................................................-69-
-------------------
EXHIBIT A
</TABLE>
-v-
<PAGE>
THIS INDENTURE, dated as of March 9, 1999, between USABancShares, Inc.
(hereinafter called the "Corporation"), a Pennsylvania corporation, and
Wilmington Trust Company, a Delaware banking corporation, as debenture trustee
(hereinafter called the "Debenture Trustee").
W I T N E S S E T H :
In consideration of the premises, and the purchase of the Securities
(as defined below) by the holders thereof, the Corporation covenants and agrees
with the Debenture Trustee for the equal and proportionate benefit of the
respective holders from time to time of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by
reference therein defined in the Securities Act of 1933, as amended (the
"Securities Act"), shall (except as herein otherwise expressly provided or
unless the context otherwise requires) have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the date
of this Indenture as originally executed. The following terms have the meanings
given to them in the Declaration: (i) Clearing Agency; (ii) Delaware Trustee;
(iii) Property Trustee; (iv) Administrative Trustees; (v) Capital Securities;
(vi) Direct Action; (vii) Capital Securities Guarantee; (viii) Distributions;
(ix) Initial Purchaser; (x) Common Securities; and (xi) Common Securities
Guarantee. All accounting terms used herein and not expressly defined shall have
the meanings assigned to such terms in accordance with generally accepted
accounting principles, and the term "generally accepted accounting principles"
means such accounting principles as are generally accepted at the time of any
computation. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision. Headings are used for convenience of
reference only and do not affect interpretation. The singular includes the
plural and vice versa.
"Accountant's Letter" shall have the meaning set forth in Section
3.02(e).
"Additional Sums" shall have the meaning set forth in Section 2.06(c).
"Adjusted Treasury Rate" means, with respect to any prepayment date
pursuant to Section 14.01, the rate per annum equal to (i) the yield, under the
heading which represents the average for the immediately prior week, appearing
in the most recently published statistical release designated "H.15 (519)" or
any successor publication which is published weekly by the Federal Reserve and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Remaining Life (if no maturity is within
three months before or three months after the maturity corresponding to the
Remaining Life, yields for the two published maturities most closely
<PAGE>
corresponding to the Remaining Life shall be determined, and the Adjusted
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month) or (ii) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date, in each case calculated on the third Business Day
preceding the prepayment date, plus: (i) 295 basis points if such prepayment
date occurs on or prior to March 15, 2000 and (ii) 250 basis points in all other
cases.
"Affiliate" shall have the meaning given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.
"Authenticating Agent" shall mean any agent or agents of the Debenture
Trustee which at the time shall be appointed and acting pursuant to Section
6.14.
"Bank" shall mean BankPhiladelphia, a wholly owned subsidiary of the
Corporation.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors of the
Corporation or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Corporation to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Debenture Trustee.
"Book-Entry Capital Securities" shall have the meaning set forth in
Section 2.05(a)(i).
"Business Day" shall mean, with respect to any series of Securities,
any day other than a Saturday or a Sunday or a day on which banking institutions
in Wilmington, Delaware are authorized or required by law or executive order to
remain closed.
"Commission" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" shall mean the Common Stock, par value $1.00 per share,
of the Corporation or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
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"Comparable Treasury Issue" shall mean the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
Remaining Life of the Securities that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining Life
of the Securities, provided that if no United States Treasury security has a
maturity which is within a period from three months before to three months after
the Remaining Life, the two most closely corresponding United States Treasury
securities as selected by the Quotation Agent shall be used as the Comparable
Treasury Issue, and the Adjusted Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month, using such
securities.
"Comparable Treasury Price" shall mean, with respect to any prepayment
date pursuant to Section 14.01, (i) the average of three Reference Treasury
Dealer Quotations for such prepayment date, after excluding the highest and
lowest Reference Treasury Dealer Quotations, or (ii) if the Debenture Trustee
obtains fewer than five such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Compounded Interest" shall have the meaning set forth in Section
16.01.
"Corporation" shall mean the Person identified as "Corporation" in the
preamble to this Indenture and, subject to the provisions of Article X, shall
also include its successors and assigns.
"Corporation Request" or "Corporation Order" shall mean a written
request or order signed in the name of the Corporation by an Officer and
delivered to the Debenture Trustee.
"Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debenture Trustee" shall mean the Person identified as "Debenture
Trustee" in the preamble to this Indenture, and, subject to the provisions of
Article VI hereof, shall also include its successors and assigns as Debenture
Trustee hereunder.
"Declaration" shall mean the Amended and Restated Declaration of Trust
of the Trust, dated as of March 9, 1999, by and among the Corporation, as
sponsor, the Trustees (as defined therein) and the holders, from time to time,
of undivided beneficial interests in the assets of the Trust, as amended from
time to time.
"Default" shall mean any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" shall have the same meaning set forth in Section
2.11.
"Deferred Interest" shall have the meaning set forth in Section 16.01.
"Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.
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"Depositary" shall mean, with respect to the Securities for which the
Corporation shall determine that such Securities will be issued as a Global
Security, The Depository Trust Company, New York, New York, or another clearing
agency, or any successor registered as a clearing agency pursuant to Section 17A
of the Exchange Act or other applicable statute or regulation, which, in each
case, shall be designated by the Corporation pursuant to Section 2.05(d).
"Dissolution Event" shall mean any event resulting in the dissolution
of the Trust pursuant to the Declaration, and the distribution of the Securities
held by the Property Trustee to the holders of the Trust Securities issued by
the Trust pro rata in accordance with the Declaration.
"Duff's" means Duff & Phelps Credit Rating Co.
"Eligible Investments" means any and all of the following:
(i) direct obligations of, and obligations fully
guaranteed for timely payment by, the United States of America, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Federal Home Loan Banks or any agency or
instrumentality of the United States of America which has a rating of
Aaa by Moody's or AAA by Duff's at the time of such investment the
obligations of which are backed by the full faith and credit of the
United States of America;
(ii) (A) demand and time deposits in, certificates of
deposit of, banker's acceptances issued by or federal funds sold by any
depository institution or trust company (including the Debenture
Trustee or its agent acting in their respective commercial capacities)
incorporated under the laws of the United States of America or any
State thereof and subject to supervision and examination by federal
and/or state authorities, so long as at the time of such investment or
contractual commitment providing for such investment, such depository
institution or trust company has a short term unsecured debt rating in
the highest available rating category and provided that each such
investment has an original maturity of no more than 365 days, and (B)
any other demand or time deposit or deposit which is fully insured by
the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (i) above and
entered into with a depository institution or trust company (acting as
a principal) rated A or higher by S&P, AA+ by Duff's, A1 or higher by
Moody's or Prime-1 by Moody's or A by Fitch; provided, however, that
collateral transferred pursuant to such repurchase obligation must (A)
be valued weekly at current market price plus accrued interest, (B)
pursuant to such valuation, equal, at all times, 105% of the cash
transferred by the Debenture Trustee in exchange for such collateral
and (C) be delivered to the Debenture Trustee or, if the Debenture
Trustee is supplying the collateral, an agent for the Debenture
Trustee, in such a manner as to accomplish perfection of a security
interest in the collateral by possession of certificated securities;
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(iv) commercial paper having an original maturity of
less than 365 days and issued by an institution having a short term
unsecured debt rating in the highest available rating category of any
Rating Agency at the time of such investment; and
(v) money market funds having ratings in the highest
available rating category of any Rating Agency at the time of such
investment.
"Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Corporation to exchange Series B
Securities for Series A Securities and to exchange a Series B Capital Securities
Guarantee for a Series A Capital Securities Guarantee and (ii) by the Trust to
exchange Series B Capital Securities for Series A Capital Securities.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 16.01.
"Federal Reserve" shall mean the Board of Governors of the Federal
Reserve System.
"Fitch" means Fitch Investors Service, Inc.
"Global Security" shall mean, with respect to the Securities, a
Security which shall be registered in the name of the Depositary or its nominee,
executed by the Corporation and delivered by the Debenture Trustee to the
Depositary or pursuant to the Depositary's instruction, or if no instructions
are received then held by the Property Trustee, all in accordance with the
Indenture.
"Indebtedness" shall mean (i) every obligation of the Corporation for
money borrowed; (ii) every obligation of the Corporation evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (iii)
every reimbursement obligation of the Corporation with respect to letters of
credit, banker's acceptances or similar facilities issued for the account of the
Corporation; (iv) every obligation of the Corporation issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities and accrued, unpaid interest to depositors
arising in the ordinary course of business); (v) every capital lease obligation
of the Corporation; (vi) all indebtedness of the Corporation, whether incurred
on or prior to the date of this Indenture or hereafter incurred, for claims in
respect of derivative products, including interest rate, foreign exchange rate
and commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, the Corporation has guaranteed or is responsible or liable for
directly or indirectly, as obligor or otherwise.
"Indebtedness Ranking on a Parity with the Securities" shall mean (i)
Indebtedness, whether outstanding on the date of execution of this Indenture or
hereafter created, assumed or incurred, to
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the extent such Indebtedness by its terms ranks pari passu with and not prior to
the Securities in the right of payment upon the happening of the dissolution,
winding-up, liquidation or reorganization of the Corporation, and (ii) all other
debt securities, and guarantees in respect of those debt securities, issued to
any trust other than the Trust, or a trustee of such trust, partnership or other
entity affiliated with the Corporation, that is a financing vehicle of the
Corporation (a "financing entity") in connection with the issuance by such
financing entity of equity securities or other securities guaranteed by the
Corporation pursuant to an instrument that ranks pari passu with or junior in
right of payment to the Capital Securities Guarantee. The securing of any
Indebtedness otherwise constituting Indebtedness Ranking on a Parity with the
Securities shall not be deemed to prevent such Indebtedness from constituting
Indebtedness Ranking on a Parity with the Securities.
"Indebtedness Ranking Junior to the Securities" shall mean any
Indebtedness, whether outstanding on the date of execution of this Indenture or
hereafter created, assumed or incurred, to the extent such Indebtedness by its
terms ranks junior to and not pari passu with or prior to the Securities (and
any other Indebtedness Ranking on a Parity with the Securities) in right of
payment upon the happening of the dissolution or winding-up or liquidation or
reorganization of the Corporation. The securing of any Indebtedness otherwise
constituting Indebtedness Ranking Junior to the Securities shall not be deemed
to prevent such Indebtedness from constituting Indebtedness Ranking Junior to
the Securities.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
"Initial Optional Redemption Date" shall mean March 15, 2009.
"Interest Payment Date" shall have the meaning set forth in Section
2.06(a).
"Investment Company Event" means the receipt by the Corporation and the
Trust of an opinion of independent securities counsel experienced in such
matters to the effect that as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws or any regulation
thereunder of the United States or any rules, guidelines or policies of any
applicable regulatory authority for the Corporation or (b) 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 original issuance
of the Securities, the Trust is, or within 90 days of the date of such opinion
will be, considered an Investment Company that is required to be registered
under the Investment Company Act.
"Like Amount" shall mean (i) with respect to a redemption of the Trust
Securities, Trust Securities having a liquidation amount equal to the principal
amount of Securities to be paid in accordance with their terms and (ii) with
respect to a distribution of Securities upon the liquidation of the Trust,
Securities having a principal amount equal to the liquidation amount of the
Trust Securities of the holder to whom Securities are distributed.
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
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"Make Whole Amount" shall mean an amount equal to the greater of (x)
100% of the principal amount of Securities to be prepaid or (y) the sum, as
determined by a Quotation Agent, of the present values of the remaining
scheduled payments of principal and interest on such Securities, discounted to
the prepayment date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate, plus, in the case of
each of clauses (x) and (y), accrued and unpaid interest thereon, including
Compounded Interest and Additional Sums, if any, to the date of such prepayment.
"Maturity Date" shall mean March 15, 2029.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" shall mean and include any mortgage, pledge, lien, security
interest, conditional sale, or other title retention agreement or similar
encumbrance.
"Non Book-Entry Capital Securities" shall have the meaning set forth in
Section 2.05(a)(ii).
"Officers" shall mean any of the Chairman, the Vice Chairman, the Chief
Executive Officer, the President, an Executive or Senior Vice President, a Vice
President, the Chief Financial Officer, the Secretary or an Assistant Secretary
of the Corporation.
"Officers' Certificate" shall mean, with respect to any Person, a
certificate signed by the Chairman, the Vice Chairman, the Chief Executive
Officer, the President, an Executive or Senior Vice President, a Vice President,
the Chief Financial Officer, and the Secretary or an Assistant Secretary
delivered to the Debenture Trustee. Any Officers' Certificate delivered by the
Trust shall be signed by at least one Administrative Trustee. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(a) a statement that each officer signing the Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" shall mean a written opinion of counsel, who may
be an employee of the Corporation, and who shall be reasonably acceptable to the
Debenture Trustee.
"Optional Redemption Price" shall have the meaning set forth in Section
14.02(a).
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"Other Debentures" shall mean all junior subordinated debentures other
than the Securities issued by the Corporation from time to time and sold to
trusts other than the Trust to be established by the Corporation (if any), in
each case similar to the Trust.
"Other Guarantees" shall mean all guarantees other than the Capital
Securities Guarantee and the Common Securities Guarantee issued by the
Corporation with respect to preferred beneficial interests (if any) issued to
trusts other than the Trust to be established by the Corporation (if any), in
each case similar to the Trust.
The term "outstanding" when used with reference to the Securities,
shall mean, subject to the provisions of Section 7.04, as of any particular
time, all Securities authenticated and delivered by the Debenture Trustee or the
Authenticating Agent under this Indenture, except
(a) Securities theretofore canceled by the Debenture Trustee
or the Authenticating Agent or delivered to the Debenture
Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or
prepayment of which moneys in the necessary amount shall
have been deposited in trust with the Debenture Trustee
or with any paying agent (other than the Corporation) or
shall have been set aside and segregated in trust by the
Corporation (if the Corporation shall act as its own
paying agent); provided that, if such Securities, or
portions thereof, are to be prepaid prior to maturity
thereof, notice of such prepayment shall have been given
as set forth in Article XIV or provision satisfactory to
the Debenture Trustee shall have been made for giving
such notice; and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered
pursuant to the terms of Section 2.08 unless proof
satisfactory to the Corporation and the Debenture Trustee
is presented that any such Securities are held by bona
fide holders in due course.
"Person" shall mean any individual, corporation, estate, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security shall mean every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.08 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Principal Office of the Debenture Trustee," or other similar term,
shall mean the office of the Debenture Trustee, at which at any particular time
its corporate trust business shall be administered.
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"Purchase Agreement" shall mean the Purchase Agreement, dated March 4,
1999, by and among the Corporation, the Trust and the Initial Purchaser named
therein.
"Property Trustees" shall have the same meaning as set forth in the
Declaration.
"Quotation Agent" shall mean the Reference Treasury Dealer appointed by
the Corporation.
"Rating Agency" means any nationally recognized securities rating
organization, including S&P, Moody's, Fitch and Duff's.
"Redemption Price" means the Special Event Redemption Price or the
Optional Redemption Price, as the context requires.
"Reference Treasury Dealer" shall mean a nationally recognized U.S.
Government securities dealer in New York, New York selected by the Corporation.
"Reference Treasury Dealer Quotations" shall mean, with respect to each
Reference Treasury Dealer and any prepayment date pursuant to Section 14.01, the
average, as determined by the Debenture Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Debenture Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such prepayment date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 9, 1999, by and among the Corporation, the Trust
and the Initial Purchaser named therein, as such agreement may be amended,
modified or supplemented from time to time.
"Regulatory Capital Event" shall mean the receipt by the Corporation
and the Trust of an opinion of independent bank regulatory counsel experienced
in such matters to the effect that as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any rules, guidelines or
policies of an applicable regulatory authority for the Corporation or the Bank
or (b) 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 original issuance of the Securities, the Capital Securities do not
constitute, or within 90 days of the date of such opinion will not constitute,
Tier 1 Capital (or its then equivalent if the Corporation were subject to such
capital requirement) applied as if the Corporation (or its successors) were a
bank holding company for purposes of capital adequacy guidelines of the Federal
Reserve Board (or any successor regulatory authority with jurisdiction over bank
holding companies), or any capital adequacy guidelines as then in effect and
applicable to the Corporation; provided, however, that the distribution of the
Securities in connection with the liquidation of the Trust by the Corporation
shall not in and of itself constitute a Regulatory Capital Event unless such
liquidation shall have occurred in connection with a Tax Event.
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"Remaining Life" shall mean the term of the Securities from any
prepayment date pursuant to Section 14.01 to the Maturity Date.
"Reserve Account" shall mean the segregated account that was
established by the Debenture Trustee prior to the Closing Date in accordance
with Section 3.02.
"Reserve Account Balance" shall mean, as of the date of determination,
the principal amount of the securities plus the cash balance held in the Reserve
Account.
"Reserve Account Property" shall have the meaning set forth in Section
3.02(f).
"Reserve Account Required Amount" shall mean, as of the date of
determination, the amount equal to $1,958,900; provided, that on September 15,
2001 and each Interest Payment Date thereafter the Reserve Account Required
Amount shall be reduced by the amount of the interest payment on the Securities
on that Interest Payment Date.
"Reserve Account Withdrawal" shall have the meaning set forth in
Section 3.02(d).
"Responsible Officer" shall mean, with respect to the Debenture
Trustee, any officer assigned to the Corporate Trust Office, including any
managing director, principal, vice president, assistant vice president,
assistant treasurer, assistant secretary or any other officer of the Debenture
Trustee customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of this Indenture, and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Restricted Security" shall mean Securities that bear or are required
to bear the legends relating to transfer restrictions under the Securities Act
set forth in Exhibit A hereto.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"S&P" means Standard & Poor's Corporation.
"Securities" shall mean the Series A Securities and the Series B
Securities.
"Securityholder," "holder of Securities," or other similar terms, shall
mean any Person in whose name at the time a particular Security is registered in
the Security Register kept by the Corporation or the Debenture Trustee for that
purpose in accordance with the terms hereof.
"Security Agreement" shall mean the Security Agreement, dated as of
March 9, 1999, between the Corporation and the Debenture Trustee, as such
agreement may be amended, modified or supplemented from time to time.
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"Security Register" shall mean (i) prior to a Dissolution Event, the
list of holders provided to the Debenture Trustee pursuant to Section 4.01, and
(ii) following a Dissolution Event, any security register maintained by a
security registrar for the Securities appointed by the Corporation following the
execution of a supplemental indenture providing for transfer procedures as
provided for in Section 2.07(a).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding
on the date of execution of this Indenture, or hereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Securities or
Indebtedness Ranking Junior to the Securities, and any deferrals, renewals or
extensions of such Senior Indebtedness.
"Series A Securities" means the Corporation's Series A 9.50% Junior
Subordinated Deferrable Interest Debentures due March 15, 2029, as authenticated
and issued under this Indenture.
"Series B Securities" means the Corporation's Series B 9.50% Junior
Subordinated Deferrable Interest Debentures due March 15, 2029, as authenticated
and issued under this Indenture.
"Special Event" shall mean a Regulatory Capital Event, Investment
Company Event or a Tax Event, as the context requires.
"Special Event Prepayment Price" shall mean, with respect to any
prepayment of the Securities following a Special Event, an amount in cash equal
to the Make Whole Amount.
"Subsidiary" shall mean with respect to any Person, (i) any corporation
at least a majority of the outstanding voting stock of which is owned, directly
or indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person or by one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries and
(iii) any limited partnership of which such Person or any of its Subsidiaries is
a general partner. For the purposes of this definition, "voting stock" means
shares, interests, participations or other equivalents in the equity interest
(however designated) in such Person having ordinary voting power for the
election of a majority of the directors (or the equivalent) of such Person,
other than shares, interests, participations or other equivalents having such
power only by reason of the occurrence of a contingency.
"Tax Event" shall mean the receipt by the Trust and the Corporation of
an opinion of independent tax 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 original issuance of the Securities, there is more than an insubstantial risk
that (i) the Trust is, or will be within 90 days of the date of such opinion,
subject
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to United States federal income tax with respect to income received or accrued
on the Securities, (ii) the interest payable by the Corporation on the
Securities is not, or within 90 days of the date of such opinion will not be,
deductible by the Corporation, in whole or in part, for United States federal
income tax purposes or (iii) the Trust is, or will be within 90 days of the date
of such opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
The "Trust" shall mean USA Capital Trust I, a Delaware business trust
created for the purpose of issuing its undivided beneficial interests in
connection with the issuance of Securities under this Indenture.
"Trust Securities" shall mean, collectively, the Capital Securities and
the Common Securities.
"U.S. Government Obligations" shall mean securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii), are not callable or prepayable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
SECTION 1.02 Business Day Certificate.
On the date of execution and delivery of this Indenture (with respect
to the remainder of calendar year 1999) and thereafter, within 15 days prior to
the end of each calendar year while this Indenture remains in effect (with
respect to the succeeding calendar years), the Corporation shall deliver to the
Debenture Trustee an Officers' Certificate specifying the days on which banking
institutions or trust companies in Wilmington, Delaware are then authorized or
obligated by law or executive order to remain closed.
ARTICLE II
SECURITIES
SECTION 2.01 Forms Generally.
The Securities and the Debenture Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto, the terms
of which are incorporated in and made a part of this Indenture. The Securities
may have notations, legends or endorsements required by law, stock
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exchange rule, agreements to which the Corporation is subject or usage. Each
Security shall be dated the date of its authentication.
SECTION 2.02 Execution and Authentication.
An Officer shall sign the Securities for the Corporation by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Debenture Trustee. The signature of the Debenture Trustee shall
be conclusive evidence that the Security has been authenticated under this
Indenture.
The Debenture Trustee shall, upon a Corporation Order, authenticate for
original issue up to, and the aggregate principal amount of Securities
outstanding at any time may not exceed, $10,310,000 aggregate principal amount
of the Securities, except as provided in Sections 2.07, 2.08, 2.09 and 14.06.
SECTION 2.03 Form and Payment.
Except as provided in Section 2.05, the Securities shall be issued in
fully registered certificated form without interest coupons. Principal of and
premium, if any, and interest on the Securities issued in certificated form will
be payable, the transfer of such Securities will be registrable and such
Securities will be exchangeable for Securities bearing identical terms and
provisions at the office or agency of the Corporation maintained for such
purpose under Section 3.02; provided, however, that payments of interest may be
made at the option of the Corporation (i) by check mailed to the holder at such
address as shall appear in the Security Register or (ii) by transfer to an
account maintained by the Person entitled thereto, provided that proper transfer
instructions have been received in writing by the relevant record date.
Notwithstanding the foregoing, so long as the holder of any Securities is the
Property Trustee, the payment of the principal of and premium, if any, and
interest (including Compounded Interest and Additional Sums, if any) on such
Securities held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.
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SECTION 2.04 Legends
(a) Except as permitted by subsection (b) of this Section 2.04 or as
otherwise determined by the Corporation in accordance with applicable law, each
Security shall bear the applicable legends relating to restrictions on transfer
pursuant to the securities laws in substantially the form set forth on Exhibit A
hereto.
(b) In the event of an Exchange Offer, the Corporation shall issue and
the Debenture Trustee, upon Corporation Order, shall authenticate Series B
Securities in exchange for Series A Securities accepted for exchange in the
Exchange Offer, which Series B Securities shall not bear the legends required by
subsection (a) above (other than the legend dealing with the restriction
referred to in Section 2.07(a)(ii) of this Indenture), in each case unless the
holder of such Series A Securities is either (A) a broker-dealer who purchased
such Series A Securities directly from the Corporation for resale pursuant to
Rule 144A or any other available exemption under the Securities Act, (B) a
Person participating in the distribution of the Series A Securities or (C) a
Person who is an Affiliate of the Corporation.
SECTION 2.05 Global Security.
(a) In connection with a Dissolution Event,
(i) if any Capital Securities are held in book-entry form
("Book-Entry Capital Securities"), a Like Amount of Definitive Securities shall
be presented to the Debenture Trustee (if an arrangement with the Depositary has
been maintained) by the Property Trustee in exchange for one or more Global
Securities (as may be required pursuant to Section 2.07), to be registered in
the name of the Depositary, or its nominee, and delivered by the Debenture
Trustee to the Depositary for crediting to the accounts of its participants
pursuant to the instructions of the Administrative Trustees; the Corporation
upon any such presentation shall execute one or more Global Securities in such
aggregate principal amount and deliver the same to the Debenture Trustee for
authentication and delivery in accordance with this Indenture; and payments on
the Securities issued as a Global Security will be made to the Depositary; and
(ii) if any Capital Securities are held in certificated form,
the related Definitive Securities may be presented to the Debenture Trustee, by
the Property Trustee and any Capital Security certificates which represent
Capital Securities other than Book-Entry Capital Securities ("Non Book-Entry
Capital Securities") will be deemed to represent beneficial interests in
Securities presented to the Debenture Trustee by the Property Trustee having an
aggregate principal amount equal to the aggregate liquidation amount of the Non
Book-Entry Capital Securities until such Capital Security certificates are
presented to the security registrar for the Securities for transfer or
reissuance, at which time such Capital Security certificates will be canceled,
and a Security in a Like Amount, registered in the name of the holder of the
Capital Security certificate or the transferee of the holder of such Capital
Security certificate, as the case may be, will be executed by the Corporation
and delivered to the Debenture Trustee for authentication and delivery in
accordance with this Indenture; and upon the issuance of such Securities,
Securities with an equivalent aggregate
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principal amount that were presented by the Property Trustee to the Debenture
Trustee will be canceled.
(b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; provided, however,
that the aggregate principal amount of outstanding Securities represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and prepayments. Any endorsement of a Global Security to
reflect the amount of any increase or decrease in the aggregate principal amount
of outstanding Securities represented thereby shall be made by the Debenture
Trustee, in accordance with instructions given by the Corporation as required by
this Section 2.05.
(c) The Global Securities may be transferred, in whole but not in part,
only to the Depositary, to another nominee of the Depositary, or to a successor
Depositary selected or approved by the Corporation or to a nominee of such
successor Depositary.
(d) If at any time the Depositary notifies the Corporation that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a clearing agency registered under the Exchange Act, and, in each case, a
successor Depositary is not appointed by the Corporation within 90 days after
the Corporation receives such notice or becomes aware of such condition, as the
case may be, the Corporation will execute, and the Debenture Trustee, upon
receipt of a Corporation Order, will authenticate and make available for
delivery the Definitive Securities, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Security,
in exchange for such Global Security. If there is a Default or an Event of
Default, the Depositary shall have the right to exchange the Global Securities
for Definitive Securities. In addition, the Corporation may at any time
determine that the Securities shall no longer be represented by a Global
Security. In the event of such an Event of Default or such a determination, the
Corporation shall execute, and subject to Section 2.07, the Debenture Trustee,
upon receipt of an Officers' Certificate evidencing such determination by the
Corporation and a Corporation Order, will authenticate and make available for
delivery the Definitive Securities, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Security,
in exchange for such Global Security. Upon the exchange of the Global Security
for such Definitive Securities, in authorized denominations, the Global Security
shall be canceled by the Debenture Trustee. Such Definitive Securities issued in
exchange for the Global Security shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Debenture
Trustee. The Debenture Trustee shall deliver such Definitive Securities to the
Depositary for delivery to the Persons in whose names such Definitive Securities
are so registered.
SECTION 2.06 Interest.
(a) Each Security will bear interest at the rate of 9.50% per annum
(the "Coupon Rate") from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid or duly provided for, from
March 9, 1999, until the principal thereof becomes due and payable, and at the
Coupon Rate on any overdue principal (and premium, if any) and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of
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interest, compounded semi-annually, payable (subject to the provisions of
Article XVI) semi-annually in arrears on March 15 and September 15 of each year,
commencing September 15, 1999 (each, an "Interest Payment Date"), to the Person
in whose name such Security or any predecessor Security is registered, at the
close of business on the regular record date for such interest installment,
which shall be the last Business Day of the month immediately preceding the
month in which the relevant Interest Payment Date falls.
(b) Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months.
(c) During such time as the Property Trustee is the holder of any
Securities, the Corporation shall pay any additional amounts on the Securities
as may be necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Trust Securities shall not be reduced as
a result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event ("Additional Sums").
SECTION 2.07 Transfer and Exchange.
(a) Transfer Restrictions.
(i) Transfer Restrictions. (i) The Series A Securities, and
those Series B Securities with respect to which any Person described in Section
2.04(b)(A), (B) or (C) is the beneficial owner, may not be transferred except in
compliance with the legends contained in Exhibit A unless otherwise determined
by the Corporation in accordance with applicable law. Upon any distribution of
the Securities following a Dissolution Event, the Corporation and the Debenture
Trustee shall enter into a supplemental indenture pursuant to Section 9.01 to
provide for the transfer restrictions and procedures with respect to the
Securities substantially similar to those contained in the Declaration to the
extent applicable in the circumstances existing at such time.
(ii) The Securities will be issued and may be transferred only
in blocks having an aggregate principal amount of not less than $100,000 and in
multiples of $1,000 in excess thereof. Any attempted transfer of the Securities
in a block having an aggregate principal amount of less than $100,000 shall be
deemed to be voided and of no legal effect whatsoever. Any such purported
transferee shall be deemed not to be a holder of such Securities for any
purpose, including, but not limited to the receipt of payments on such
Securities, and such purported transferee shall be deemed to have no interest
whatsoever in such Securities.
(b) General Provisions Relating to Transfers and Exchanges. To permit
registrations of transfers and exchanges, the Corporation shall execute and the
Debenture Trustee shall authenticate Definitive Securities and Global Securities
at the request of the security registrar for the Securities. All Definitive
Securities and Global Securities issued upon any registration of transfer or
exchange of Definitive Securities or Global Securities shall be the valid
obligations of the Corporation, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Definitive Securities or Global
Securities surrendered upon such registration of transfer or exchange.
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No service charge shall be made to a holder for any registration of
transfer or exchange, but the Corporation may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith.
The Corporation shall not be required to: (i) issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business 15 days before the day of mailing of a notice of prepayment or any
notice of selection of Securities for prepayment under Article XIV hereof and
ending at the close of business on the day of such mailing; or (ii) register the
transfer of or exchange any Security so selected for prepayment in whole or in
part, except the nonprepaid portion of any Security being prepaid in part.
Prior to due presentment for the registration of a transfer of any
Security, the Debenture Trustee, the Corporation and any agent of the Debenture
Trustee or the Corporation may deem and treat the Person in whose name any
Security is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and premium, if any, and interest on such
Securities, and none of the Debenture Trustee, the Corporation and any agents of
the Debenture Trustee or the Corporation shall be affected by notice to the
contrary.
(c) Exchange of Series A Securities for Series B Securities. The Series
A Securities may be exchanged for Series B Securities pursuant to the terms of
the Exchange Offer. The Debenture Trustee shall make the exchange as follows:
The Corporation shall present the Debenture Trustee with an
Officers' Certificate certifying the following:
(A) upon issuance of the Series B Securities, the
transactions contemplated by the Exchange Offer have been
consummated; and
(B) the principal amount of Series A Securities properly
tendered in the Exchange Offer that are represented by a
Global Security and the principal amount of Series A
Securities properly tendered in the Exchange Offer that
are represented by Definitive Securities, the name of
each holder of such Definitive Securities, the principal
amount properly tendered in the Exchange Offer by each
such holder and the name and address to which Definitive
Securities for Series B Securities shall be registered
and sent for each such holder.
The Debenture Trustee, upon receipt of (i) such Officers' Certificate,
(ii) and Opinion of Counsel (x) to the effect that the Series B Securities have
been registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters set
forth in Section 3(p) of the Registration Rights Agreement and (iii) a
Corporation Order, shall authenticate (A) a Global Security representing Series
B Securities in aggregate principal amount equal to the aggregate principal
amount of Series A Securities represented by Global Security indicated in such
Officers' Certificate as having been properly
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tendered and (B) Definitive Securities representing Series B Securities
registered in the names of, and in the principal amounts indicated in, such
Officers' Certificate.
If the principal amount of the Global Security for the Series B
Securities is less than the principal amount of the Global Security for the
Series A Securities, the Debenture Trustee shall make an endorsement on such
Global Security for Series A Securities indicating a reduction in the principal
amount represented thereby.
The Debenture Trustee shall deliver such Definitive Securities
representing Series B Securities to the holders thereof as indicated in such
Officers' Certificate.
SECTION 2.08 Replacement Securities.
If any mutilated Security is surrendered to the Debenture Trustee, or
the Corporation and the Debenture Trustee receive evidence to their satisfaction
of the destruction, loss or theft of any Security, the Corporation shall issue
and the Debenture Trustee shall authenticate a replacement Security if the
Debenture Trustee's requirements for replacements of Securities are met. An
indemnity bond must be supplied by the holder that is sufficient in the judgment
of the Debenture Trustee and the Corporation to protect the Corporation, the
Debenture Trustee, any agent thereof or any Authenticating Agent from any loss
that any of them may suffer if a Security is replaced. The Corporation or the
Debenture Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Corporation and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
SECTION 2.09 Temporary Securities.
Pending the preparation of Definitive Securities, the Corporation may
execute, and upon Corporation Order the Debenture Trustee shall authenticate and
make available for delivery, temporary Securities that are printed,
lithographed, typewritten or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the Definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the Officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Corporation shall cause
Definitive Securities to be prepared without unreasonable delay. The Definitive
Securities shall be printed, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
Officers executing such Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the office
or agency maintained by the Corporation for such purpose pursuant to Section
3.03 hereof, without charge to the holder. Upon surrender for cancellation of
any one or more temporary Securities, the Corporation shall execute, and the
Debenture Trustee shall authenticate and make available for
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delivery, in exchange therefor the same aggregate principal amount of Definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as Definitive Securities.
SECTION 2.10 Cancellation.
The Corporation at any time may deliver Securities to the Debenture
Trustee for cancellation. The Debenture Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall return such canceled Securities to the
Corporation. The Corporation may not issue new Securities to replace Securities
that have been prepaid or paid or that have been delivered to the Debenture
Trustee for cancellation.
SECTION 2.11 Defaulted Interest.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the holder on the
relevant regular record date by virtue of having been such holder; and such
Defaulted Interest shall be paid by the Corporation, at its election, as
provided in clause (a) or clause (b) below:
(a) The Corporation may make payment of any Defaulted Interest
on Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Corporation
shall notify the Debenture Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each such Security and the
date of the proposed payment, and at the same time the Corporation
shall deposit with the Debenture Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Debenture
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Debenture Trustee shall fix a special record date for the
payment of such Defaulted Interest which shall not be more than 15 nor
less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Debenture Trustee of the
notice of the proposed payment. The Debenture Trustee shall promptly
notify the Corporation of such special record date and, in the name and
at the expense of the Corporation, shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor
to be mailed, first class postage prepaid, to each Securityholder at
his or her address as it appears in the Security Register, not less
than 10 days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered on such special record date and
shall be no longer payable pursuant to the following clause (b).
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(b) The Corporation may make payment of any Defaulted Interest
on any Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Corporation to the Debenture Trustee of the
proposed payment pursuant to this clause, such manner of payment shall
be deemed practicable by the Debenture Trustee.
SECTION 2.12 CUSIP Numbers.
The Corporation in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Debenture Trustee shall use "CUSIP"
numbers in notices of prepayment as a convenience to Securityholders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a prepayment and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such prepayment shall
not be affected by any defect in or omission of such numbers. The Corporation
will promptly notify the Debenture Trustee of any change in the CUSIP numbers.
ARTICLE III
PARTICULAR COVENANTS OF THE CORPORATION
SECTION 3.01 Payment of Principal, Premium and Interest.
The Corporation covenants and agrees for the benefit of the holders of
the Securities that it will duly and punctually pay or cause to be paid the
principal of and premium, if any, and interest on the Securities at the place,
at the respective times and in the manner provided herein. Except as provided in
Section 2.03, each installment of interest on the Securities may be paid by
mailing checks for such interest payable to the order of the holder of Security
entitled thereto as they appear in the Security Register. The Corporation
further covenants to pay any and all amounts, including, without limitation,
Additional Sums, as may be required pursuant to Section 2.06(c), Liquidated
Damages, if any, on the dates and in the manner required under the Registration
Rights Agreement and Compounded Interest, as may be required pursuant to Section
16.01.
SECTION 3.02 Reserve Account.
(a) The Debenture Trustee, on behalf of the Corporation, hereby
establishes the Reserve Account to be held (together with all property therein
from time to time) by and maintained with the Debenture Trustee in accordance
with the provisions hereof. The Reserve Account shall be held as one or more
segregated accounts and shall be titled as follows: "Wilmington Trust Company,
as Debenture Trustee for the 9.50% Junior Subordinated Deferrable Interest
Debentures, due March 15, 2029 -- Reserve Account." On the Closing Date, the
Corporation shall make an initial deposit into the Reserve Account in an amount
equal to the Reserve Account Required Amount. As set forth in paragraph (g) of
this Section 3.02, the Debenture Trustee shall invest the amounts deposited in
the Reserve Account in Eligible Investments.
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(b) To the extent that the Corporation's available funds are
insufficient to pay the interest that is due and payable on the Securities on an
Interest Payment Date, the amount on deposit in the Reserve Account shall be
used to make such payment. The Corporation shall notify the Debenture Trustee in
writing at least 10 days prior to any Interest Payment Date of the need for
funds to be withdrawn from the Reserve Account to make an interest payment on
the Securities. Commencing with the interest payment due September 15, 2001, the
Debenture Trustee shall use amounts on deposit in the Reserve Account to make
interest payments on the Securities on each Interest Payment Date until all
amounts in the Reserve Account have been disbursed. The Debenture Trustee shall
promptly, but in no event later than two Business Days prior to any such
Interest Payment Date, withdraw the funds required to make such interest payment
on the Securities. The Debenture Trustee is authorized to sell Eligible
Investments held in the Reserve Account in an amount so as to yield cash
proceeds therefrom to cover interest payments due on the Securities on an
Interest Payment Date; provided, however, that the Debenture Trustee shall not
be liable or responsible for losses resulting from its sale of Eligible
Investments. Any excess cash remaining from the sale of Eligible Investments in
excess of the amount needed to make interest payments shall remain in the
Reserve Account and be reinvested in other Eligible Investments in accordance
with paragraph (g) of this Section 3.02.
(c) The Debenture Trustee shall deliver to the Corporation by the
fifteenth day of each month a report indicating (i) the Reserve Account Balance
with the identity of the investments included therein, and (ii) the outstanding
principal balance of the Securities, as of the end of the previous month.
(d) If, based on any report delivered by the Debenture Trustee, the
balance in the Reserve Account is greater than the Reserve Account Required
Amount, the Debenture Trustee, at the written instruction of the Corporation,
shall release and pay the cash amount (such amount, a "Reserve Account
Withdrawal") of the excess to the Corporation. If funds in the Reserve Account
are invested in Eligible Investments whereby an insufficient amount of cash is
available, the Debenture Trustee shall not be required to make a Reserve Account
Withdrawal in excess of the amount of cash available until such excess amount
becomes available in cash.
(e) The Corporation agrees to treat all money, security and other
property on deposit in the Reserve Account (including income and gains or losses
thereon) (the "Reserve Account Property") as its assets (and earnings) for
federal, state and local tax purposes and not to sell, transfer or otherwise
dispose of any Reserve Account Property or its interest therein.
(f) The Corporation and the Debenture Trustee agree that any cash or
assets held in the Reserve Account shall be held solely in the name of the
Debenture Trustee, as described herein, and shall be subject to the exclusive
custody and control of the Debenture Trustee.
(g) The Debenture Trustee shall invest any cash deposited in the
Reserve Account in Eligible Investments as the Corporation shall direct in
writing. Except as provided in paragraph (b) of this Section 3.02, each Eligible
Investment for the Reserve Account (including reinvestment of the proceeds of
Eligible Investments) shall be held to its maturity and shall mature not later
than 365 days from the date on which the investment was initially made. The
Debenture Trustee shall not be
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liable or responsible for losses on any investments made by it pursuant to and
in compliance with such instructions of the Corporation. Any cash in the Reserve
Account must be insured by the Federal Deposit Insurance Corporation up to the
maximum allowable amount under applicable law.
(h) At all times when there are amounts in the Reserve Account, the
Corporation will maintain arrangements with respect to the creation, maintenance
and perfection of a first priority security interest in favor of the
Securityholders in the Reserve Account, including, without limitation, the
execution and delivery of the Security Agreement.
(i) The Debenture Trustee shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties under this Section 3.02.
(j) On any date on or after the date this Indenture ceases to be in
effect pursuant to Section 11.01 hereof, the Debenture Trustee shall withdraw
all cash amounts and securities then on deposit in the Reserve Account and
deliver such amounts to the Corporation or its designee in accordance with the
provisions of Section 11.03 hereof.
SECTION 3.03 Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the Corporation
will maintain in Wilmington, Delaware an office or agency where the Securities
may be presented for payment, an office or agency where the Securities may be
presented for registration of transfer and for exchange as in this Indenture
provided and an office or agency where notices and demands to or upon the
Corporation in respect of the Securities or this Indenture may be served. The
Corporation will give to the Debenture Trustee written notice of the location of
any such office or agency and of any change of location thereof. Until otherwise
designated from time to time by the Corporation in a notice to the Debenture
Trustee, any such office or agency for all of the above purposes shall be the
Principal Office of the Debenture Trustee. In case the Corporation shall fail to
maintain any such office or agency in Wilmington, Delaware or shall fail to give
such notice of the location or of any change in the location thereof,
presentations and demands may be made and notices may be served at the Principal
Office of the Debenture Trustee.
In addition to any such office or agency, the Corporation may from time
to time designate one or more offices or agencies outside Wilmington, Delaware
where the Securities may be presented for payment, for registration of transfer
and for exchange and where notices and demands to or upon the Corporation in
respect of the Securities or this Indenture may be served in the manner provided
in this Indenture, and the Corporation may from time to time rescind such
designation, as the Corporation may deem desirable or expedient; provided,
however, that no such designation or rescission shall in any manner relieve the
Corporation of its obligation to maintain any such office or agency in
Wilmington, Delaware for the purposes above mentioned. The Corporation will give
to the Debenture Trustee prompt written notice of any such designation or
rescission thereof.
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SECTION 3.04 Appointments to Fill Vacancies in Debenture Trustee's
Office.
The Corporation, whenever necessary to avoid or fill a vacancy in the
office of Debenture Trustee, will appoint, in the manner provided in Section
6.10(b), a Debenture Trustee, so that there shall at all times be a Debenture
Trustee hereunder.
SECTION 3.05 Provision as to Paying Agent.
(a) If the Corporation shall appoint a paying agent other than the
Debenture Trustee with respect to the Securities, it will cause such paying
agent to execute and deliver to the Debenture Trustee an instrument in which
such agent shall agree with the Debenture Trustee, subject to the provision of
this Section 3.05,
(1) that it will hold all sums held by it as such agent
for the payment of the principal of and premium, if
any, or interest on the Securities (whether such sums
have been paid to it by the Corporation or by any
other obligor on the Securities) in trust for the
benefit of the holders of the Securities; and
(2) that it will give the Debenture Trustee notice of any
failure by the Corporation (or by any other obligor
on the Securities) to make any payment of the
principal of and premium or interest (including
Additional Sums and Compounded Interest, if any) on
the Securities when the same shall be due and
payable.
(b) If the Corporation shall act as its own paying agent, it will, on
or before each due date of the principal of and premium, if any, or interest on
the Securities, set aside, segregate and hold in trust for the benefit of the
holders of the Securities a sum sufficient to pay such principal, premium or
interest so becoming due and will notify the Debenture Trustee of any failure to
take such action and of any failure by the Corporation (or by any other obligor
under the Securities) to make any payment of the principal of and premium, if
any, or interest on the Securities when the same shall become due and payable.
(c) Anything in this Section 3.05 to the contrary notwithstanding, the
Corporation may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Securities hereunder, or for any other reason, pay
or cause to be paid to the Debenture Trustee all sums held in trust for such
Securities by the Debenture Trustee or any paying agent hereunder, as required
by this Section 3.05, such sums to be held by the Debenture Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.05 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.05 is subject to
Sections 11.03 and 11.04.
SECTION 3.06 Certificate to Debenture Trustee.
The Corporation will deliver to the Debenture Trustee on or before 120
days after the end of each fiscal year in each year, commencing with the first
fiscal year ending after the date hereof,
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so long as Securities are outstanding hereunder, an Officers' Certificate, one
of the signers of which shall be the principal executive, principal financial or
principal accounting officer of the Corporation, stating that in the course of
the performance by the signers of their duties as officers of the Corporation
they would normally have knowledge of any Default by the Corporation in the
performance of any covenants contained herein, stating whether or not they have
knowledge of any such Default and, if so, specifying each such Default of which
the signers have knowledge and the nature thereof.
SECTION 3.07 Compliance with Consolidation Provisions.
The Corporation will not, while any of the Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other Person unless the
provisions of Article X hereof are complied with.
SECTION 3.08 Limitation on Dividends.
The Corporation will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Corporation's capital stock (which includes common
and preferred stock), (ii) make any payment of principal of or premium, if any,
or interest on or repay, repurchase or redeem any debt securities of the
Corporation (including Other Debentures) constituting Indebtedness Ranking on a
Parity with the Securities or Indebtedness Ranking Junior to the Securities, or
(iii) make any guarantee payments with respect to any guarantee (other than the
Capital Securities Guarantee) by the Corporation of the debt securities of any
Subsidiary of the Corporation (including Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the Securities (other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, Common Stock, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, (d) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (e) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Corporation's benefit or
compensation plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans), if at such time (1) there shall have
occurred any event of which the Corporation has actual knowledge that (a) is a
Default or an Event of Default and (b) in respect of which the Corporation shall
not have taken reasonable steps to cure, (2) if such Securities are held by the
Property Trustee, the Corporation shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee or (3) the
Corporation shall have given notice of its election to exercise its right to
commence an Extended Interest Payment Period and shall not have rescinded such
notice, and such Extended Interest Payment Period or any extension thereof shall
have commenced and be continuing.
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SECTION 3.09 Covenants as to the Trust.
In the event Securities are issued to the Trust or a trustee of the
Trust in connection with the issuance of Trust Securities by the Trust, for so
long as such Trust Securities remain outstanding, the Corporation (i) will
maintain 100% direct or indirect ownership of the Common Securities of the
Trust; provided, however, that any successor of the Corporation, permitted
pursuant to Article X, may succeed to the Corporation's ownership of such Common
Securities, (ii) will use commercially reasonable efforts to cause the Trust (a)
to remain a business trust, except in connection with a distribution of
Securities to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (b)
to otherwise continue to be classified as a grantor trust and not an association
taxable as a corporation for United States federal income tax purposes, (iii)
will use commercially reasonable efforts to cause each holder of the Trust
Securities to be treated as owning an undivided beneficial interest in the
Securities and (iv) will not cause, as sponsor of the Trust, or permit, as
holder of the Common Securities, the dissolution, winding-up or liquidation of
the Trust, except as provided in the Declaration.
SECTION 3.10 Payment of Expenses.
In connection with the offering, sale and issuance of the Securities to
the Trust and in connection with the sale of the Trust Securities by the Trust,
the Corporation, in its capacity as borrower with respect to the Securities,
shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities, including commissions and expenses
and indemnification obligations, if any, to or for the benefit
of the Initial Purchaser (as defined in the Purchase
Agreement) payable pursuant to the Purchase Agreement, fees
and expenses in connection with any exchange offer, filing of
a shelf registration statement or other action to be taken
pursuant to the Registration Rights Agreement and compensation
of the Debenture Trustee in accordance with the provisions of
Section 6.06;
(b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of
the Trust), the offering, sale and issuance of the Trust
Securities (including commissions to the Initial Purchaser in
connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses
relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying
agent(s), registrar(s), transfer agent(s), duplicating, travel
and telephone and other telecommunications expenses and costs
and expenses incurred in connection with the acquisition,
financing, and disposition of assets of the Trust;
(c) be primarily and fully liable for any indemnification
obligations arising with respect to the Declaration;
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(d) pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of
the Trust; and
(e) pay all other fees, expenses, debts and obligations (other
than in respect of the Trust Securities) related to the Trust,
including, without limitation, the fees and expenses of the
Debenture Trustee.
SECTION 3.11 Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or resignation of the
Debenture Trustee, unless otherwise stated, the Corporation shall pay to the
Debenture Trustee all amounts accrued and owing to the date of such termination,
removal or resignation. Upon termination of the Declaration or the removal or
resignation of the Delaware Trustee or the Property Trustee, as the case may be,
pursuant to Section 5.7 of the Declaration, the Corporation shall pay to the
Delaware Trustee or the Property Trustee, as the case may be, all amounts
accrued and owing to the date of such termination, removal or resignation.
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
CORPORATION AND THE DEBENTURE TRUSTEE
SECTION 4.01 Securityholders' Lists.
The Corporation covenants and agrees that it will furnish or cause to
be furnished to the Debenture Trustee:
(a) on a semi-annual basis on each regular record date for the
Securities, a list, in such form as the Debenture Trustee may
reasonably require, of the names and addresses of the
Securityholders as of such record date; and
(b) at such other times as the Debenture Trustee may request in
writing, within 30 days after the receipt by the Corporation,
of any such request, a list of similar form and content as of
a date not more than 15 days prior to the time such list is
furnished,
except that, no such lists need be furnished so long as the Debenture Trustee is
in possession thereof by reason of its acting as security registrar for the
Securities.
SECTION 4.02 Preservation and Disclosure of Lists.
(a) The Debenture Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of the Securities (1) contained in the most recent list furnished to it
as provided in Section 4.01 or (2) received by it in
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the capacity of security registrar (if so acting) hereunder. The Debenture
Trustee may destroy any list furnished to it as provided in Section 4.01 upon
receipt of a new list so furnished.
(b) In case three or more holders of Securities (hereinafter referred
to as "applicants") apply in writing to the Debenture Trustee and furnish to the
Debenture Trustee reasonable proof that each such applicant has owned a Security
for a period of at least six months preceding the date of such application, and
such application states that the applicants desire to communicate with other
holders of Securities or with holders of all Securities with respect to their
rights under this Indenture and is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit, then the
Debenture Trustee shall within five Business Days after the receipt of such
application, at its election, either:
(1) afford such applicants access to the information
preserved at the time by the Debenture Trustee in
accordance with the provisions of subsection (a) of
this Section 4.02, or
(2) inform such applicants as to the approximate number
of holders of all Securities whose names and
addresses appear in the information preserved at the
time by the Debenture Trustee in accordance with the
provisions of subsection (a) of this Section 4.02,
and as to the approximate cost of mailing to such
Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Debenture Trustee shall elect not to afford such applicants
access to such information, the Debenture Trustee shall, upon the written
request of such applicants, mail to each Securityholder whose name and address
appear in the information preserved at the time by the Debenture Trustee in
accordance with the provisions of subsection (a) of this Section 4.02 a copy of
the form of proxy or other communication which is specified in such request with
reasonable promptness after a tender to the Debenture Trustee of the material to
be mailed and of payment, or provision for the payment, of the reasonable
expenses of mailing, unless within five Business Days after such tender, the
Debenture Trustee shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement to the
effect that, in the opinion of the Debenture Trustee, such mailing would be
contrary to the best interests of the holders of Securities or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Debenture Trustee shall mail
copies of such material to all such Securityholders with reasonable promptness
after the entry of such order and the renewal of such tender; otherwise the
Debenture Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
(c) Each and every holder of Securities, by receiving and holding the
same, agrees with the Corporation and the Debenture Trustee that neither the
Corporation nor the Debenture Trustee
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nor any paying agent shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the holders of Securities
in accordance with the provisions of subsection (b) of this Section 4.02,
regardless of the source from which such information was derived, and that the
Debenture Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
SECTION 4.03 Reports by the Corporation.
(a) The Corporation shall file or cause to be filed with the Debenture
Trustee and with the Commission, and transmit to all holders of Securities, such
information, documents and other reports, and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided in the Trust Indenture Act. In the case of information, documents or
reports required to be filed with the Commission pursuant to Section 13(a) or
Section 15(d) of the Exchange Act, the Corporation shall file or cause the
filing of such information documents or reports with the Debenture Trustee
within 15 days after the same is required to be filed with the Commission.
(b) The Corporation covenants and agrees to transmit by mail to all
holders of Securities, as the names and addresses of such holders appear upon
the Security Register, within 30 days after the filing thereof with the
Debenture Trustee, such summaries of any information, documents and reports
required to be filed by the Corporation pursuant to subsections (a) and (b) of
this Section 4.03 as may be required by rules and regulations prescribed from
time to time by the Commission.
(c) Delivery of such reports, information and documents to the
Debenture Trustee is for informational purposes only and the Debenture Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Corporation's compliance with any of its covenants hereunder (as to which
the Debenture Trustee is entitled to rely exclusively on Officers'
Certificates).
(d) So long as is required for an offer or sale of the Securities to
qualify for an exemption under Rule 144A under the Securities Act, the
Corporation shall, upon request, provide the information required by clause
(d)(4) thereunder to each Securityholder and to each beneficial owner and
prospective purchaser of Securities identified by each Securityholder of
Restricted Securities, unless such information is furnished to the Commission
pursuant to Section 13 or l5 (d) of the Exchange Act.
SECTION 4.04 Reports by the Debenture Trustee.
(a) The Debenture Trustee shall transmit to Securityholders such
reports concerning the Debenture Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Debenture Trustee shall, within 60 days after each March 15,
following the date of this Indenture, commencing March 15, 2000, deliver to
Securityholders a brief report, dated as of such date which complies with the
provisions of such Section 313(a).
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(b) A copy of each such report shall, at the time of such transmission
to Securityholders, be filed by the Debenture Trustee with each stock exchange,
if any, upon which the Securities are listed, with the Commission and with the
Corporation. The Corporation will promptly notify the Debenture Trustee when the
Securities are listed on any stock exchange.
ARTICLE V
REMEDIES OF THE DEBENTURE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 5.01 Events of Default.
One or more of the following events of default shall constitute an
Event of Default hereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any interest (including Compounded
Interest and Additional Sums, if any or Liquidated Damages, if
any, upon any Security) on the Securities or any Other
Debentures (about which a Responsible Officer of the Debenture
Trustee has actual knowledge) when due, and continuance of
such default for a period of 30 days; provided, however, that
a valid extension of an interest payment period by the
Corporation in accordance with the terms hereof or thereof
shall not constitute a default in the payment of interest for
this purpose; or
(b) default in the payment of any principal of (or premium, if
any, on) the Securities or any Other Debentures (about which a
Responsible Officer of the Debenture Trustee has actual
knowledge) when due, whether at maturity, upon prepayment, by
declaration of acceleration of maturity or otherwise; or
(c) default in the performance, or breach, of any covenant or
warranty of the Corporation in this Indenture (other than a
covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with),
and continuance of such default or breach for a period of 90
days after there has been given, by registered or certified
mail, to the Corporation by the Debenture Trustee or to the
Corporation and the Debenture Trustee by the holders of at
least 25% in aggregate principal amount of the outstanding
Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(d) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Corporation in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing
a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Corporation or for
any substantial part of its property, or ordering the
winding-up or
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liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of 90 consecutive
days; or
(e) the Corporation shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Corporation or
of any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.
If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Debenture
Trustee or the holders of not less than 25% in aggregate principal amount of the
Securities then outstanding may declare the principal amount of all Securities
to be due and payable immediately, by a notice in writing to the Corporation
(and to the Debenture Trustee if given by the holders of the outstanding
Securities), and upon any such declaration the same shall become immediately due
and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Corporation shall pay or shall deposit with the Debenture Trustee a sum
sufficient to pay (A) all matured installments of interest (including Compounded
Interest and Additional Sums, if any) and Liquidated Damages, if any, upon all
the Securities and the principal of and premium, if any, on any and all
Securities which shall have become due otherwise than by acceleration (with
interest upon such principal and premium, if any, and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest, at the same rate as the rate of interest specified in
the Securities to the date of such payment or deposit) and (B) such amount as
shall be sufficient to cover compensation due to the Debenture Trustee and each
predecessor Debenture Trustee, their respective agents, attorneys and counsel,
pursuant to Section 6.06, and (ii) any and all Events of Default under the
Indenture, other than the non-payment of the principal of the Securities which
shall have become due solely by such declaration of acceleration, shall have
been cured, waived or otherwise remedied as provided herein, then, in every such
case, the holders of a majority in aggregate principal amount of the Securities
then outstanding, by written notice to the Corporation and to the Debenture
Trustee, may rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.
In case the Debenture Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Debenture Trustee, then and in every
such case the Corporation, the Debenture Trustee and the holders of the
Securities shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Corporation, the Debenture
Trustee and the holders of the Securities shall continue as though no such
proceeding had been taken.
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SECTION 5.02 Payment of Securities on Default; Suit Therefor.
The Corporation covenants that (a) in case default shall be made in the
payment of any installment of interest (including Compounded Interest and
Additional Sums, if any) and Liquidated Damages, if any, upon any of the
Securities as and when the same shall become due and payable, and such default
shall have continued for a period of 30 days, or (b) in case default shall be
made in the payment of the principal of or premium, if any, on any of the
Securities as and when the same shall have become due and payable, whether at
maturity of the Securities or upon prepayment or by declaration or otherwise,
then, upon demand of the Debenture Trustee, the Corporation will pay to the
Debenture Trustee, for the benefit of the holders of the Securities, the whole
amount that then shall have become due and payable on all such Securities for
principal and premium, if any, or interest (including Compounded Interest and
Additional Sums, if any and Liquidated Damages, if any, upon, or both, as the
case may be) with interest upon the overdue principal and premium, if any, and
(to the extent that payment of such interest is enforceable under applicable law
and, if the Securities are held by the Trust or a trustee of such trust, without
duplication of any other amounts paid by the Trust or a trustee in respect
thereof) upon the overdue installments of interest (including Compounded
Interest and Additional Sums, if any and Liquidated Damages, if any), at the
rate borne by the Securities; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation to the Debenture Trustee, its agents, attorneys and
counsel, and any other amount due to the Debenture Trustee pursuant to Section
6.06.
In case the Corporation shall fail forthwith to pay such amounts upon
such demand, the Debenture Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Corporation or any other
obligor on the Securities and collect in the manner provided by law out of the
property of the Corporation or any other obligor on the Securities, wherever
situated, the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Corporation or any other obligor on the Securities
under Title 11, United States Code, or any other applicable law, or in case a
receiver or trustee shall have been appointed for the property of the
Corporation or such other obligor, or in the case of any other similar judicial
proceedings relative to the Corporation or other obligor upon the Securities, or
to the creditors or property of the Corporation or such other obligor, the
Debenture Trustee, irrespective of whether the principal of the Securities shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Debenture Trustee shall have made any demand
pursuant to the provisions of this Section 5.02, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and interest owing and unpaid
in respect of the Securities and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Debenture Trustee (including any
claim for amounts due to the Debenture Trustee pursuant to 6.06) and of the
Securityholders allowed in such judicial proceedings relative to the Corporation
or any other obligor on the Securities, or to the creditors or property of the
Corporation or such other
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obligor, unless prohibited by applicable law and regulations, to vote on behalf
of the holders of the Securities in any election of a trustee or a standby
trustee in arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or person performing similar functions in comparable
proceedings, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the Securityholders to make
such payments to the Debenture Trustee, and, in the event that the Debenture
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Debenture Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Debenture Trustee, each
predecessor Debenture Trustee and their respective agents, attorneys and
counsel, and all other amounts due to the Debenture Trustee pursuant to Section
6.06.
Nothing herein contained shall be construed to authorize the Debenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any holder thereof or to
authorize the Debenture Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Debenture Trustee without
the possession of any of the Securities, or the production thereof on any trial
or other proceeding relative thereto, and any such suit or proceeding instituted
by the Debenture Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the holders of the Securities.
In any proceedings brought by the Debenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Debenture Trustee shall be a party), the Debenture Trustee shall be
held to represent all the holders of the Securities, and it shall not be
necessary to make any holders of the Securities parties to any such proceedings.
SECTION 5.03 Application of Moneys Collected by Debenture Trustee.
Any moneys collected by the Debenture Trustee shall be applied in the
following order, at the date or dates fixed by the Debenture Trustee for the
distribution of such moneys, upon presentation of the Securities in respect of
which moneys have been collected, and stamping thereon the payment, if only
partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection applicable to
the Securities and all other amounts due to the Debenture Trustee under Section
6.06;
Second: To the payment of all Senior Indebtedness of the Corporation if
and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon
Securities for principal of (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) and
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Liquidated Damages, if any, on the Securities, in respect of which or for the
benefit of which money has been collected, ratably, without preference of
priority of any kind, according to the amounts due on such Securities for
principal (and premium, if any) and interest, respectively; and
Fourth: To the Corporation.
SECTION 5.04 Proceedings by Securityholders.
No holder of any Security shall have any right by virtue of or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such holder previously shall have given to the Debenture
Trustee written notice of an Event of Default and of the continuance thereof
with respect to the Securities specifying such Event of Default, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Securities then outstanding shall have made written
request upon the Debenture Trustee to institute such action, suit or proceeding
in its own name as Debenture Trustee hereunder and shall have offered to the
Debenture Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Debenture
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action, suit or proceeding, it
being understood and intended, and being expressly covenanted by the taker and
holder of every Security with every other taker and holder and the Debenture
Trustee, that no one or more holders of Securities shall have any right in any
manner whatever by virtue of or by availing of any provision of this Indenture
to affect, disturb or prejudice the rights of any other holder of Securities, or
to obtain or seek to obtain priority over or preference to any other such
holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Securities.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Security to receive payment of the principal of (and
premium, if any) and interest on (including Compounded Interest and Additional
Sums, if any) and Liquidated Damages, if any, on such Security, on or after the
same shall have become due and payable, or to institute suit for the enforcement
of any such payment, shall not be impaired or affected without the consent of
such holder, and by accepting a Security hereunder it is expressly understood,
intended and covenanted by the taker and holder of every Security with every
other such taker and holder and the Debenture Trustee, that no one or more
holders of Securities shall have any right in any manner whatsoever by virtue or
by availing of any provision of this Indenture to affect, disturb or prejudice
the rights of the holders of any other Securities, or to obtain or seek to
obtain priority over or preference to any other such holder, or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Debenture Trustee shall be entitled to such relief as can
be given either at law or in equity.
The Corporation and the Debenture Trustee acknowledge that pursuant to
the Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set
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forth therein, to commence a Direct Action with respect to any Event of Default
referred to in clause (a) or (b) of Section 5.01.
SECTION 5.05 Proceedings by Debenture Trustee.
In case an Event of Default occurs with respect to Securities and is
continuing, the Debenture Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Debenture Trustee shall deem most effectual to protect and
enforce any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Debenture Trustee by this Indenture or by law.
SECTION 5.06 Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Debenture
Trustee or to the Securityholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and remedies available
to the Debenture Trustee or the holders of the Securities, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture or otherwise established
with respect to the Securities, and no delay or omission of the Debenture
Trustee or of any holder of any of the Securities to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or an acquiescence therein; and, subject to the provisions of Section
5.04, every power and remedy given by this Article V or by law to the Debenture
Trustee or to the Securityholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Debenture Trustee or by the
Securityholders.
SECTION 5.07 Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.
The holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee; provided, however, that (subject to the provisions of Section 6.01) the
Debenture Trustee shall have the right to decline to follow any such direction
if the Debenture Trustee shall determine that the action so directed would be
unjustly prejudicial to the holders not taking part in such direction or if the
Debenture Trustee being advised by counsel determines that the action or
proceeding so directed may not lawfully be taken or if the Debenture Trustee in
good faith by one of its Responsible Officers shall determine that the action or
proceedings so directed would involve the Debenture Trustee in personal
liability. Prior to any declaration accelerating the maturity of the Securities,
the holders of a majority in aggregate principal amount of the Securities at the
time outstanding may on behalf of the holders of all of the Securities waive any
past Default or Event of Default and its consequences except a Default (a) in
the payment of principal of (or premium, if any) or interest on (including
Compounded Interest and Additional Sums, if any) on any of the Securities
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(unless such default has been cured and a sum sufficient to pay all matured
installments of interest (including Compounded Interest and Additional Sums, if
any) (and premium, if any) and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or Liquidated Damages, if any, on any
of the Securities, or (b) in respect of covenants or provisions hereof which
cannot be modified or amended without the consent of the holder of each Security
affected; provided, however, that if the Securities are held by the Property
Trustee, such waiver or modification to such waiver shall not be effective until
the holders of a majority in aggregate liquidation amount of Trust Securities
shall have consented to such waiver or modification to such waiver; provided,
further, that if the consent of the holder of each outstanding Security is
required, such waiver shall not be effective until each holder of the Trust
Securities shall have consented to such waiver. Upon any such waiver, the
Default covered thereby shall be deemed to be cured for all purposes of this
Indenture and the Corporation, the Debenture Trustee and the holders of the
Securities shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon. Whenever any Default or Event of Default
hereunder shall have been waived as permitted by this Section 5.07, said Default
or Event of Default shall for all purposes of the Securities and this Indenture
be deemed to have been cured and to be not continuing.
SECTION 5.08 Notice of Defaults
(a) The Debenture Trustee shall, within 90 days after the occurrence of
a Default with respect to the Securities actually known to a Responsible Officer
of the Debenture Trustee, mail to all Securityholders, as the names and
addresses of such holders appear upon the Security Register, notice of all such
Defaults, unless such Default shall have been cured before the giving of such
notice (the term "Default" for the purpose of this Section 5.08 being hereby
defined to be any of the events specified in clauses (a), (b), (c), (d) and (e)
of Section 5.01, not including periods of grace, if any, provided for therein,
and irrespective of the giving of written notice specified in clause (c) of
Section 5.01); provided, however, that, except in the case of Default in the
payment of the principal of (or premium, if any) or interest (including
Compounded Interest or Additional Sums, if any) or Liquidated Damages, if any,
on any of the Securities, the Debenture Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers of the
Debenture Trustee in good faith determines that the withholding of such notice
is in the interests of the Securityholders; provided, further, that in the case
of any Default of the character specified in Section 5.01(c), no such notice to
Securityholders shall be given until at least 60 days after the occurrence
thereof, but shall be given within 90 days after such occurrence.
(b) Within ten Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Debenture Trustee, the
Debenture Trustee shall transmit notice of such Event of Default to all
Securityholders as their names and addresses appear on the Security Register,
unless such Event of Default shall have been cured or waived.
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SECTION 5.09 Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any Security by
its acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Debenture Trustee for any action
taken or omitted by it as Debenture Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit instituted
by the Debenture Trustee, to any suit instituted by any Securityholder, or group
of Securityholders, holding in the aggregate more than 10% in aggregate
principal amount of the Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest (including Compounded Interest and Additional Sums,
if any) or Liquidated Damages, if any, on any Security against the Corporation
on or after the same shall have become due and payable.
ARTICLE VI
CONCERNING THE DEBENTURE TRUSTEE
SECTION 6.01 Duties and Responsibilities of Debenture Trustee.
With respect to the holders of the Securities issued hereunder, the
Debenture Trustee, prior to the occurrence of an Event of Default (which, other
than in the case of Sections 5.01(a) and 5.01(b) hereof, is known to the
Debenture Trustee) and after the curing or waiving of all such Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture. In case an Event of Default
(which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is known
to the Debenture Trustee) has occurred (which has not been cured or waived), the
Debenture Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
No provision of this Indenture shall be construed to relieve the
Debenture Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default (which, other
than in the case of Sections 5.01(a) and 5.01(b) hereof, is
known to the Debenture Trustee) and after the curing or
waiving of all such Events of Default which may have occurred,
(1) the duties and obligations of the Debenture Trustee
shall be determined solely by the express provisions
of this Indenture, and the Debenture Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set forth
in this Indenture, and no implied covenants or
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obligations shall be read into this Indenture against
the Debenture Trustee; and
(2) in the absence of bad faith on the part of the
Debenture Trustee, the Debenture Trustee may
conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished
to the Debenture Trustee and conforming to the
requirements of this Indenture; but, in the case of
any such certificates or opinions which by any
provision hereof are specifically required to be
furnished to the Debenture Trustee, the Debenture
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Indenture;
(b) the Debenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or
Responsible Officers, unless it shall be proved that the
Debenture Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Debenture Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Securityholders pursuant
to Section 5.07, relating to the time, method and place of
conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred
upon the Debenture Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Debenture Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it reasonably believes that the repayment of
such funds or liability is not reasonably assured to it under the terms of this
Indenture or adequate indemnity against such risk is not reasonably assured to
it.
SECTION 6.02 Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Debenture Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, note, debenture
or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Corporation
mentioned herein may be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be
herein specifically prescribed); and any Board Resolution may
be evidenced to the Debenture Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of the
Corporation;
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(c) the Debenture Trustee may, at the expense of the Corporation,
consult with counsel of its selection and any advice or
Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel;
(d) the Debenture Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at
the request, order or direction of any of the Securityholders,
pursuant to the provisions of this Indenture, unless such
Securityholders shall have offered to the Debenture Trustee
reasonable and sufficient security or indemnity against the
costs, expenses and liabilities which may be incurred therein
or thereby;
(e) the Debenture Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers
conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Debenture Trustee of the
obligation, upon the occurrence of an Event of Default (which,
other than in the case of Sections 5.01(a) and 5.01(b) hereof,
is known to the Debenture Trustee) (that has not been cured or
waived), to exercise such of the rights and powers vested in
it by this Indenture, and to use the same degree of care and
skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs;
(f) the Debenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond,
debenture, coupon or other paper or document, unless requested
in writing to do so by the holders of a majority in aggregate
principal amount of the outstanding Securities; provided,
however, that if the payment within a reasonable time to the
Debenture Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is,
in the opinion of the Debenture Trustee, not reasonably
assured to the Debenture Trustee by the security afforded to
it by the terms of this Indenture, the Debenture Trustee may
require reasonable indemnity against such expense or liability
as a condition to so proceeding;
(g) the Debenture Trustee may, at the expense of the Corporation,
execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents
(including any Authenticating Agent) or attorneys, and the
Debenture Trustee shall not be responsible for any misconduct
or negligence on the part of any such agent or attorney
appointed by it with due care;
(h) the Debenture Trustee shall not be charged with knowledge of
any Default or Event of Default unless (1) such Default or
Event of Default falls within Section 5.01(a) (other than a
default with respect to the payment of Compounded Interest,
Liquidated Damages or Additional Sums) or 5.01(b) of the
Indenture, (2) a Responsible Officer shall have actual
knowledge of such Default or Event of Default or (3) written
notice
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of such Default or Event of Default shall have been given to
the Debenture Trustee by the Corporation or any other obligor
on the Securities or by any holder of the Securities; and
(i) the Debenture Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith, without
negligence or willful misconduct and believed by it to be
authorized or within the discretion or rights or powers
conferred upon it by this Indenture.
SECTION 6.03 No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in the
certificate of authentication of the Debenture Trustee or the Authenticating
Agent) shall be taken as the statements of the Corporation, and the Debenture
Trustee and the Authenticating Agent assume no responsibility for the
correctness of the same. The Debenture Trustee and the Authenticating Agent make
no representations as to the validity or sufficiency of this Indenture or of the
Securities. The Debenture Trustee and the Authenticating Agent shall not be
accountable for the use or application by the Corporation of any Securities or
the proceeds of any Securities authenticated and delivered by the Debenture
Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture. The Debenture Trustee shall not be charged with knowledge of any
default or Event of Default under Section 5.01 (a) or (b) relating to Other
Debentures unless (i) a Responsible Officer of the Debenture Trustee assigned to
its Principal Office shall have actual knowledge thereof or (ii) the
Corporation, any Securityholder or the holder of any Other Debenture shall have
given the Debenture Trustee written notice thereof in accordance with Section
13.04.
SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents,
Transfer Agents or Registrar May Own Securities.
The Debenture Trustee or any Authenticating Agent or any paying agent
or any transfer agent or any security registrar for the Securities, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights it would have if it were not Debenture Trustee,
Authenticating Agent, paying agent, transfer agent or security registrar for the
Securities.
SECTION 6.05 Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys received by the
Debenture Trustee or any paying agent shall, until used or applied as herein
provided, be held in trust for the purpose for which they were received, but
need not be segregated from other funds except to the extent required by law.
The Debenture Trustee and any paying agent shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed in
writing with the Corporation. So long as no Event of Default shall have occurred
and be continuing, all interest allowed on any such moneys shall be paid from
time to time upon the written order of the Corporation, signed by an Officer
thereof.
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SECTION 6.06 Compensation and Expenses of Debenture Trustee.
The Corporation, as issuer of Securities under this Indenture,
covenants and agrees to pay to the Debenture Trustee from time to time, and the
Debenture Trustee shall be entitled to, such compensation as shall be separately
agreed to in writing between the Corporation and the Debenture Trustee (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Corporation will pay or reimburse the
Debenture Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Debenture Trustee in accordance with any of
the provisions of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ), except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Corporation also covenants to indemnify each of
the Debenture Trustee (including in its individual capacity) and any predecessor
Debenture Trustee (and its or their officers, agents, directors and employees)
for, and to hold it harmless against, any and all loss, damage, claim, action,
suit, liability, cost or expense including the fees and expenses of its counsel
and any taxes (other than taxes based on the income of the Debenture Trustee)
incurred without negligence or bad faith on the part of the Debenture Trustee
and arising out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself against any
claim of liability in the premises. The obligations of the Corporation under
this Section 6.06 to compensate and indemnify the Debenture Trustee and to pay
or reimburse the Debenture Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Securities upon all property and
funds held or collected by the Debenture Trustee as such, except funds held in
trust for the benefit of the holders of particular Securities.
When the Debenture Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(d) or Section
5.01(e), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for its services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the resignation or removal
of the Debenture Trustee and the defeasance or other termination of this
Indenture.
SECTION 6.07 Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02, whenever in the
administration of the provisions of this Indenture the Debenture Trustee shall
deem it necessary or desirable that a matter be proved or established prior to
taking or omitting any action hereunder, such matter (unless other evidence in
respect thereof is herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Debenture Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Debenture Trustee, and such Officers' Certificate, in the absence of negligence
or bad faith on the part of the Debenture Trustee, shall be full warrant to the
Debenture Trustee for any action taken or omitted by it under the provisions of
this Indenture upon the faith thereof.
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SECTION 6.08 Conflicting Interest of Debenture Trustee.
If the Debenture Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Debenture Trustee and the Corporation shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 6.09 Eligibility of Debenture Trustee.
The Debenture Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state or territory thereof or of the District of Columbia, or a corporation
or other Person permitted to act as trustee by the Commission authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least 10 million U.S. dollars ($10,000,000) and subject to
supervision or examination by federal, state, territorial, or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 6.09 the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
The Corporation may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Corporation, serve
as Debenture Trustee.
In case at any time the Debenture Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Debenture Trustee shall
resign immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation or Removal of Debenture Trustee.
(a) The Debenture Trustee, or any trustee or trustees hereafter
appointed, may at any time resign by giving written notice of such resignation
to the Corporation and by mailing notice thereof to the holders of the
Securities at their addresses as they shall appear on the Security Register.
Upon receiving such notice of resignation, the Corporation shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Debenture Trustee
and one copy to the successor trustee. If no successor trustee shall have been
so appointed and have accepted appointment within 60 days after the mailing of
such notice of resignation to the affected Securityholders, the resigning
Debenture Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Securityholder who has been a bona
fide holder of a Security for at least six months may, subject to the provisions
of Section 5.09, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
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(b) In case at any time any of the following shall occur:
(1) the Debenture Trustee shall fail to comply with the
provisions of Section 6.08 after written request
therefor by the Corporation or by any Securityholder
who has been a bona fide holder of a Security or
Securities for at least six months, or
(2) the Debenture Trustee shall cease to be eligible in
accordance with the provisions of Section 6.09 and
shall fail to resign after written request therefor
by the Corporation or by any such Securityholder, or
(3) the Debenture Trustee shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Debenture Trustee or of its
property shall be appointed, or any public officer
shall take charge or control of the Debenture Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Corporation may remove the Debenture Trustee and
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Debenture Trustee so removed and one
copy to the successor trustee, or, subject to the provisions of Section 5.09,
any Securityholder who has been a bona fide holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Debenture Trustee and
the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the Debenture
Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Debenture Trustee
and nominate a successor trustee, which shall be deemed appointed as successor
trustee unless within 10 days after written notification of such nomination the
Corporation objects thereto, or if no successor trustee shall have been so
appointed and shall have accepted appointment within 30 days after such removal,
in which case the Debenture Trustee so removed or any Securityholder, upon the
terms and conditions and otherwise as in subsection (a) of this Section 6.10
provided, may petition any court of competent jurisdiction for an appointment of
a successor trustee.
(d) Any resignation or removal of the Debenture Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 6.10
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 6.11.
SECTION 6.11 Acceptance by Successor Debenture Trustee.
Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Corporation and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with
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all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if originally named as trustee herein; but, nevertheless, on
the written request of the Corporation or of the successor trustee, the trustee
ceasing to act shall, upon payment of all amounts then due it pursuant to the
provisions of Section 6.06, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act and shall duly assign, transfer and deliver to such successor trustee all
property and money held by such retiring trustee thereunder. Upon request of any
such successor trustee, the Corporation shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such
trustee to secure any amounts then due it pursuant to the provisions of Section
6.06.
No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Corporation shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they shall
appear on the Security Register. If the Corporation fails to mail such notice
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Corporation.
SECTION 6.12 Succession by Merger, etc.
Any corporation into which the Debenture Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Debenture Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Debenture Trustee, shall be the successor of the Debenture
Trustee hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
In case any Securities shall have been authenticated but not delivered
at the time such successor to the Debenture Trustee shall succeed to the trusts
created by this Indenture, any such successor to the Debenture Trustee may adopt
the certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Debenture Trustee may
authenticate such Securities in the name of the successor trustee; and in all
such cases such certificates shall have the full force which the Securities or
this Indenture elsewhere provides that the certificate of the Debenture Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Debenture Trustee shall apply only to its
successor or successors by merger or consolidation.
SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor.
The Debenture Trustee shall comply with Section 311(a) of the Trust
Indenture Act, if applicable, excluding any creditor relationship described in
Section 311(b) of the Trust Indenture
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Act. A Debenture Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent included therein.
SECTION 6.14 Authenticating Agents.
There may be one or more Authenticating Agents appointed by the
Debenture Trustee upon the request of the Corporation with power to act on its
behalf and subject to its direction in the authentication and delivery of
Securities issued upon exchange or transfer thereof as fully to all intents and
purposes as though any such Authenticating Agent had been expressly authorized
to authenticate and deliver Securities; provided, however, that the Debenture
Trustee shall have no liability to the Corporation for any acts or omissions of
the Authenticating Agent with respect to the authentication and delivery of
Securities. Any such Authenticating Agent shall at all times be a corporation
organized and doing business under the laws of the United States or of any state
or territory thereof or of the District of Columbia authorized under such laws
to act as Authenticating Agent, having a combined capital and surplus of at
least $5,000,000 and being subject to supervision or examination by federal,
state, territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually pursuant to law or the
requirements of such authority, then for the purposes of this Section 6.14 the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which any Authenticating Agent shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of any Authenticating Agent, shall be the successor of such
Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14 without the execution or filing of any paper or
any further act on the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Debenture Trustee and to the Corporation. The
Debenture Trustee may at any time terminate the agency of any Authenticating
Agent by giving written notice of termination to such Authenticating Agent and
to the Corporation. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.14, the Debenture Trustee may, and upon the
request of the Corporation shall, promptly appoint a successor Authenticating
Agent eligible under this Section 6.14, shall give written notice of such
appointment to the Corporation and shall mail notice of such appointment to all
Securityholders as the names and addresses of such holders appear on the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all rights, powers, duties and
responsibilities of its predecessor hereunder, with like effect as if originally
named as Authenticating Agent herein.
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The Corporation, as issuer of the Securities, agrees to pay to any
Authenticating Agent from time to time reasonable compensation for its services.
Any Authenticating Agent shall have no responsibility or liability for any
action taken by it as such in accordance with the directions of the Debenture
Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01 Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action), the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced (a) by any instrument (including by way of
electronic transmission) or any number of instruments of similar tenor executed
by such Securityholders in person or by agent or proxy appointed in writing, or
(b) by the record of such holders of Securities voting in favor thereof at any
meeting of such Securityholders duly called and held in accordance with the
provisions of Article VIII, or (c) by a combination of such instrument or
instruments and any such record of such a meeting of such Securityholders.
If the Corporation shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Corporation may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Corporation shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record date, but only
the Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
outstanding Securities shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
months after the record date.
SECTION 7.02 Proof of Execution by Securityholders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Debenture Trustee or in such manner as shall be
satisfactory to the Debenture Trustee. The ownership of Securities shall be
proved by the Security Register or by a certificate of the security registrar
for the Securities. The
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Debenture Trustee may require such additional proof of any matter referred to in
this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.
SECTION 7.03 Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any Security,
the Corporation, the Debenture Trustee, any Authenticating Agent, any paying
agent, any transfer agent and any security registrar for the Securities may deem
the person in whose name such Security shall be registered upon the Security
Register to be, and may treat him as, the absolute owner of such Security
(whether or not such Security shall be overdue) for the purpose of receiving
payment of or on account of the principal of and premium, if any, and (subject
to Section 2.06) interest on such Security and for all other purposes; and
neither the Corporation nor the Debenture Trustee nor any Authenticating Agent
nor any paying agent nor any transfer agent nor any security registrar for the
Securities shall be affected by any notice to the contrary. All such payments so
made to any holder for the time being or upon his order shall be valid and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security.
SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate principal
amount of Securities have concurred in any direction, consent or waiver under
this Indenture, Securities which are owned by the Corporation or any other
obligor on the Securities or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Corporation or
any other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided, however, that
for the purposes of determining whether the Debenture Trustee shall be protected
in relying on any such direction, consent or waiver, only Securities which a
Responsible Officer of the Debenture Trustee actually knows are so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as outstanding for the purposes of this Section 7.04 if the pledgee
shall establish to the satisfaction of the Debenture Trustee the pledgee's right
to vote such Securities and that the pledgee is not the Corporation or any such
other obligor or Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Corporation or any such other
obligor. In the case of a dispute as to such right, any decision by the
Debenture Trustee taken upon the advice of counsel shall be full protection to
the Debenture Trustee.
SECTION 7.05 Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Debenture
Trustee, as provided in Section 7.01, of the taking of any action by the holders
of the percentage in aggregate principal amount of the Securities specified in
this Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.01, the serial number of which is shown by the evidence to
be included in the group of
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Securities the holders of which have consented to such action, may, by filing
written notice with the Debenture Trustee at its principal office and upon proof
of holding as provided in Section 7.02, revoke such action so far as concerns
such Security (or so far as concerns the principal amount represented by any
exchanged or substituted Security). Except as aforesaid, any such action taken
by the holder of any Security shall be conclusive and binding upon such holder
and upon all future holders and owners of such Security, and of any Security
issued in exchange or substitution therefor, irrespective of whether or not any
notation in regard thereto is made upon such Security or any Security issued in
exchange or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01 Purposes of Meetings.
A meeting of Securityholders may be called at any time and from time to
time pursuant to the provisions of this Article VIII for any of the following
purposes:
(a) to give any notice to the Corporation or to the Debenture
Trustee, or to give any directions to the Debenture Trustee,
or to consent to the waiving of any Default hereunder and its
consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of
Article V;
(b) to remove the Debenture Trustee and nominate a successor
trustee pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section
9.02; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal
amount of such Securities under any other provision of this
Indenture or under applicable law.
SECTION 8.02 Call of Meetings by Debenture Trustee.
The Debenture Trustee may at any time call a meeting of Securityholders
to take any action specified in Section 8.01, to be held at such time and at
such place in Wilmington, Delaware or Philadelphia, Pennsylvania as the
Debenture Trustee shall determine. Notice of every meeting of the
Securityholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
to holders of Securities at their addresses as they shall appear on the Security
Register. Such notice shall be mailed not less than 20 nor more than 180 days
prior to the date fixed for the meeting.
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SECTION 8.03 Call of Meetings by Corporation or Securityholders.
In case at any time the Corporation, pursuant to a resolution of the
Board of Directors, or the holders of at least 10% in aggregate principal amount
of the Securities then outstanding, shall have requested the Debenture Trustee
to call a meeting of Securityholders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Debenture Trustee shall not have mailed the notice of such meeting within 20
days after receipt of such request, then the Corporation or such Securityholders
may determine the time and the place in Philadelphia, Pennsylvania for such
meeting and may call such meeting to take any action authorized in Section 8.01,
by mailing notice thereof as provided in Section 8.02.
SECTION 8.04 Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders, a Person
shall be (a) a holder of one or more Securities or (b) a Person appointed by an
instrument in writing as proxy by a holder of one or more Securities. The only
Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Debenture Trustee and its counsel and any
representatives of the Corporation and its counsel.
SECTION 8.05 Regulations.
Notwithstanding any other provisions of this Indenture, the Debenture
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Securityholders, in regard to proof of the holding of Securities and
of the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Debenture Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Corporation or by Securityholders as provided in Section 8.03, in which case
the Corporation or the Securityholders calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by majority vote of the
meeting.
Subject to the provisions of Section 8.04, at any meeting each holder
of Securities or proxy therefor shall be entitled to one vote for each $1,000
principal amount of Securities held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or 8.03 may be adjourned from time to time by a majority of those present,
and the meeting may be held as so adjourned without further notice.
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SECTION 8.06 Voting.
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Corporation and
the other to the Debenture Trustee to be preserved by the Debenture Trustee, the
latter to have attached thereto the ballots voted at the meeting. The holders of
the Series A Capital Securities and the Series B Capital Securities shall vote
for all purposes as a single class.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
ARTICLE IX
AMENDMENTS
SECTION 9.01 Without Consent of Securityholders.
The Corporation and the Debenture Trustee may from time to time and at
any time amend this Indenture, without the consent of the Securityholders, for
one or more of the following purposes:
(a) to evidence the succession of another Person to the
Corporation, or successive successions, and the assumption by
the successor Person of the covenants, agreements and
obligations of the Corporation pursuant to Article X hereof;
(b) to add to the covenants of the Corporation such further
covenants, restrictions or conditions for the protection of
the Securityholders as the Board of Directors and the
Debenture Trustee shall consider to be for the protection of
the Securityholders, and to make the occurrence, or the
occurrence and continuance, of a default in any of such
additional covenants, restrictions or conditions a Default or
an Event of Default permitting the enforcement of all or any
of the remedies provided in this Indenture as herein set
forth; provided, however, that in respect of any such
additional covenant, restriction or condition such amendment
may provide for a particular period of grace after default
(which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate
enforcement upon
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such default or may limit the remedies available to the
Debenture Trustee upon such default;
(c) to provide for the issuance under this Indenture of Securities
in coupon form (including Securities registrable as to
principal only) and to provide for exchangeability of such
Securities with the Securities issued hereunder in fully
registered form and to make all appropriate changes for such
purpose;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture
which may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture;
or to make such other provisions in regard to matters or
questions arising under this Indenture, provided that any such
action shall not materially adversely affect the interests of
the holders of the Securities;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the
Securities;
(f) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities
legends, if any, to be placed on Securities, and all other
matters required pursuant to Section 2.07 or otherwise
necessary, desirable or appropriate in connection with the
issuance of Securities to holders of Capital Securities in the
event of a distribution of Securities by the Trust following a
Dissolution Event, provided that any such action shall not
materially adversely affect the interests of the holders of
the Securities;
(g) to qualify or maintain qualification of this Indenture under
the Trust Indenture Act;
(h) to enable the Corporation and the Trust to conduct an Exchange
Offer as contemplated by the Registration Rights Agreement,
provided that any such action shall not materially adversely
affect the interests of the holders of the Securities; or
(i) to make any change that does not adversely affect the rights
of any Securityholder in any material respect.
The Debenture Trustee is hereby authorized to join with the Corporation
in the execution of any supplemental indenture to effect such amendment, to make
any further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, and the Debenture Trustee may, in its discretion, but shall not be
obligated to enter into any such supplemental indenture which affects the
Debenture Trustee's own rights, duties or immunities under this Indenture or
otherwise.
Any amendment to this Indenture authorized by the provisions of this
Section 9.01 may be executed by the Corporation and the Debenture Trustee
without the consent of the holders of any of the Securities at the time
outstanding, notwithstanding any of the provisions of Section 9.02.
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SECTION 9.02 With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of the holders
of a majority in aggregate principal amount of the Securities at the time
outstanding, the Corporation, when authorized by a Board Resolution, and the
Debenture Trustee may from time to time and at any time amend this Indenture for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the holders of the Securities; provided, however, that no such amendment
shall, without the consent of the holders of each Security then outstanding and
affected thereby (i) change the Maturity Date of any Security, or reduce the
rate or extend the time of payment of interest thereon (except as contemplated
by Article XVI), or reduce the principal amount thereof, or change any
prepayment provisions, or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any Securityholder to institute suit for payment thereof, or
(ii) reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such amendment to the Indenture; provided, however,
that if the Securities are held by the Trust, such amendment shall not be
effective until the holders of a majority in liquidation amount of Trust
Securities shall have consented to such amendment; provided, further, that if
the consent of the holder of each outstanding Security is required, such
amendment shall not be effective until each holder of the Trust Securities shall
have consented to such amendment.
Upon the request of the Corporation accompanied by a copy of a
resolution of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Debenture Trustee of evidence of the
consent of Securityholders as aforesaid, the Debenture Trustee shall join with
the Corporation in the execution of such supplemental indenture unless such
supplemental indenture affects the Debenture Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Debenture
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
Promptly after the execution by the Corporation and the Debenture
Trustee of any supplemental indenture pursuant to the provisions of this
Section, the Debenture Trustee shall transmit by mail, first class postage
prepaid, a notice, prepared by the Corporation, setting forth in general terms
the substance of such supplemental indenture, to the Securityholders as their
names and addresses appear upon the Security Register. Any failure of the
Debenture Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03 Compliance with Trust Indenture Act; Effect of
Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon the execution of any
supplemental indenture pursuant
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to the provisions of this Article IX, this Indenture shall be and be deemed to
be modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Debenture Trustee, the Corporation and the holders of Securities shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.04 Notation on Securities.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation in form approved by the Debenture Trustee as to any matter provided for
in such supplemental indenture. If the Corporation or the Debenture Trustee
shall so determine, new Securities so modified as to conform, in the opinion of
the Debenture Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may be prepared and
executed by the Corporation, authenticated by the Debenture Trustee or the
Authenticating Agent and delivered in exchange for the Securities then
outstanding.
SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be
Furnished to Debenture Trustee.
The Debenture Trustee, subject to the provisions of Sections 6.01 and
6.02, may receive, in addition to the documents required by Section 13.06, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture or amendment executed pursuant hereto complies with the
requirements of this Article IX. The Debenture Trustee may receive an Opinion of
Counsel as conclusive evidence that any supplemental indenture or amendment
executed pursuant to this Article is authorized or permitted by, and conforms
to, the terms of this Article and that it is proper for the Debenture Trustee
under the provisions of this Article to join in the execution thereof.
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE
SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms.
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Corporation with or into any other
Person (whether or not affiliated with the Corporation, as the case may be), or
successive consolidations or mergers in which the Corporation or its successor
or successors, as the case may be, shall be a party or parties, or shall prevent
any sale, conveyance, transfer or lease of the property of the Corporation, or
its successor or successors as the case may be, as an entirety, or substantially
as an entirety, to any other Person (whether or not affiliated with the
Corporation, or its successor or successors, as the case may be) authorized to
acquire and operate the same, provided that (a) the Corporation is the surviving
Person, or the Person
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formed by or surviving any such consolidation or merger (if other than the
Corporation) or to which such sale, conveyance, transfer or lease of property is
made is a Person organized and existing under the laws of the United States or
any State thereof or the District of Columbia, and (b) if the Corporation is not
the surviving Person, upon any such consolidation, merger, sale, conveyance,
transfer or lease, the due and punctual payment of the principal of (and
premium, if any) and interest on the Securities according to their tenor and the
due and punctual performance and observance of all the covenants and conditions
of this Indenture to be kept or performed by the Corporation shall be expressly
assumed by the surviving Person, by supplemental indenture (which shall conform
to the provisions of the Trust Indenture Act as then in effect) satisfactory in
form to the Debenture Trustee executed and delivered to the Debenture Trustee by
the Person formed by such consolidation, or into which the Corporation shall
have been merged, or by the Person which shall have acquired such property, as
the case may be, (c) after giving effect to such consolidation, merger, sale,
conveyance, transfer or lease, no Default or Event of Default shall have
occurred and be continuing and (d) such consolidation, merger, sale, conveyance,
transfer or lease does not cause the Securities to be downgraded by a nationally
recognized statistical rating organization..
SECTION 10.02 Successor Person to be Substituted for Corporation.
In case of any such consolidation, merger, sale, conveyance, transfer
or lease and upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Debenture Trustee and satisfactory in
form to the Debenture Trustee, of the obligation of due and punctual payment of
the principal of (and premium, if any) and interest on all of the Securities and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed or observed by the Corporation,
such successor Person shall succeed to and be substituted for the Corporation,
with the same effect as if it had been named herein as a party hereto, and the
Corporation thereupon shall be relieved of any further liability or obligation
hereunder or upon the Securities. Such successor Person thereupon may cause to
be signed, and may issue either in its own name or in the name of the
Corporation, any or all of the Securities issuable hereunder which theretofore
shall not have been signed by the Corporation and delivered to the Debenture
Trustee or the Authenticating Agent; and, upon the order of such successor
Person instead of the Corporation and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Debenture Trustee or the
Authenticating Agent shall authenticate and deliver any Securities which
previously shall have been signed and delivered by any Officer of the
Corporation to the Debenture Trustee or the Authenticating Agent for
authentication, and any Securities which such successor Person thereafter shall
cause to be signed and delivered to the Debenture Trustee or the Authenticating
Agent for that purpose. All the Securities so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee.
The Debenture Trustee, subject to the provisions of Sections 6.01 and
6.02, may receive an Opinion of Counsel as conclusive evidence that any
consolidation, merger, sale, conveyance, transfer
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or lease, and any assumption, permitted or required by the terms of this Article
X complies with the provisions of this Article X.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01 Discharge of Indenture.
When (a) the Corporation shall deliver to the Debenture Trustee for
cancellation all Securities theretofore authenticated (other than any Securities
which shall have been destroyed, lost or stolen and which shall have been
replaced as provided in Section 2.08) and not theretofore canceled, or (b) all
the Securities not theretofore canceled or delivered to the Debenture Trustee
for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for prepayment within
one year under arrangements satisfactory to the Debenture Trustee for the giving
of notice of prepayment, and the Corporation shall deposit with the Debenture
Trustee, in trust, funds sufficient to pay on the Maturity Date or upon
prepayment all of the Securities (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced as provided in
Section 2.08) not theretofore canceled or delivered to the Debenture Trustee for
cancellation, including principal (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if any,
due or to become due to the Maturity Date or prepayment date, as the case may
be, but excluding, however, the amount of any moneys for the payment of
principal of (or premium, if any) or interest (including Compounded Interest and
Additional Sums, if any) and Liquidated Damages, if any, on the Securities (1)
theretofore repaid to the Corporation in accordance with the provisions of
Section 11.04, or (2) paid to any State or to the District of Columbia pursuant
to its unclaimed property or similar laws, and if, in either case the
Corporation shall also pay or cause to be paid all other sums payable hereunder
by the Corporation, then this Indenture shall cease to be of further effect
except for the provisions of Sections 2.02, 2.07, 2.08, 3.01, 3.03, 3.05, 6.06,
6.10 and 11.04 hereof, which shall survive until such Securities shall mature
and be paid. Thereafter, Sections 6.06, 6.10 and 11.04 shall survive, and the
Debenture Trustee, on demand of the Corporation accompanied by any Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Corporation, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Corporation, however, hereby agrees to reimburse
the Debenture Trustee for any costs or expenses thereafter reasonably and
properly incurred by the Debenture Trustee in connection with this Indenture or
the Securities.
SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be
Held in Trust by Debenture Trustee.
Subject to the provisions of Section 11.04, all moneys and U.S.
Government Obligations deposited with the Debenture Trustee pursuant to Sections
11.01 or 11.05 shall be held in trust and applied by it to the payment, either
directly or through any paying agent (including the Corporation if acting as its
own paying agent), to the holders of the particular Securities for the payment
of which
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such moneys or U.S. Government Obligations have been deposited with the
Debenture Trustee, of all sums due and to become due thereon for principal,
premium, if any, and interest.
The Corporation shall pay and indemnify the Debenture Trustee against
any tax, fee or other charge imposed on or assessed against the U.S.
Governmental Obligations deposited pursuant to Section 11.05 or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the holders of outstanding Securities.
SECTION 11.03 Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Securities (other than the Debenture Trustee)
shall, upon written demand of the Corporation, be repaid to it or paid to the
Debenture Trustee, and thereupon such paying agent shall be released from all
further liability with respect to such moneys.
SECTION 11.04 Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Debenture Trustee or any
paying agent for payment of the principal of (or premium, if any) or interest
(including Compounded Interest and Additional Sums, if any) on Securities and
not applied but remaining unclaimed by the holders of Securities for two years
after the date upon which the principal of (or premium, if any) or interest
(including Compounded Interest and Additional Sums, if any) or Liquidated
Damages, if any, on such Securities, as the case may be, shall have become due
and payable, shall be repaid to the Corporation by the Debenture Trustee or such
paying agent; and the holder of any of the Securities shall thereafter look only
to the Corporation for any payment which such holder may be entitled to collect
and all liability of the Debenture Trustee or such paying agent with respect to
such moneys shall thereupon cease.
SECTION 11.05 Defeasance Upon Deposit of Moneys or U.S. Government
Obligations.
The Corporation shall be deemed to have been Discharged (as defined
below) from its obligations with respect to the Securities on the 91st day after
the applicable conditions set forth below have been satisfied:
(a) the Corporation shall have deposited or caused to be deposited
irrevocably with the Debenture Trustee or the Defeasance Agent
(as defined below) as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit
of the holders of the Securities (i) money in an amount, or
(ii) U.S. Government Obligations which through the payment of
interest and principal in respect thereof in accordance with
their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (iii) a
combination of (i) and (ii), sufficient, in the opinion (with
respect to (ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Debenture Trustee and
the Defeasance Agent, if any, to pay and discharge each
installment of
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principal of and interest and premium, if any, on the
outstanding Securities on the dates such installments of
principal, interest or premium are due;
(b) if the Securities are then listed on any national securities
exchange, the Corporation shall have delivered to the
Debenture Trustee and the Defeasance Agent, if any, an Opinion
of Counsel to the effect that the exercise of the option under
this Section 11.05 would not cause such Securities to be
delisted from such exchange;
(c) no Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such
deposit; and
(d) the Corporation shall have delivered to the Debenture Trustee
and the Defeasance Agent, if any, an Opinion of Counsel to the
effect that holders of the Securities will not recognize
income, gain or loss for United States federal income tax
purposes as a result of the exercise of the option under this
Section 11.05 and will be subject to United States federal
income tax on the same amount and in the same manner and at
the same times as would have been the case if such option had
not been exercised, and such opinion shall be based on a
statute so providing or be accompanied by a private letter
ruling to that effect received from the United States Internal
Revenue Service or a revenue ruling pertaining to a comparable
form of transaction to that effect published by the United
States Internal Revenue Service.
"Discharged" means that the Corporation shall be deemed to have paid
and discharged the entire indebtedness represented by, and obligations under,
the Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Debenture Trustee, at the expense of the
Corporation, shall execute proper instruments acknowledging the same), except
(1) the rights of holders of Securities to receive, from the trust fund
described in clause (a) above, payment of the principal of and the interest and
premium, if any, on the Securities when such payments are due; (2) the
Corporation's obligations with respect to the Securities under Sections 2.07,
2.08, 5.02, 6.10 and 11.04 and with respect to the Debenture Trustee under
Section 6.06; and (3) the rights, powers, trusts, duties and immunities of the
Debenture Trustee hereunder.
"Defeasance Agent" means another financial institution which is
eligible to act as Debenture Trustee hereunder and which assumes all of the
obligations of the Debenture Trustee necessary to enable the Debenture Trustee
to act hereunder. In the event such a Defeasance Agent is appointed pursuant to
this Section, the following conditions shall apply:
(1) the Debenture Trustee shall have approval rights over the
document appointing such Defeasance Agent and the document
setting forth such Defeasance Agent's rights and
responsibilities; and
(2) the Defeasance Agent shall provide verification to the
Debenture Trustee acknowledging receipt of sufficient money
and/or U.S. Government Obligations to meet the applicable
conditions set forth in this Section 11.05.
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ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01 Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest (including Compounded Interest and Additional Sums, if any) on any
Security, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Corporation
in this Indenture, or in any Security, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, employee, officer or director, as such, past, present or future, of
the Corporation or of any successor Person to the Corporation, either directly
or through the Corporation or any successor Person to the Corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issuance of the
Securities.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01 Successors.
All the covenants, stipulations, promises and agreements in this
Indenture contained by the Corporation shall bind its successors and assigns
whether so expressed or not.
SECTION 13.02 Official Acts by Successor Person.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Corporation shall and may be done and performed with like force and effect by
the like board, committee, officer, or other individuals or group of individuals
acting in similar capacities, of any Person that shall at the time be the lawful
sole successor of the Corporation.
SECTION 13.03 Surrender of Corporation Powers.
The Corporation by instrument in writing executed by authority of not
less than 2/3 (two-thirds) of its Board of Directors and delivered to the
Debenture Trustee may surrender any of the powers reserved to the Corporation,
and thereupon such power so surrendered shall terminate both as to the
Corporation, as the case may be, and as to any successor Person.
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SECTION 13.04 Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Debenture Trustee or by the
holders of Securities on the Corporation may be given or served by being
deposited postage prepaid by first class mail, registered or certified mail,
overnight courier service or conformed telecopy addressed (until another address
is filed by the Corporation with the Debenture Trustee for the purpose) to the
Corporation at 1535 Locust Street, Philadelphia, PA 19102, Attention: Chief
Financial Officer, telecopy: (215) 569-4214. Any notice, direction, request or
demand by any Securityholder to or upon the Debenture Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or made in
writing at the office of Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, Telecopy: (302) 651-8882 (unless another address is provided by
the Debenture Trustee to the Corporation for such purpose). Any notice or
communication to a Securityholder shall be mailed by first class mail to his or
her address shown on the Security Register kept by the security registrar for
the Securities.
SECTION 13.05 Governing Law.
This Indenture and each Security shall be deemed to be a contract made
under the laws of the State of New York, and for all purposes shall be governed
by and construed in accordance with the laws of said State without regard to
conflict of law principles thereof.
SECTION 13.06 Evidence of Compliance with Conditions Precedent.
Upon any application or request by the Corporation to the Debenture
Trustee to take any action under any of the provisions of this Indenture, the
Corporation shall furnish to the Debenture Trustee an Officers' Certificate
stating that in the opinion of the signers all conditions precedent, if any,
provided for in this Indenture (including any covenants compliance with which
constituted a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Debenture Trustee with respect to compliance with a condition
or covenant provided for in this Indenture (except certificates delivered
pursuant to Section 3.06) shall include (1) a statement that the Person making
such certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
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SECTION 13.07 Business Days.
In any case where the date of payment of principal of (or premium, if
any) or interest on the Securities is not a Business Day, the payment of such
principal of (or premium, if any) or interest on the Securities will not be made
on such date but will be made on the next succeeding Business Day, except that
if such next succeeding Business Day falls in the next succeeding calendar year,
then such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the original date of
payment, and no interest shall accrue for the period from and after such date.
SECTION 13.08 Trust Indenture Act to Control.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 13.09 Table of Contents, Headings, etc.
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SECTION 13.10 Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 13.11 Separability.
In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 13.12 Assignment.
The Corporation will have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Corporation, provided that, in the event of any
such assignment, the Corporation will remain liable for all such obligations.
Subject to the foregoing, this Indenture is binding upon and inures to the
benefit of the parties thereto and their respective successors and assigns. This
Indenture may not otherwise be assigned by the parties thereto.
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SECTION 13.13 Acknowledgment of Rights.
The Corporation acknowledges that, with respect to any Securities held
by the Trust or a trustee of such trust, if the Property Trustee of such Trust
fails to enforce its rights under this Indenture as the holder of the Securities
held as the assets of the Trust, any holder of Capital Securities may institute
legal proceedings directly against the Corporation to enforce such Property
Trustee's rights under this Indenture without first instituting any legal
proceedings against such Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Corporation to
pay principal of (or premium, if any) or interest on the Securities when due,
the Corporation acknowledges that a holder of Capital Securities may directly
institute a proceeding for enforcement of payment to such holder of the
principal of (or premium, if any) or interest on the Securities having an
aggregate principal amount equal to the aggregate liquidation amount of the
Capital Securities of such holder on or after the respective due date specified
in the Securities.
ARTICLE XIV
REDEMPTION OF SECURITIES; MANDATORY AND
OPTIONAL SINKING FUND
SECTION 14.01 Special Event Redemption.
If, prior to the Initial Optional Redemption Date, a Special Event has
occurred and is continuing, then notwithstanding Section 14.02(a) but subject to
Section 14.03(b), the Corporation shall have the right, at any time within 90
days following the occurrence of such Special Event, upon (i) not less than 45
days written notice to the Debenture Trustee and (ii) not less than 30 days nor
more than 60 days' written notice to the Securityholders, to redeem the
Securities, in whole (but not in part), at the Special Event Redemption Price.
Following a Special Event, the Corporation shall take such action as is
necessary to promptly determine the Special Event Redemption Price, including,
without limitation, the appointment of a Quotation Agent. The Special Event
Redemption Price shall be paid prior to 12:00 noon, Wilmington, Delaware time,
on the date of such redemption or such earlier time as the Corporation
determines, provided that the Corporation shall deposit with the Debenture
Trustee by 10:00 a.m., Wilmington, Delaware time, on the date such Special Event
Redemption Price is to be paid, an amount sufficient to pay the Special Event
Redemption Price. The Corporation shall provide the Debenture Trustee with
written notice of the Redemption Price promptly after the calculation thereof,
which notice shall include any calculation made by the Quotation Agent in
connection with the determination of the Special Event Redemption Price.
SECTION 14.02 Optional Redemption by Corporation.
(a) Subject to Sections 14.02(b) and 14.03(b), the Corporation shall
have the right to redeem the Securities, in whole or in part, at any time on or
after the Initial Optional Redemption Date, upon not less than 30 days and not
more than 60 days' written notice to the Securityholders and the Debenture
Trustee, at the redemption prices set forth below (expressed as percentages of
principal) plus, in each case, accrued and unpaid interest thereon (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if any,
to the applicable date of redemption
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(the "Optional Redemption Price") if redeemed during the 12-month period
beginning March 15, of the years indicated below:
Percentage
Year of Principal
---- ------------
2009 104.750
2010 104.275
2011 103.800
2012 103.325
2013 102.850
2014 102.375
2015 101.900
2016 101.425
2017 100.950
2018 100.475
2019 and thereafter 100.000
If the Securities are only partially redeemed pursuant to this Section
14.02, the Securities to be redeemed shall be selected on a pro rata basis not
more than 60 days prior to the date fixed for redemption from the outstanding
Securities not previously called for redemption; provided, however, that with
respect to Securityholders that would be required to hold Securities with an
aggregate principal amount of less than $100,000 but more than an aggregate
principal amount of zero as a result of such pro rata redemption, the
Corporation shall redeem Securities of each such Securityholder so that after
such redemption such Securityholder shall hold Securities either with an
aggregate principal amount of at least $100,000 or such Securityholder no longer
holds any Securities, and shall use such method (including, without limitation,
by lot) as the Debenture Trustee shall deem fair and appropriate; provided,
further, that any such proration may be made on the basis of the aggregate
principal amount of Securities held by each Securityholder and may be made by
making such adjustments as the Debenture Trustee deems fair and appropriate in
order that only Securities in denominations of $1,000 or integral multiples
thereof shall be prepaid. The Optional Redemption Price shall be paid prior to
12:00 noon, Wilmington, Delaware time, on the date of such redemption or at such
earlier time as the Corporation determines, provided that the Corporation shall
deposit with the Debenture Trustee by 10:00 a.m., Wilmington, Delaware time, on
the date such Optional Redemption Price is to be paid, an amount sufficient to
pay the Optional Redemption Price.
(b) Notwithstanding the first sentence of Section 14.02(a), upon the
entry of an order for dissolution of the Trust by a court of competent
jurisdiction, the Securities thereafter will be subject to optional redemption,
in whole only, but not in part, on or after the Initial Optional Redemption
Date, at the applicable Optional Redemption Prices and otherwise in accordance
with this Article XIV.
SECTION 14.03 [Omitted]
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SECTION 14.04 No Sinking Fund.
The Securities are not entitled to the benefit of any sinking fund.
SECTION 14.05 Notice of Redemption; Selection of Securities.
In case the Corporation shall desire to exercise the right to redeem
all, or, as the case may be, any part of the Securities in accordance with their
terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the holders of Securities to be so redeemed as a whole or in part
at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
Each such notice of redemption shall specify the CUSIP number, if
applicable, of the Securities to be redeemed, the date fixed for redemption, the
Redemption Price at which the Securities are to be redeemed (or the method by
which such Redemption Price is to be calculated), the place or places of payment
that payment will be made upon presentation and surrender of the Securities,
that interest accrued to the date fixed for redemption will be paid as specified
in said notice, and that on and after said date, interest thereon or on the
portions thereof to be redeemed will cease to accrue. If less than all of the
Securities are to be redeemed, the notice of redemption shall specify the
numbers of the Securities to be redeemed. In case any Security is to be redeemed
in part only, the notice of redemption shall state the portion of the principal
amount thereof to be redeemed and shall state that on and after the date fixed
for redemption, upon surrender of such Security, a new Security or Securities in
principal amount equal to the portion thereof that has not been redeemed will be
issued.
By 10:00 a.m., Wilmington, Delaware time, on the redemption date
specified in the notice of redemption given as provided in this Section, the
Corporation will deposit with the Debenture Trustee or with one or more paying
agents an amount of money sufficient to redeem on the redemption date all the
Securities so called for redemption at the appropriate Redemption Price together
with accrued interest to the date fixed for redemption.
The Corporation will give the Debenture Trustee notice not less than 45
days prior to the redemption date as to the aggregate principal amount of
Securities to be redeemed and the Debenture Trustee shall select, in such manner
as in its sole discretion it shall deem appropriate and fair, the Securities or
portions thereof (in integral multiples of $1,000, except as otherwise set forth
in the applicable form of Security) to be redeemed.
SECTION 14.06 Payment of Securities Called for Redemption.
If notice of redemption has been given as provided in Section 14.05,
the Securities or portions of Securities with respect to which such notice has
been given shall become due and
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payable on the date and at the place or places stated in such notice at the
applicable Redemption Price (subject to the rights of holders of Securities) at
the close of business on a regular record date in respect of an Interest Payment
Date occurring on or prior to the redemption date) and on and after said date
(unless the Corporation shall default in the payment of such Securities at the
Redemption Price interest (including Compounded Interest and Additional Sums, if
any) and Liquidated Damages, if any on the Securities or portions of Securities
so called for redemption shall cease to accrue. On presentation and surrender of
such Securities at a place of payment specified in said notice, the said
Securities or the specified portions thereof shall be paid and redeemed by the
Corporation at the applicable Redemption Price (including Compounded Interest
and Additional Sums, if any) and Liquidated Damages, if any (subject to the
rights of holders of Securities on the close of business on a regular record
date in respect of an Interest Payment Date occurring on or prior to the
redemption date).
Upon presentation of any Security prepaid in part only, the Corporation
shall execute and the Debenture Trustee or Authenticating Agent shall
authenticate and make available for delivery to the holder thereof, at the
expense of the Corporation, a new Security or Securities of authorized
denominations, in principal amount equal to the portion of the Security so
presented that has not been prepaid.
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01 Agreement to Subordinate
The Corporation covenants and agrees, and each holder of Securities
issued hereunder likewise covenants and agrees, that the Securities shall be
issued subject to the provisions of this Article XV; and each holder of a
Security, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.
The payment by the Corporation of the principal of, premium, if any,
and interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on all Securities issued hereunder, including any
payment to be made from the Reserve Account, shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
all Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 15.02 Default on Senior Indebtedness.
In the event and during the continuation of any default by the
Corporation in the payment of principal, premium, interest or any other payment
due on any Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case, no
payment shall be made by the Corporation with respect to the principal
(including
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redemption payments) of (or premium, if any) or interest on the Securities
(including Compounded Interest and Additional Sums (if any) or any other amounts
which may be due on the Securities pursuant to the terms hereof or thereof).
In the event of the acceleration of the maturity of the Securities,
then no payment shall be made by the Corporation with respect to the principal
(including redemption payments) of (or premium, if any) or interest on the
Securities (including Compounded Interest and Additional Sums (if any) or any
other amounts which may be due on the Securities pursuant to the terms hereof or
thereof) until the holders of all Senior Indebtedness outstanding at the time of
such acceleration shall receive payment in full of such Senior Indebtedness
(including any amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment shall be
received by the Debenture Trustee when such payment is prohibited by the
preceding paragraphs of this Section 15.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Debenture Trustee in writing within 90
days of such payment of the amounts then due and owing on such Senior
Indebtedness, and only the amounts specified in such notice to the Debenture
Trustee shall be paid to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear.
SECTION 15.03 Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Corporation or distribution of assets of the
Corporation of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution, winding-up, liquidation or reorganization of
the Corporation, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, the holders of all Senior Indebtedness of the
Corporation will first be entitled to receive payment in full of such Senior
Indebtedness before any payment is made by the Corporation on account of the
principal of (or premium, if any) or interest on the Securities (including
Compounded Interest and Additional Sums (if any) or any other amounts which may
be due on the Securities pursuant to the terms hereof or thereof); and upon any
such dissolution, winding-up, liquidation or reorganization, any payment by the
Corporation, or distribution of assets of the Corporation of any kind or
character, whether in cash, property or securities, which the Securityholders or
the Debenture Trustee would be entitled to receive from the Corporation, except
for the provisions of this Article XV, shall be paid by the Corporation or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Securityholders or by the
Debenture Trustee under the Indenture if received by them or it, directly to the
holders of Senior Indebtedness of the Corporation (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders,
as calculated by the Corporation) or their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all such
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Senior Indebtedness in full, in money or moneys worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Debenture Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Corporation of any kind or character prohibited by
the foregoing, whether in cash, property or securities, shall be received by the
Debenture Trustee before all Senior Indebtedness is paid in full, or provision
is made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Corporation, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Corporation as
reorganized or readjusted, or securities of the Corporation or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article
XV with respect to the Securities to the payment of Senior Indebtedness that may
at the time be outstanding, provided that (i) such Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such reorganization
or readjustment, and (ii) the rights of the holders of such Senior Indebtedness
are not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Corporation with, or the merger of the
Corporation into, another Person or the liquidation or dissolution of the
Corporation following the sale, conveyance, transfer or lease of its property as
an entirety, or substantially as an entirety, to another Person upon the terms
and conditions provided for in Article X of this Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 15.03 if such other Person shall, as a part of such consolidation,
merger, sale, conveyance, transfer or lease, comply with the conditions stated
in Article X of this Indenture. Nothing in Sections 15.01 or 15.02 or in this
Section 15.03 shall apply to claims of, or payments to, the Debenture Trustee
under or pursuant to Section 6.06 of this Indenture.
SECTION 15.04 Subrogation.
Subject to the payment in full of all Senior Indebtedness, the rights
of the Securityholders shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Corporation, as the case may be, applicable to such Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Securities shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Securityholders or the Debenture
Trustee would be entitled except for the provisions of this Article XV, and no
payment over pursuant to the provisions of this Article XV to or for the benefit
of the holders of such Senior
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Indebtedness by Securityholders or the Debenture Trustee, shall, as between the
Corporation, its creditors other than holders of Senior Indebtedness of the
Corporation, and the holders of the Securities, be deemed to be a payment by the
Corporation to or on account of such Senior Indebtedness. It is understood that
the provisions of this Article XV are and are intended solely for the purposes
of defining the relative rights of the holders of the Securities, on the one
hand, and the holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Corporation,
its creditors other than the holders of Senior Indebtedness of the Corporation,
and the holders of the Securities, the obligation of the Corporation, which is
absolute and unconditional, to pay to the holders of the Securities the
principal of (and premium, if any) and Liquidated Damages, if any, and interest
(including Compounded Interest and Additional Sums, if any) on the Securities as
and when the same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the holders of the
Securities and creditors of the Corporation, as the case may be, other than the
holders of Senior Indebtedness of the Corporation, as the case may be, nor shall
anything herein or therein prevent the Debenture Trustee or the holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under the Indenture, subject to the rights, if any, under this Article
XV of the holders of such Senior Indebtedness in respect of cash, property or
securities of the Corporation, as the case may be, received upon the exercise of
any such remedy.
Upon any payment or distribution of assets of the Corporation referred
to in this Article XV, the Debenture Trustee, subject to the provisions of
Article VI of this Indenture, and the Securityholders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Debenture Trustee or to the
Securityholders, for the purposes of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Indebtedness and other
indebtedness of the Corporation, as the case may be, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XV.
SECTION 15.05 Debenture Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Debenture Trustee on such Securityholder's behalf to
take such action (upon written instruction) to effectuate the subordination
provided in this Article XV and appoints the Debenture Trustee such
Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06 Notice by the Corporation.
The Corporation shall give prompt written notice to a Responsible
Officer of the Debenture Trustee of any fact known to the Corporation that would
prohibit the making of any payment of monies to or by the Debenture Trustee in
respect of the Securities pursuant to the provisions of this Article XV.
Notwithstanding the provisions of this Article XV or any other provision of this
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Indenture, the Debenture Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Debenture Trustee in respect of the Securities pursuant to the
provisions of this Article XV, unless and until a Responsible Officer of the
Debenture Trustee shall have received written notice thereof from the
Corporation or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Debenture
Trustee, subject to the provisions of Article VI of this Indenture, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Debenture Trustee shall not have received the notice provided for in
this Section 15.06 at least two Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of (or premium, if any) or
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on any Security) then, anything herein contained to
the contrary notwithstanding, the Debenture Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such date.
The Debenture Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on a written notice delivered
to it by a Person representing himself to be a holder of Senior Indebtedness of
the Corporation (or a trustee on behalf of such holder), as the case may be, to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Debenture Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of such Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article XV, the Debenture Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Debenture Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article XV, and, if such
evidence is not furnished, the Debenture Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
Upon any payment or distribution of assets of the Corporation referred
to in this Article XV, the Debenture Trustee and the Securityholders shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding-up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, liquidating trustee,
custodian, receiver, assignee for the benefit of creditors, agent or other
person making such payment or distribution, delivered to the Debenture Trustee
or to the Securityholders, for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Corporation, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XV.
SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior
Indebtedness.
The Debenture Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article XV in respect of any Senior
Indebtedness at any time held by it, to the same extent as
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<PAGE>
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Debenture Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Corporation,
the Debenture Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article XV, and
no implied covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the Debenture Trustee.
The Debenture Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Article VI
of this Indenture, the Debenture Trustee shall not be liable to any holder of
such Senior Indebtedness if it shall pay over or deliver to Securityholders, the
Corporation or any other Person money or assets to which any holder of such
Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Debenture Trustee under or pursuant to Section 6.06.
SECTION 15.08 Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness of
the Corporation to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Corporation, as the case may be, or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Corporation, as the
case may be, with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Corporation may, at any time and from
time to time, without the consent of or notice to the Debenture Trustee or the
Securityholders, without incurring responsibility to the Securityholders and
without impairing or releasing the subordination provided in this Article XV or
the obligations hereunder of the holders of the Securities to the holders of
such Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same or any agreement
under which such Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Indebtedness; (iii) release any Person liable in any manner
for the collection of such Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Corporation, as the case may be, and any
other Person.
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<PAGE>
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01 Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing, and
following disbursement of all funds held in the Reserve Account, the Corporation
shall have the right, at any time and from time to time during the term of the
Securities, to defer payments of interest by extending the interest payment
period of such Securities for a period not exceeding 10 consecutive semiannual
periods, including the first such semi-annual period during such extension
period (the "Extended Interest Payment Period"), during which Extended Interest
Payment Period no interest shall be due and payable, provided that no Extended
Interest Payment Period shall end on a date other than an Interest Payment Date
or extend beyond the Maturity Date. To the extent permitted by applicable law,
interest, the payment of which has been deferred because of the extension of the
interest payment period pursuant to this Section 16.01, will bear interest
thereon at the Coupon Rate compounded semi-annually for each semi-annual period
during the Extended Interest Payment Period ("Compounded Interest"). At the end
of the Extended Interest Payment Period, the Corporation shall pay all interest
accrued and unpaid on the Securities, including any Additional Sums and
Compounded Interest (together, "Deferred Interest"), that shall be payable to
the holders of the Securities in whose names the Securities are registered in
the Security Register on the record date immediately preceding the end of the
Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Corporation may further defer payments of interest
by further extending such Extended Interest Payment Period, provided that such
Extended Interest Payment Period, together with all such previous and further
extensions within such Extended Interest Payment Period, shall not (i) exceed 10
consecutive semi-annual periods, including the first such semiannual period
during such Extended Interest Payment Period, (ii) end on a date other than an
Interest Payment Date or (iii) extend beyond the Maturity Date of the
Securities. Upon the termination of any Extended Interest Payment Period and the
payment of all amounts then due, the Corporation may commence a new Extended
Interest Payment Period, subject to the foregoing requirements. No interest
shall be due and payable during an Extended Interest Payment Period, except at
the end thereof, but the Corporation may redeem at any time all or any portion
of the interest accrued during an Extended Interest Payment Period.
SECTION 16.02 Notice of Extension.
(a) If the Property Trustee is the only holder of the Securities at the
time the Corporation elects to commence an Extended Interest Payment Period, the
Corporation shall give written notice to the Administrative Trustees, the
Property Trustee and the Debenture Trustee of its election to commence such
Extended Interest Payment Period at least five Business Days before the earlier
of (i) the next succeeding date on which Distributions on the Trust Securities
would have been payable, or (ii) the date the Property Trustee is required to
give notice of the record date, or the date such Distributions are payable, to
any national securities exchange or to holders of the Capital Securities, but in
any event at least five Business Days before such record date.
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<PAGE>
(b) If the Property Trustee is not the only holder of the Securities at
the time the Corporation elects to commence an Extended Interest Payment Period,
the Corporation shall give the holders of the Securities and the Debenture
Trustee written notice of its selection of such Extended Interest Payment Period
at least 10 Business Days before the earlier of (i) the next succeeding Interest
Payment Date, or (ii) the date the Debenture Trustee is required to give notice
of the record or payment date of such interest payment to any national
securities exchange.
(c) The semi-annual period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 10
semi-annual periods permitted in the maximum Extended Interest Payment Period
permitted under Section 16.01.
The Debenture Trustee hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written.
USABANCSHARES, INC.
By: /s/ Kenneth L. Tepper
--------------------------------------
Name: Kenneth L. Tepper
Title: President and Chief Executive Officer
WILMINGTON TRUST COMPANY
as Debenture Trustee
By: /s/ Patricia A. Evans
--------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
Exhibit 4.2
FORM OF SERIES B DEBENTURE
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. ANY ATTEMPTED
TRANSFER OF SECURITIES IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS
THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE
VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE
DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT
NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF, PREMIUM (IF ANY) OR INTEREST ON
SUCH SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO
INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 495 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
<PAGE>
USABANCSHARES, INC.
CUSIP No.: ____________
Amount $ 10,310,000
SERIES B 9.50% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE MARCH 15, 2029
USA BancShares, Inc., a Pennsylvania corporation (the "Corporation,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to USA Capital Trust I,
or registered assigns, the principal sum of $10,310,000 on March 15, 2029 (the
"Maturity Date"), unless previously redeemed, and to pay interest on the
outstanding principal amount hereof from March 15, 1999, or from the most recent
interest payment date (each such date, an "Interest Payment Date") to which
interest has been paid or duly provided for, semi-annually (subject to deferral
as set forth herein) in arrears on March 15 and September 15 of each year,
commencing September 15, 1999, at the rate of 9.50% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually ("Compounded
Interest"). The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months and, for any
period less than a full calendar month, the number of days elapsed in such month
based on a 30-day month. In the event that any date on which the principal of
(or premium, if any) or interest on this Security is payable is not a Business
Day (as defined in the Indenture), then the payment payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), with the same force and effect
as if made on such date. Pursuant to the Indenture, in certain circumstances the
Corporation will be required to pay Additional Sums (as defined in the
Indenture) with respect to this Security. Pursuant to the Registration Rights
Agreement, in certain limited circumstances the Corporation will be required to
pay Liquidated Damages (as defined in the Registration Rights Agreement) with
respect to this Security.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be at the
close of business on the last Business Day of the month immediately prior to the
month in which the relevant Interest Payment Date falls. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be
payable to the holders on such regular record date and may be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by the
Debenture Trustee for the payment of such defaulted interest, notice whereof
shall be given to the holders of Securities not less than 10 days prior to such
special record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed,
<PAGE>
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture.
The principal of (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if any,
on this Security shall be payable at the office or agency of the Debenture
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Corporation by (i) check mailed to the holder at such address as
shall appear in the Security Register or (ii) transfer to an account maintained
by the Person entitled thereto, provided that proper written transfer
instructions have been received by the relevant record date. Notwithstanding the
foregoing, so long as the holder of this Security is the Property Trustee of USA
Capital Trust I, the payment of the principal of (and premium, if any) and
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on this Security will be made at such place and to
such account as may be designated by such Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Debenture Trustee on his or her
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Debenture Trustee
his or her attorney-in-fact for any and all such purposes. Each holder hereof,
by his or her acceptance hereof, hereby waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Indebtedness, whether now outstanding or hereafter incurred,
and waives reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture
or be valid or become obligatory for any purpose until the Certificate of
Authentication hereon shall have been signed by or on behalf of the Debenture
Trustee.
The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
duly executed and sealed this ____ day of _________, 1999.
USABANCSHARES, INC.
By:_______________________________
Name: Brian M. Hartline
Title: Chief Financial Officer
Attest:
By:___________________________
Name: Elizabeth Schneck
Title: Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Series B 9.50% Junior Subordinated Deferrable Interest
Debentures of the USABancShares, Inc. referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as
Debenture Trustee
Dated: __________, 1999 By:_______________________________
Authorized Signatory
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Corporation (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of March 9,
1999 (the "Indenture"), duly executed and delivered between the Corporation and
Wilmington Trust Company, as Debenture Trustee (the "Debenture Trustee"), to
which Indenture reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Debenture Trustee, the Corporation and the holders of the Securities.
Upon the occurrence and continuation of a Special Event (as defined in
the Indenture) prior to March 15, 2009 (the "Initial Optional Redemption Date"),
the Corporation shall have the right, at any time within 90 days following the
occurrence of such Special Event, to redeem this Security in whole (but not in
part) at the Special Event Redemption Price. "Special Event Redemption Price"
shall mean, with respect to any redemption of this Security following a Special
Event, an amount in cash equal to the Make Whole Amount. The "Make Whole Amount"
shall mean an amount equal to the greater of (i) 100% of the principal amount to
be redeemed or (ii) the sum, as determined by a Quotation Agent (as defined in
the Indenture), of the present values of remaining scheduled payments of
principal and interest hereon, discounted to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined in the Indenture), plus, in the case
of each of clauses (i) and (ii), any accrued and unpaid interest thereon
(including Compounded Interest and Additional Sums, if any) and Liquidated
Damages, if any, thereon to the date of such redemption.
In addition, the Corporation shall have the right to redeem this
Security, in whole or in part, at any time on or after the Initial Optional
Redemption Date (an "Optional Redemption"), at the redemption prices set forth
below plus, in each case, accrued and unpaid interest (including Additional Sums
and Compounded Interest, if any) thereon to the applicable date of redemption
(the "Optional Redemption Price"), if redeemed during the 12-month period
beginning March 15, of the years indicated below.
Percentage
Year of Principal
---- ------------
2009 104.750
2010 104.225
2011 103.800
2012 103.325
2013 102.850
2014 102.375
2015 101.900
2016 101.425
2017 100.950
2018 100.475
2019 and thereafter 100.000
<PAGE>
The Optional Redemption Price, the Conversion Redemption Price or the
Special Event Redemption Price, as the case requires, shall be paid prior to
12:00 noon, New York City time, on the date of such redemption or at such
earlier time as the Corporation determines, provided, that the Corporation shall
deposit with the Debenture Trustee an amount sufficient to pay the applicable
Redemption Price by 10:00 a.m., New York City time, on the date such Redemption
Price is to be paid. Any redemption pursuant to this paragraph will be made upon
not less than 30 days nor more than 60 days' prior written notice.
If the Securities are only partially redeemed by the Corporation
pursuant to an Optional Redemption, the particular Securities to be redeemed
shall be selected on a pro rata basis from the outstanding Securities not
previously called for redemption; provided, however, that with respect to
Securityholders that would be required to hold Securities with an aggregate
principal amount of less than $100,000 but more than an aggregate principal
amount of zero as a result of such pro rata redemption, the Corporation shall
redeem Securities of each such Securityholder so that after such redemption such
Securityholder shall hold Securities either with an aggregate principal amount
of at least $100,000 or such Securityholder no longer holds any Securities and
shall use such method (including, without limitation, by lot) as the Debenture
Trustee shall deem fair and appropriate; provided, further, that any such
proration may be made on the basis of the aggregate principal amount of
Securities held by each Securityholder thereof and may be made by making such
adjustments as the Corporation deems fair and appropriate in order that only
Securities in denominations of $1,000 or integral multiples thereof shall be
redeemed. In the event of redemption of this Security in part only, a new
Security or Securities for the portion hereof that has not been redeemed will be
issued in the name of the holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any redemption of Securities by the
Corporation shall be subject to the receipt of any and all required regulatory
approvals.
The Corporation shall establish a reserve account (the "Reserve
Account") in which the Corporation shall deposit an amount equal to two years of
interest payments on the Securities. To the extent that the Corporation's
available funds are insufficient to pay the interest that is due and payable on
the Securities on an Interest Payment Date (as defined in the Indenture), the
amount on deposit in the Reserve Account shall be used to make such payment.
Commencing September 15, 2001, amounts in the Reserve Account will be applied to
pay interest on the Securities until all amounts in the Reserve Account have
been disbursed. Holders of the Securities will have no interest in the Reserve
Account unless and until funds therein are used to make an interest payment, and
any interest in the funds withdrawn from the Reserve Account that such holders
may obtain will be subordinated and junior to the interests of holders of Senior
Indebtedness (as defined in the Indenture).
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
<PAGE>
The Indenture contains provisions permitting the Corporation and the
Debenture Trustee, with the consent of the holders of a majority in aggregate
principal amount of the Securities at the time outstanding (as defined in the
Indenture), to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such supplemental indenture shall,
without the consent of each holder of Securities then outstanding and affected
thereby, (i) change the Maturity Date of any Security, or reduce the rate or
extend the time of payment of interest thereon (subject to Article XVI of the
Indenture), or reduce the principal amount thereof, or change any of the
redemption provisions or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any holder of Securities to institute suit for payment
thereof, or (ii) reduce the aforesaid percentage of Securities the holders of
which are required to consent to any such supplemental indenture. The Indenture
also contains provisions permitting the holders of a majority in aggregate
principal amount of the Securities at the time outstanding affected thereby, on
behalf of all of the holders of the Securities, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default in the payment
of the principal of or premium, if any, or interest on any of the Securities or
a default in respect of any covenant or provision under which the Indenture
cannot be modified or amended without the consent of each holder of Securities
then outstanding. Any such consent or waiver by the holder of this Security
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such holder and upon all future holders and owners of this Security and of
any Security issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest (including Compounded Interest and Additional Sums, if any)
and Liquidated Damages, if any, on this Security at the time and place and at
the rate and in the money herein prescribed.
So long as no Event of Default shall have occurred and be continuing,
and following disbursement of all funds in the Reserve Account, the Corporation
shall have the right, at any time and from time to time during the term of the
Securities, to defer payments of interest by extending the interest payment
period (an "Extended Interest Payment Period") of such Securities for a period
not (i) exceeding 10 consecutive semi-annual periods, including the first such
semi-annual period during such extension period, (ii) extending beyond the
Maturity Date of the Securities or (iii) ending on a date other than an Interest
Payment Date, at the end of which period the Corporation shall pay all interest
then accrued and unpaid (together with interest thereon at the rate specified
for the Securities to the extent that payment of such interest is enforceable
under applicable law). Before the termination of any such Extended Interest
Payment Period, the Corporation may further defer payments of interest by
further extending such Extended Interest Payment Period, provided that such
Extended Interest Payment Period, together with all such previous and further
extensions within such Extended Interest Payment Period, (i) shall not exceed 10
consecutive semi-annual
<PAGE>
periods, including the first semi-annual period during such Extended Interest
Payment Period, (ii) shall not end on any date other than an Interest Payment
Date, and (iii) shall not extend beyond the Maturity Date of the Securities.
Upon the termination of any such Extended Interest Payment Period and the
payment of all accrued and unpaid interest and any additional amounts then due,
the Corporation may commence a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Corporation
may redeem at any time all or any portion of the interest accrued during an
Extended Interest Payment Period.
The Corporation has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase (which includes common and
preferred stock), acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock, (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities (including other Debentures) of the Corporation that rank pari passu
with or junior in right of payment to the Securities or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of the debt securities
of any Subsidiary of the Corporation (including Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to the Securities
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the Corporation,
(b) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Capital Securities Guarantee, as defined in the Indenture,
(d) as a result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of the Corporation's capital stock, (e) the purchase
of fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, and (f) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Corporation's benefit or
compensation plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans), if at such time (1) there shall have
occurred any event of which the Corporation has actual knowledge that (a) is, or
with the giving of notice or the lapse of time, or both, would constitute, an
Event of Default and (b) in respect of which the Corporation shall not have
taken reasonable steps to cure, (2) if such Securities are held by the Property
Trustee of USA Capital Trust I (the "Trust"), the Corporation shall be in
default with respect to its payment of any obligations under the Capital
Securities Guarantee or (3) the Corporation shall have given notice of its
election to exercise its right to commence an Extended Interest Payment Period,
and shall not have rescinded such Notice, and such Extended Interest Payment
Period or any extension thereof shall have commenced and be continuing.
Subject to (i) the Corporation having received any required regulatory
approvals and (ii) the Administrative Trustees of the Trust having received an
opinion of counsel to the effect that such distribution will not cause the
holders of Capital Securities to recognize gain or loss for federal income tax
purposes, the Corporation will have the right at any time to liquidate the Trust
and, after satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause the Securities to be distributed to the holders of the
Trust Securities in liquidation of the Trust.
<PAGE>
The Securities are issuable only in registered form without coupons in
minimum denominations of $100,000 and multiples of $1,000 in excess thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Corporation,
upon surrender of this Security for registration of transfer at the office or
agency of the Corporation in New York, New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Corporation or
the Debenture Trustee duly executed by the holder hereof or his or her attorney
duly authorized in writing, and thereupon one or more new Securities of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Corporation may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.
Prior to due presentment for registration of transfer of this Security,
the Corporation, the Debenture Trustee, any authenticating agent, any paying
agent, any transfer agent and the security registrar may deem and treat the
holder hereof as the absolute owner hereof (whether or not this Security shall
be overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the security registrar for the Securities) for the purpose of
receiving payment of or on account of the principal hereof and premium, if any,
and (subject to the Indenture) interest due hereon and for all other purposes,
and neither the Corporation nor the Debenture Trustee nor any authenticating
agent nor any paying agent nor any transfer agent nor any security registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest (including Compounded Interest and Additional Sums,
if any) on this Security, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, employee, officer or director, past, present or future, as such, of
the Corporation or of any predecessor or successor Person, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
<PAGE>
Exhibit 4.3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH USABANCSHARES, INC.
(THE "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE CORPORATION, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D)
OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO THE CORPORATION, AND (ii) PURSUANT TO CLAUSE
(D) TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
REVERSE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE
CORPORATION. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.
<PAGE>
ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING AN AGGREGATE PRINCIPAL
AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY
PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF, PREMIUM (IF
ANY) OR INTEREST ON SUCH SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 495 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
<PAGE>
USABANCSHARES, INC.
CUSIP No.: ____________
Amount $10,310,000
SERIES A 9.50% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE MARCH 15, 2029
USA BancShares, Inc., a Pennsylvania corporation (the "Corporation,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to USA Capital Trust I,
or registered assigns, the principal sum of $10,310,000 on March 15, 2029 (the
"Maturity Date"), unless previously redeemed, and to pay interest on the
outstanding principal amount hereof from March 15, 1999, or from the most recent
interest payment date (each such date, an "Interest Payment Date") to which
interest has been paid or duly provided for, semi-annually (subject to deferral
as set forth herein) in arrears on March 15 and September 15 of each year,
commencing September 15, 1999, at the rate of 9.50% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually ("Compounded
Interest"). The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months and, for any
period less than a full calendar month, the number of days elapsed in such month
based on a 30-day month. In the event that any date on which the principal of
(or premium, if any) or interest on this Security is payable is not a Business
Day (as defined in the Indenture), then the payment payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), with the same force and effect
as if made on such date. Pursuant to the Indenture, in certain circumstances the
Corporation will be required to pay Additional Sums (as defined in the
Indenture) with respect to this Security. Pursuant to the Registration Rights
Agreement, in certain limited circumstances the Corporation will be required to
pay Liquidated Damages (as defined in the Registration Rights Agreement) with
respect to this Security.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be at the
close of business on the last Business Day of the month immediately prior to the
month in which the relevant Interest Payment Date falls. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be
payable to the holders on such regular record date and may be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by the
Debenture Trustee for the payment of such defaulted interest, notice whereof
shall be given to the holders of Securities not less than 10 days prior to such
special record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed,
<PAGE>
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture.
The principal of (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) and Liquidated Damages, if any,
on this Security shall be payable at the office or agency of the Debenture
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Corporation by (i) check mailed to the holder at such address as
shall appear in the Security Register or (ii) transfer to an account maintained
by the Person entitled thereto, provided that proper written transfer
instructions have been received by the relevant record date. Notwithstanding the
foregoing, so long as the holder of this Security is the Property Trustee of USA
Capital Trust I, the payment of the principal of (and premium, if any) and
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on this Security will be made at such place and to
such account as may be designated by such Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Debenture Trustee on his or her
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Debenture Trustee
his or her attorney-in-fact for any and all such purposes. Each holder hereof,
by his or her acceptance hereof, hereby waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Indebtedness, whether now outstanding or hereafter incurred,
and waives reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture
or be valid or become obligatory for any purpose until the Certificate of
Authentication hereon shall have been signed by or on behalf of the Debenture
Trustee.
The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
duly executed and sealed this 9th day of March, 1999.
USABANCSHARES, INC.
By:_______________________________
Name: Brian M. Hartline
Title: Chief Financial Officer
Attest:
By:___________________________
Name: Elizabeth Schneck
Title: Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the 9.50% Junior Subordinated Deferrable Interest Debentures of
the USABancShares, Inc. referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as
Debenture Trustee
Dated: March 9, 1999 By:_______________________________
Authorized Signatory
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Corporation (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of March 9,
1999 (the "Indenture"), duly executed and delivered between the Corporation and
Wilmington Trust Company, as Debenture Trustee (the "Debenture Trustee"), to
which Indenture reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Debenture Trustee, the Corporation and the holders of the Securities.
Upon the occurrence and continuation of a Special Event (as defined in
the Indenture) prior to March 15, 2009 (the "Initial Optional Redemption Date"),
the Corporation shall have the right, at any time within 90 days following the
occurrence of such Special Event, to redeem this Security in whole (but not in
part) at the Special Event Redemption Price. "Special Event Redemption Price"
shall mean, with respect to any redemption of this Security following a Special
Event, an amount in cash equal to the Make Whole Amount. The "Make Whole Amount"
shall mean an amount equal to the greater of (i) 100% of the principal amount to
be redeemed or (ii) the sum, as determined by a Quotation Agent (as defined in
the Indenture), of the present values of remaining scheduled payments of
principal and interest hereon, discounted to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined in the Indenture), plus, in the case
of each of clauses (i) and (ii), any accrued and unpaid interest thereon
(including Compounded Interest and Additional Sums, if any) and Liquidated
Damages, if any, thereon to the date of such redemption.
In addition, the Corporation shall have the right to redeem this
Security, in whole or in part, at any time on or after the Initial Optional
Redemption Date (an "Optional Redemption"), at the redemption prices set forth
below plus, in each case, accrued and unpaid interest (including Additional Sums
and Compounded Interest, if any) thereon to the applicable date of redemption
(the "Optional Redemption Price"), if redeemed during the 12-month period
beginning March 15, of the years indicated below.
Percentage
Year of Principal
---- ------------
2009 104.750
2010 104.225
2011 103.800
2012 103.325
2013 102.850
2014 102.375
2015 101.900
2016 101.425
2017 100.950
2018 100.475
2019 and thereafter 100.000
<PAGE>
The Optional Redemption Price, the Conversion Redemption Price or the
Special Event Redemption Price, as the case requires, shall be paid prior to
12:00 noon, New York City time, on the date of such redemption or at such
earlier time as the Corporation determines, provided, that the Corporation shall
deposit with the Debenture Trustee an amount sufficient to pay the applicable
Redemption Price by 10:00 a.m., New York City time, on the date such Redemption
Price is to be paid. Any redemption pursuant to this paragraph will be made upon
not less than 30 days nor more than 60 days' prior written notice.
If the Securities are only partially redeemed by the Corporation
pursuant to an Optional Redemption, the particular Securities to be redeemed
shall be selected on a pro rata basis from the outstanding Securities not
previously called for redemption; provided, however, that with respect to
Securityholders that would be required to hold Securities with an aggregate
principal amount of less than $100,000 but more than an aggregate principal
amount of zero as a result of such pro rata redemption, the Corporation shall
redeem Securities of each such Securityholder so that after such redemption such
Securityholder shall hold Securities either with an aggregate principal amount
of at least $100,000 or such Securityholder no longer holds any Securities and
shall use such method (including, without limitation, by lot) as the Debenture
Trustee shall deem fair and appropriate; provided, further, that any such
proration may be made on the basis of the aggregate principal amount of
Securities held by each Securityholder thereof and may be made by making such
adjustments as the Corporation deems fair and appropriate in order that only
Securities in denominations of $1,000 or integral multiples thereof shall be
redeemed. In the event of redemption of this Security in part only, a new
Security or Securities for the portion hereof that has not been redeemed will be
issued in the name of the holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any redemption of Securities by the
Corporation shall be subject to the receipt of any and all required regulatory
approvals.
The Corporation shall establish a reserve account (the "Reserve
Account") in which the Corporation shall deposit an amount equal to two years of
interest payments on the Securities. To the extent that the Corporation's
available funds are insufficient to pay the interest that is due and payable on
the Securities on an Interest Payment Date (as defined in the Indenture), the
amount on deposit in the Reserve Account shall be used to make such payment.
Commencing September 15, 2001, amounts in the Reserve Account will be applied to
pay interest on the Securities until all amounts in the Reserve Account have
been disbursed. Holders of the Securities will have no interest in the Reserve
Account unless and until funds therein are used to make an interest payment, and
any interest in the funds withdrawn from the Reserve Account that such holders
may obtain will be subordinated and junior to the interests of holders of Senior
Indebtedness (as defined in the Indenture).
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
<PAGE>
The Indenture contains provisions permitting the Corporation and the
Debenture Trustee, with the consent of the holders of a majority in aggregate
principal amount of the Securities at the time outstanding (as defined in the
Indenture), to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such supplemental indenture shall,
without the consent of each holder of Securities then outstanding and affected
thereby, (i) change the Maturity Date of any Security, or reduce the rate or
extend the time of payment of interest thereon (subject to Article XVI of the
Indenture), or reduce the principal amount thereof, or change any of the
redemption provisions or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any holder of Securities to institute suit for payment
thereof, or (ii) reduce the aforesaid percentage of Securities the holders of
which are required to consent to any such supplemental indenture. The Indenture
also contains provisions permitting the holders of a majority in aggregate
principal amount of the Securities at the time outstanding affected thereby, on
behalf of all of the holders of the Securities, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default in the payment
of the principal of or premium, if any, or interest on any of the Securities or
a default in respect of any covenant or provision under which the Indenture
cannot be modified or amended without the consent of each holder of Securities
then outstanding. Any such consent or waiver by the holder of this Security
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such holder and upon all future holders and owners of this Security and of
any Security issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest (including Compounded Interest and Additional Sums, if any)
and Liquidated Damages, if any, on this Security at the time and place and at
the rate and in the money herein prescribed.
So long as no Event of Default shall have occurred and be continuing,
and following disbursement of all funds in the Reserve Account, the Corporation
shall have the right, at any time and from time to time during the term of the
Securities, to defer payments of interest by extending the interest payment
period (an "Extended Interest Payment Period") of such Securities for a period
not (i) exceeding 10 consecutive semi-annual periods, including the first such
semi-annual period during such extension period, (ii) extending beyond the
Maturity Date of the Securities or (iii) ending on a date other than an Interest
Payment Date, at the end of which period the Corporation shall pay all interest
then accrued and unpaid (together with interest thereon at the rate specified
for the Securities to the extent that payment of such interest is enforceable
under applicable law). Before the termination of any such Extended Interest
Payment Period, the Corporation may further defer payments of interest by
further extending such Extended Interest Payment Period, provided that such
Extended Interest Payment Period, together with all such previous and further
extensions within such Extended Interest Payment Period, (i) shall not exceed 10
consecutive semi-annual
<PAGE>
periods, including the first semi-annual period during such Extended Interest
Payment Period, (ii) shall not end on any date other than an Interest Payment
Date, and (iii) shall not extend beyond the Maturity Date of the Securities.
Upon the termination of any such Extended Interest Payment Period and the
payment of all accrued and unpaid interest and any additional amounts then due,
the Corporation may commence a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Corporation
may redeem at any time all or any portion of the interest accrued during an
Extended Interest Payment Period.
The Corporation has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase (which includes common and
preferred stock), acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock, (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities (including other Debentures) of the Corporation that rank pari passu
with or junior in right of payment to the Securities or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of the debt securities
of any Subsidiary of the Corporation (including Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to the Securities
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the Corporation,
(b) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Capital Securities Guarantee, as defined in the Indenture,
(d) as a result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of the Corporation's capital stock, (e) the purchase
of fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, and (f) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Corporation's benefit or
compensation plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans), if at such time (1) there shall have
occurred any event of which the Corporation has actual knowledge that (a) is, or
with the giving of notice or the lapse of time, or both, would constitute, an
Event of Default and (b) in respect of which the Corporation shall not have
taken reasonable steps to cure, (2) if such Securities are held by the Property
Trustee of USA Capital Trust I (the "Trust"), the Corporation shall be in
default with respect to its payment of any obligations under the Capital
Securities Guarantee or (3) the Corporation shall have given notice of its
election to exercise its right to commence an Extended Interest Payment Period,
and shall not have rescinded such Notice, and such Extended Interest Payment
Period or any extension thereof shall have commenced and be continuing.
Subject to (i) the Corporation having received any required regulatory
approvals and (ii) the Administrative Trustees of the Trust having received an
opinion of counsel to the effect that such distribution will not cause the
holders of Capital Securities to recognize gain or loss for federal income tax
purposes, the Corporation will have the right at any time to liquidate the Trust
and, after satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause the Securities to be distributed to the holders of the
Trust Securities in liquidation of the Trust.
<PAGE>
The Securities are issuable only in registered form without coupons in
minimum denominations of $100,000 and multiples of $1,000 in excess thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Corporation,
upon surrender of this Security for registration of transfer at the office or
agency of the Corporation in New York, New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Corporation or
the Debenture Trustee duly executed by the holder hereof or his or her attorney
duly authorized in writing, and thereupon one or more new Securities of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Corporation may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.
Prior to due presentment for registration of transfer of this Security,
the Corporation, the Debenture Trustee, any authenticating agent, any paying
agent, any transfer agent and the security registrar may deem and treat the
holder hereof as the absolute owner hereof (whether or not this Security shall
be overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the security registrar for the Securities) for the purpose of
receiving payment of or on account of the principal hereof and premium, if any,
and (subject to the Indenture) interest due hereon and for all other purposes,
and neither the Corporation nor the Debenture Trustee nor any authenticating
agent nor any paying agent nor any transfer agent nor any security registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest (including Compounded Interest and Additional Sums,
if any) on this Security, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, employee, officer or director, past, present or future, as such, of
the Corporation or of any predecessor or successor Person, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
<PAGE>
Exhibit 4.4
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/03/1999
991082892 - 3009049
CERTIFICATE OF TRUST
OF
USA CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of USA Capital Trust I (the "Trust"), dated
as of March 3, 1999, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. ss.3801, et. seq.).
- ------ -------
(i) Name. The name of the business trust being formed
hereby is USA Capital Trust I.
(ii) Delaware Trustee. The name and business address of
the trustee of the Trust with a principal place of
business in the State of Delaware are Wilmington Trust
Company, Rodney Square North, 1100 N. Market Street,
Wilmington, Delaware 19890.
(iii) Effective Date. This Certificate of Trust shall be
effective as of its filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as trustee
By: /s/ PATRICIA A. EVANS
-----------------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as trustee
By: /s/ PATRICIA A. EVANS
-----------------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
/s/ KENNETH L. TEPPER
-----------------------------------------------------
Name: Kenneth L. Tepper
not in his individual capacity but solely as
trustee
/s/ BRIAN M. HARTLINE
-----------------------------------------------------
Name: Brian M. Hartline
not in his individual capacity but solely as
trustee
/s/ CRAIG SCHER
-----------------------------------------------------
Name: Craig Scher
not in his individual capacity but solely as
trustee
<PAGE>
Exhibit 4.5
================================================================================
AMENDED AND RESTATED DECLARATION
OF TRUST
OF
USA CAPITAL TRUST I
Dated as of March 9, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions..................................................2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.................................10
SECTION 2.2 Lists of Holders of Securities...................................10
SECTION 2.3 Reports by the Property Trustee..................................11
SECTION 2.4 Periodic Reports by Sponsor and Administrative Trustees..........11
SECTION 2.5 Evidence of Compliance with Conditions Precedent.................11
SECTION 2.6 Events of Default; Waiver........................................12
SECTION 2.7 Default; Notice..................................................13
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.............................................................14
SECTION 3.2 Office...........................................................14
SECTION 3.3 Purpose..........................................................15
SECTION 3.4 Authority........................................................15
SECTION 3.5 Title to Property of the Trust...................................15
SECTION 3.6 Powers and Duties of the Administrative Trustees.................15
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.............18
SECTION 3.8 Powers and Duties of the Property Trustee........................19
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee......21
SECTION 3.10 Certain Rights of Property Trustee...............................23
SECTION 3.11 Delaware Trustee.................................................26
SECTION 3.12 Execution of Documents...........................................26
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities...........26
SECTION 3.14 Duration of Trust................................................26
SECTION 3.15 Mergers..........................................................27
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities..........................29
SECTION 4.2 Responsibilities of the Sponsor..................................29
SECTION 4.3 Right to Proceed.................................................29
SECTION 4.4 Right to Dissolve Trust..........................................30
i
<PAGE>
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee....................30
SECTION 5.2 Delaware Trustee.................................................31
SECTION 5.3 Property Trustee; Eligibility....................................31
SECTION 5.4 Certain Qualifications of Administrative Trustees and
Delaware Trustee Generally....................................32
SECTION 5.5 Administrative Trustees..........................................32
SECTION 5.6 Appointment, Removal and Resignation of Trustees.................33
SECTION 5.7 Vacancies among Trustees.........................................35
SECTION 5.8 Effect of Vacancies..............................................35
SECTION 5.9 Meetings.........................................................35
SECTION 5.10 Delegation of Power..............................................35
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business......36
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions....................................................36
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities..........................37
SECTION 7.2 Execution and Authentication.....................................37
SECTION 7.3 Form and Dating..................................................38
SECTION 7.4 Registrar, Paying Agent and Exchange Agent.......................40
SECTION 7.5 Paying Agent to Hold Money in Trust..............................40
SECTION 7.6 Replacement Securities...........................................40
SECTION 7.7 Outstanding Capital Securities...................................41
SECTION 7.8 Capital Securities in Treasury...................................41
SECTION 7.9 Temporary Securities.............................................41
SECTION 7.10 Cancellation.....................................................42
SECTION 7.11 CUSIP Numbers....................................................42
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust........................................43
ii
<PAGE>
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities...........................................44
SECTION 9.2 Transfer Procedures and Restrictions.............................45
SECTION 9.3 Deemed Security Holders..........................................54
SECTION 9.4 Book-Entry Interests.............................................54
SECTION 9.5 Notices to Clearing Agency.......................................55
SECTION 9.6 Appointment of Successor Clearing Agency.........................55
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability........................................................56
SECTION 10.2 Exculpation......................................................56
SECTION 10.3 Fiduciary Duty...................................................57
SECTION 10.4 Indemnification..................................................58
SECTION 10.5 Outside Businesses...............................................60
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year......................................................61
SECTION 11.2 Certain Accounting Matters.......................................61
SECTION 11.3 Banking..........................................................62
SECTION 11.4 Withholding......................................................62
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.......................................................62
SECTION 12.2 Meetings of the Holders; Action by Written Consent...............64
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee...............66
SECTION 13.2 Representations and Warranties of Delaware Trustee...............66
SECTION 14.1 Registration Rights Agreement....................................67
iii
<PAGE>
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices..........................................................67
SECTION 15.2 Governing Law....................................................69
SECTION 15.3 Intention of the Parties.........................................69
SECTION 15.4 Headings.........................................................69
SECTION 15.5 Successors and Assigns...........................................69
SECTION 15.6 Partial Enforceability...........................................69
SECTION 15.7 Counterparts.....................................................70
ANNEX I
TERMS OF SERIES A/SERIES B CAPITAL AND COMMON SECURITIES
EXHIBIT A-1
FORM OF SERIES A CAPITAL SECURITY CERTIFICATE
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
EXHIBIT B
SPECIMEN OF DEBENTURE
EXHIBIT C
PURCHASE AGREEMENT
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
iv
<PAGE>
CROSS-REFERENCE TABLE*
Section of
Trust Indenture
Act of 1939, as Section of
amended Declaration
- --------------- -----------
310(a) .............................................. 5.3(a)
310(b) .............................................. 5.3(c), 5.3(d)
311(a) .............................................. 2.2(b)
311(b) .............................................. 2.2(b)
312(a) .............................................. 2.2(a)
312(b) .............................................. 2.2(b)
313 .............................................. 2.3
314(a) .............................................. 2.4; 3.6(j)
314(c) .............................................. 2.5
314(e) .............................................. 2.5
315(b) .............................................. 2.7(a)
315(c) .............................................. 3.9(a)
315(d) .............................................. 3.9(b)
316(a) .............................................. 2.6
316(c) .............................................. 3.6(e)
317(a) .............................................. 3.8(e); 3.8(h)
317(b) .............................................. 3.8(i); 7.5
- ------------
* This Cross-Reference Table does not constitute part of this Declaration and
shall not affect the interpretation of any of its terms or provisions.
v
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
USA CAPITAL TRUST I
Dated as of March 9, 1999
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of March 9, 1999, by and among the Trustees (as defined
herein), the Sponsor (as defined herein) and by the holders, from time to time,
of undivided beneficial interests in the assets of the Trust to be issued
pursuant to this Declaration;
WHEREAS, certain of the Trustees and the Sponsor established
USA Capital Trust I (the "Trust"), a trust created under the Business Trust Act
pursuant to a Declaration of Trust dated as of March 3, 1999 (the "Original
Declaration"), and a Certificate of Trust filed with the Delaware Secretary of
State on March 3, 1999, for the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in the assets of the
Trust, investing the proceeds thereof in certain Debentures of the Debenture
Issuer (each as hereinafter defined), and engaging in only those activities
necessary, advisable or incidental thereto;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;
WHEREAS, as of the date hereof, no interests in the Trust have
been issued; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration and, in consideration
of the mutual covenants contained herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in
the preamble above or elsewhere herein have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are
to this Declaration and each Annex and Exhibit hereto, as modified, supplemented
or amended from time to time;
(d) all references in this Declaration to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires;
(f) a term defined in the Indenture (as defined herein) has the
same meaning when used in this Declaration unless otherwise defined in this
Declaration or the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Administrative Trustee" has the meaning set forth in Section 5.1.
"Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
"Authorized Officer" of a Person means any other Person that is
authorized to legally bind such former Person.
"Book-Entry Interest" means a beneficial interest in the Global
Capital Security registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.
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<PAGE>
"Business Day" means any day other than a Saturday or a Sunday or
a day on which banking institutions in Wilmington, Delaware are authorized or
required by law or executive order to remain closed.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Capital Securities" means, collectively, the Series A Capital
Securities and the Series B Capital Securities.
"Capital Securities Guarantee" means, collectively, the Series A
Capital Securities Guarantee and the Series B Capital Securities Guarantee.
"Capital Security Beneficial Owner" means, with respect to a
Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Capital Security Certificate" has the meaning set forth in
Section 9.4.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a global certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Time" means the "Closing Time" as defined in the Purchase
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation.
"Commission" means the United States Securities and Exchange
Commission as from time to time constituted, or if at any time after the
execution of this Declaration such Commission is not existing and performing the
duties now assigned to it under applicable federal securities laws, then the
body performing such duties at such time.
"Common Securities" has the meaning specified in Section 7.1(a).
"Common Securities Guarantee" means the Common Securities
Guarantee Agreement, dated as of the Closing Time, the Sponsor, in respect of
the Common Securities.
-3-
<PAGE>
"Common Securities Subscription Agreement" means the Common
Securities Subscription Agreement, dated as of the Closing Time, between the
Trust and the Sponsor, relating to the Common Securities.
"Company Indemnified Person" means (a) any Administrative Trustee;
(b) any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates.
"Corporate Trust Office" means the office of the Property Trustee
at which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means USABancShares, Inc., a Pennsylvania
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.
"Debenture Subscription Agreement" means the Debenture
Subscription Agreement, dated as of the Closing Time, between the Debenture
Issuer and the Trust in respect of the Series Debentures.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.
"Debentures" means, the 9.50% Junior Subordinated Deferrable
Interest Debentures due March 15, 2029, of the Debenture Issuer issued pursuant
to the Indenture.
"Default" means an event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" has the meaning set forth in
Section 7.3(c).
"Delaware Secretary of State" means the office of the Secretary of
State of the State of Delaware.
"Delaware Trustee" has the meaning set forth in Section 5.1.
-4-
<PAGE>
"Direct Action" has the meaning set forth in Section 3.8(e).
"Distribution" means a distribution payable to Holders in
accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Exchange Agent" has the meaning set forth in Section 7.4.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Trust to exchange Series B Capital
Securities for Series A Capital Securities and (ii) by the Debenture Issuer to
exchange Series B Debentures for Series A Debentures and the Series B Capital
Securities Guarantee for the Series A Capital Securities Guarantee.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Capital Security" has the meaning set forth in Section
7.3(a).
"Holder" means a Person in whose name a Security or Successor
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Indenture, dated as of the Closing Time,
between the Debenture Issuer and the Debenture Trustee, as amended from time to
time.
"Initial Optional Redemption Date" has the meaning set forth in
Section 4(b) of Annex I hereto.
"Investment Company" means an investment company as defined in the
Investment Company Act.
-5-
<PAGE>
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Section
4(c) of Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Like Amount" has the meaning set forth in Section 3 of Annex I
hereto.
"List of Holders" has the meaning set forth in Section 2.2(a).
"Liquidated Damages" has the meaning set forth in the Registration
Rights Agreement.
"Majority in Liquidation Amount " means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"Offering Memorandum" has the meaning set forth in Section
3.6(b)(i).
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman, the Vice Chairman, the Chief Executive
Officer, the President, an Executive or Senior Vice President, a Vice President,
the Chief Financial Officer, and the Secretary or an Assistant Secretary. Any
Officers' Certificate delivered by the Trust shall be signed by at least one
Administrative Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Declaration shall
include:
(a) a statement that each officer signing the Certificate has read
the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
-6-
<PAGE>
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may
be an employee of the Sponsor, and who shall be acceptable to the Property
Trustee.
"Participants" has the meaning specified in Section 7.3(b).
"Paying Agent" has the meaning specified in Section 7.4.
"Payment Amount" has the meaning specified in Section 6.1.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"PORTAL" has the meaning set forth in Section 3.6(b) (iii).
"Property Trustee" has the meaning set forth in Section 5.3(a).
"Property Trustee Account" has the meaning set forth in Section
3.8(c)(i).
"Purchase Agreement" means the Purchase Agreement relating to the
Capital Securities, dated March 4, 1999, by and among the Trust, the Debenture
Issuer and the Initial Purchaser named therein.
"QIBs" shall mean qualified institutional buyers as defined in
Rule 144A.
"Quorum" means a majority of the Administrative Trustees or, if
there are only two Administrative Trustees, both of them.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of March 9, 1999, by and among the Trust, the Debenture
Issuer and the initial purchaser named therein, as amended from time to time.
"Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Regulatory Capital Event" has the meaning set forth in Section
4(c) of Annex I hereto.
-7-
<PAGE>
"Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property Trustee,
any officer assigned to the Corporate Trust Office, including any managing
director, principal, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Property Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Declaration, and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Restricted Capital Security" means a Capital Security required by
Section 9.2 to contain a Restricted Securities Legend.
"Restricted Definitive Capital Securities" has the meaning set
forth in Section 7.3(c).
"Restricted Securities Legend" has the meaning set forth in
Section 9.2(i).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or
any successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities" or "Trust Securities" means the Common Securities and
the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee and
the Capital Securities Guarantee.
"Series A Capital Securities" has the meaning specified in Section
7.1(a) and may be alternatively referred to as the 9.50% Capital Securities.
"Series A Capital Securities Guarantee" means the guarantee
agreement dated as of March 9, 1999, by the Sponsor in respect of the Series A
Capital Securities.
-8-
<PAGE>
"Series A Debentures" means the Series A 9.50% Junior Subordinated
Deferrable Interest Debentures due March 15, 2029 of the Debenture Issuer issued
pursuant to the Indenture.
"Series B Capital Securities" has the meaning specified in Section
7.1(a).
"Series B Capital Securities Guarantee" means the guarantee
agreement to be entered in connection with the Exchange Offer by the Sponsor in
respect of the Series B Capital Securities.
"Series B Debentures" means the Series B 9.50% Junior Subordinated
Deferrable Interest Debentures due March 15, 2029 of the Debenture Issuer issued
pursuant to the Indenture.
"Special Event" has the meaning set forth in Section 4(c) of Annex
I hereto.
"Special Event Redemption Price" has the meaning set forth in
Section 4(c) of Annex I hereto.
"Sponsor" means USABancShares, Inc., a Pennsylvania corporation,
or any successor entity resulting from any merger, consolidation, amalgamation
or other business combination, in its capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning set forth in Section
5.6(b)(ii).
"Successor Entity" has the meaning set forth in Section
3.15(b)(i).
"Successor Property Trustee" has the meaning set forth in Section
3.8(f)(ii).
"Successor Securities" has the meaning set forth in Section
3.15(b)(i).
"Super Majority" has the meaning set forth in Section 2.6(a) (ii).
"Tax Event" has the meaning set forth in Section 4(c) of Annex I
hereto.
"10% in Liquidation Amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holders of outstanding Trust Securities voting together as
a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more of the aggregate liquidation
amount (including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such
-9-
<PAGE>
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
"Trust Property" means (a) the Debentures, (b) any cash on deposit
in or owing to the Property Trustee Account and (c) all proceeds and rights in
respect of the foregoing and any other property and assets for the time being
held or deemed to be held by the Property Trustee pursuant to this Declaration.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue as a trustee of
the Trust in accordance with the terms hereof, and all other Persons who may
from time to time be duly appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and references herein to a Trustee or the
Trustees shall refer to such Person or Persons solely in their capacity as
trustees hereunder.
"Unrestricted Global Capital Security" has the meaning set forth
in Section 9.2(b).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration in order for this
Declaration to be qualified under the Trust Indenture Act and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee that is a
trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by ss.ss. 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrative Trustees on behalf
of the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
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<PAGE>
Holders") as of such record date, provided that, neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time that the List of Holders does not differ from
the most recent List of Holders given to the Property Trustee by the Sponsor and
the Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity), provided that the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under
ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after March 15 of each year, commencing March 15,
2000, the Property Trustee shall provide to the Holders of the Capital
Securities such reports as are required by ss. 313 of the Trust Indenture Act,
if any, in the form and in the manner provided by ss. 313 of the Trust Indenture
Act. The Property Trustee shall also comply with the requirements of ss. 313(d)
of the Trust Indenture Act.
SECTION 2.4 Periodic Reports by Sponsor and Administrative Trustees.
Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall file with and/or provide to the Commission, the Property Trustee
and/or the Holders of the Capital Securities such documents, reports and
information (if any) as are required by ss. 314 of the Trust Indenture Act and
the compliance certificate required by ss. 314 of the Trust Indenture Act in the
form, in the manner and at the times required by ss. 314 of the Trust Indenture
Act, such compliance certificate to be delivered annually on or before 120 days
after the end of each fiscal year of the Sponsor. Delivery of such documents,
reports and information to the Property Trustee is for informational purposes
only and the Property Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Sponsor's compliance with any of
its covenants hereunder (as to which the Property Trustee is entitled to rely
exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee such evidence of compliance with
any conditions precedent provided for in this Declaration (including any
covenants compliance with which constitutes a condition precedent) that relate
to any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to ss.
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
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SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in Liquidation Amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, provided that, if the underlying Event of Default under
the Indenture:
(i) is not available under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority
in aggregate principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of
Default under the Declaration may only be waived by the vote of
the Holders of at least the proportion in aggregate liquidation
amount of the Capital Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of ss.
316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
Default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other Default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
The Holders of a Majority in liquidation amount of the Capital Securities shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee or to direct the exercise of
any trust or power conferred upon the Property Trustee, including the right to
direct the Property Trustee to exercise the remedies available to it as holder
of the Debentures, provided however, that (subject to the provisions of Section
3.9) the Property Trustee shall have the right to decline to follow any such
direction if the Property Trustee shall determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such direction
or if the Property Trustee, being advised by counsel, determines that the action
or proceeding so directed may not lawfully be taken or if the Property Trustee,
in good faith, by its board of directors or trustees, executive committee, or a
trust committee of directors or trustees and/or Responsible Officers, shall
determine that the action or proceedings so directed would involve the Property
Trustee in personal liability.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of
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Default with respect to the Common Securities and its consequences, provided
that, if the underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration shall
also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the Declaration
as provided below in this Section 2.6(b), the Event of Default
under the Declaration may only be waived by the vote of the
Holders of at least the proportion in aggregate liquidation amount
of the Common Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and their consequences if all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the Holders of
the Capital Securities and only the Holders of the Capital Securities will have
the right to direct the Property Trustee in accordance with the terms of the
Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of
ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such ss.ss.
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly
excluded from this Declaration and the Securities, as permitted by the Trust
Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon
such waiver, any such Default shall cease to exist and any Event of Default with
respect to the Common Securities arising therefrom shall be deemed to have been
cured for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other Default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the Capital Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Default; Notice.
(a) The Property Trustee shall, within 90 days after a Responsible
Officer obtains actual knowledge of the occurrence of a Default with respect to
the Securities, transmit by mail, first class postage prepaid, to the Holders,
notices of all such Defaults, unless such Defaults have been cured before the
giving of such notice or previously waived; provided, however, that
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except in the case of a Default arising from the nonpayment of principal of (or
premium, if any) or interest (including Compounded Interest and Additional Sums
(as such terms are defined in the Indenture), if any) or Liquidated Damages (as
defined in the Registration Rights Agreement) on any of the Debentures, the
Property Trustee shall be protected in withholding such notice if and so long as
a Responsible Officer in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Property Trustee shall not be deemed to have knowledge of
any Default or Event of Default except:
(i) a Default or Event of Default under Sections 5.01(a)
(other than the payment of Compounded Interest, Additional Sums
and Liquidation Damages) and 5.01(b) of the Indenture; or
(ii) any Default or Event of Default as to which the Property
Trustee shall have received written notice or of which a
Responsible Officer charged with the administration of the
Declaration shall have actual knowledge.
(c) Within ten Business Days after a Responsible Officer obtains
actual knowledge of the occurrence of any Event of Default, the Property Trustee
shall transmit notice of such Event of Default to the Holders of the Capital
Securities, the Administrative Trustees and the Sponsor, unless such Event of
Default shall have been cured or waived. The Sponsor and the Administrative
Trustees shall file annually with the Property Trustee a certification as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under this Declaration.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "USA Capital Trust I" as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Delaware Trustee, the Property Trustee and the Holders. The
Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o
USABancShares, Inc., One Lincoln Plaza, 1535 Locust Street, Philadelphia, PA
19102. On ten Business Days' prior written notice to the Delaware Trustee, the
Property Trustee and the Holders of Securities, the Administrative Trustees may
designate another principal office.
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SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue
and sell Securities, (b) to use the proceeds from the sale of the Securities to
acquire the Debentures, (c) to issue the Series B Securities in exchange for the
Series A Securities, and (d) except as otherwise limited herein, to engage in
only those other activities necessary, advisable or incidental thereto,
including without limitation, those activities specified in Sections 3.6, 3.8,
3.9, 3.10, 3.11 and/or 3.12. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, mortgage or pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by one or more of the Administrative Trustees in accordance with
their powers shall constitute the act of and serve to bind the Trust and an
action taken by the Property Trustee on behalf of the Trust in accordance with
its powers shall constitute the act of and serve to bind the Trust. In dealing
with the Trustees acting on behalf of the Trust, no Person shall be required to
inquire into the authority of the Trustees to bind the Trust. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures
and the Property Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of the Trust shall be vested in the Trust. The Holders
shall not have legal title to any part of the assets of the Trust, but shall
have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Administrative Trustees.
The Administrative Trustees shall have the exclusive power, duty
and authority, and are hereby authorized and directed, to cause the Trust to
engage in the following activities:
(a) to execute, enter into and deliver the Common Securities
Subscription Agreement and to execute, deliver, issue and sell the Securities in
accordance with this Declaration; provided, however, that (i) the Trust may
issue no more than one series of Capital Securities and no more than one series
of Common Securities, (ii) there shall be no interests in the Trust other than
the Securities, and (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both Capital Securities and Common Securities at the
Closing Time;
(b) in connection with the issue and sale of the Capital
Securities and the consummation of the Exchange Offer to:
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(i) prepare and execute, if necessary, an offering memorandum
(the "Offering Memorandum") in preliminary and final form prepared
by the Sponsor, in relation to the offering and sale of Series A
Capital Securities to QIBs in reliance on Rule 144A and to
institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act);
(ii) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be necessary in
order to qualify or register all or part of the Capital Securities
in any State in which the Sponsor has determined to qualify or
register such Capital Securities for sale;
(iii) execute and file an application, prepared by the
Sponsor, to permit the Capital Securities to trade or be quoted or
listed in or on the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market or any other securities
exchange, quotation system or the NASDAQ Stock Market's National
Market or Small Cap Market; and
(iv) execute and deliver letters, documents, or instruments
with DTC and other Clearing Agencies relating to the Capital
Securities.
(v) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments
thereto, prepared by the Sponsor, relating to the registration of
the Capital Securities under Section 12(g) of the Exchange Act;
and
(vi) execute and enter into the Purchase Agreement, the Common
Securities Guarantee and the Debenture Subscription Agreement
dated as of March 9, 1999 between the Sponsor and the Trust and
the Registration Rights Agreement providing for the sale and
registration of the Capital Securities;
(c) to acquire the Series A Debentures with the proceeds of the
sale of the Series A Capital Securities and the Common Securities and to
exchange the Series A Debentures for a like principal amount of Series B
Debentures, pursuant to the Exchange Offer; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including and with
respect to, for the purposes of ss. 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Capital Securities and Holders of Common Securities as
to such actions and applicable record dates;
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(f) to take all actions and perform such duties as may be required
of the Administrative Trustees pursuant to the terms of the Securities;
(g) to the fullest extent permitted by law, to bring or defend,
pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust
claims or demands of or against the Trust ("Legal Action"), unless pursuant to
Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal
Action;
(h) to employ or otherwise engage employees, agents (who may be
designated as officers with titles), managers, contractors, advisors and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;
(k) to incur expenses that are necessary or incidental to carry
out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar and
Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4, except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;
(m) to give prompt written notice to the Property Trustee and to
Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to take all action that may be necessary or appropriate for
the preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders or to enable the Trust
to effect the purposes for which the Trust was created;
(o) to take any action, not inconsistent with this Declaration or
with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company
Act;
(ii) causing the Trust to continue to be classified for United
States federal income tax purposes as a grantor trust; and
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(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer
for United States federal income tax purposes;
(p) to take all action necessary to consummate the Exchange Offer
or otherwise cause the Capital Securities to be registered pursuant to an
effective registration statement under the provisions of the Registration Rights
Agreement.
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Administrative Trustees, on
behalf of the Trust; and
(r) to execute and deliver all documents or instruments, perform
all duties and powers, and do all things for and on behalf of the Trust in all
matters necessary, advisable or incidental to the foregoing.
The Administrative Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall
have none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
The Administrative Trustees shall take all actions on behalf of
the Trust that are not specifically required by this Declaration to be taken by
any other Trustee.
Any expenses incurred by the Administrative Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property
Trustee and the Delaware Trustee) shall not, and the Administrative Trustees
shall cause the Trust not to, engage in any activity other than as required or
authorized by this Declaration. The Trust shall not:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders
pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust Property for other than a Trust purpose or
execute any mortgage in respect of, or pledge, any Trust Property;
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(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust Property or the terms of the Securities in any way
whatsoever, except as otherwise expressly provided herein;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) other than as provided in this Declaration or Annex I
hereto, (A) direct the time, method and place of conducting any
proceeding with respect to any remedy available to the Debenture
Trustee, or exercising any trust or power conferred upon the
Debenture Trustee with respect to the Debentures, (B) waive any
past default that is available under the Indenture, or (C)
exercise any right to rescind or annul any declaration that the
principal of all the Debentures shall be due and payable; or
(viii) consent to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be
required unless the Trust shall have received an opinion of
independent tax counsel experienced in such matters to the effect
that such amendment, modification or termination will not cause
more than an insubstantial risk that the Trust will not be
classified as a grantor trust for United States federal income tax
purposes.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held
of record in the name of the Property Trustee in trust for the benefit of the
Trust and the Holders. The right, title and interest of the Property Trustee to
the Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.6. Such vesting and
cessation of title shall be effective whether or not conveyancing documents with
regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and
under the exclusive control of the Property Trustee on behalf of
the Holders and, upon the receipt of payments of funds made in
respect of the Debentures held by the Property
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Trustee, deposit such funds into the Property Trustee Account and
make payments or cause the Paying Agent to make payments to the
Holders from the Property Trustee Account in accordance with
Section 6.1; funds in the Property Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration;
and the Property Trustee Account shall be an account that is
maintained with a banking institution the rating on whose
long-term unsecured indebtedness by a "nationally recognized
statistical rating organization," as that term is defined for
purposes of Rule 436(g)(2) under the Securities Act, is at least
equal to the rating assigned to the Capital Securities;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the
Securities to the extent the Debentures are redeemed or mature;
and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the
Securities, engage in such ministerial activities as shall be
necessary or appropriate to effect the distribution of the
Debentures to Holders upon the occurrence of certain events.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of this Declaration and the Securities. The Property Trustee shall not
perform any duties and obligations of the Administrative Trustees.
(e) Subject to Section 3.9(a), the Property Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a Responsible Officer has actual knowledge or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act; and if
the Property Trustee shall have failed to take such Legal Action, the Holders of
the Capital Securities may, to the fullest extent permitted by law, take such
Legal Action, to the same extent as if such Holders of Capital Securities held
an aggregate principal amount of Debentures equal to the aggregate liquidation
amount of such Capital Securities, without first proceeding against the Property
Trustee or the Trust; provided, however, that if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Debenture Issuer to pay the principal of or premium, if any, or interest
(including Compounded Interest and Additional Sums, if any) or Liquidated
Damages, if any, on the Debentures on the date such principal, premium, if any,
or interest (including Compounded Interest and Additional Sums, if any) or
Liquidated Damages, if any, is otherwise payable (or in the case of redemption,
on the redemption date), then a Holder of Capital Securities may directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or premium, if any, or interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of Capital Securities to the extent of any payment made by the
Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the
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preceding sentences, the Holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
(f) The Property Trustee shall continue to serve as a Trustee
until either:
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders pursuant to the
terms of the Securities and this Declaration; or
(ii) a successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6 (a
"Successor Property Trustee").
(g) The Property Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer
occurs and is continuing, the Property Trustee shall, for the benefit of
Holders, enforce its rights as holder of the Debentures subject to the rights of
the Holders pursuant to the terms of this Declaration and the Securities.
(h) The Property Trustee shall be authorized to undertake any
actions set forth in ss. 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with ss. 317(b) of the Trust Indenture Act. Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee while the Property Trustee is acting as Paying Agent.
(j) Subject to this Section 3.8, the Property Trustee shall have
none of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.6.
Notwithstanding anything expressed or implied to the contrary in
this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must
exercise the powers set forth in this Section 3.8 in a manner that is consistent
with the purposes and functions of the Trust set out in Section 3.3, and (ii)
the Property Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any Event of
Default (of which, other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the Property
Trustee has actual knowledge) and after the curing or waiving of all such Events
of Default that may have occurred, shall undertake to perform only
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such duties as are specifically set forth in this Declaration and in the
Securities and no implied covenants shall be read into this Declaration against
the Property Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.6) of which a Responsible Officer has
actual knowledge, the Property Trustee shall exercise such of the rights and
powers vested in it by this Declaration, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default (of which,
other than in the case of Events of Default under Sections 5.01(a)
and 5.01(b) of the Indenture, a Responsible Officer of the
Property Trustee has actual knowledge) and after the curing or
waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall
be determined solely by the express provisions of this
Declaration and in the Securities and the Property Trustee
shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this
Declaration and in the Securities, and no implied covenants or
obligations shall be read into this Declaration or the
Securities against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished
to the Property Trustee and conforming to the requirements of
this Declaration; provided, however, that in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee shall be under a duty to examine the same
to determine whether or not on their face they conform to the
requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
Liquidation Amount of the Securities relating to the time, method
and place of conducting any proceeding for any remedy available to
the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration;
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(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under
the terms of this Declaration or indemnity reasonably satisfactory
to the Property Trustee against such risk or liability is not
reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures
and the Property Trustee Account shall be to deal with such
property in a similar manner as the Property Trustee deals with
similar property for its own account, subject to the protections
and limitations on liability afforded to the Property Trustee
under this Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise
agree in writing with the Sponsor. Money held by the Property
Trustee need not be segregated from other funds held by it except
in relation to the Property Trustee Account maintained by the
Property Trustee pursuant to Section 3.8(c)(i) and except to the
extent otherwise required by law;
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Sponsor with their respective duties under this Declaration, nor
shall the Property Trustee be liable for any default or misconduct
of the Administrative Trustees or the Sponsor; and
(ix) the Property Trustee shall not be deemed to have notice
of any Event of Default unless a Responsible Officer of the
Property Trustee has actual knowledge thereof or unless written
notice of any event which is in fact such a default is received by
the Property Trustee at the Corporate Trust Office of the Property
Trustee, and such notice references the Securities and this
Declaration.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate,
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statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the proper
party or parties;
(ii) any direction or act of the Sponsor or the Administrative
Trustees contemplated by this Declaration may be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered
by the Sponsor or the Administrative Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration
thereof;
(v) the Property Trustee may consult with counsel or other
experts of its selection and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion; such counsel may be
counsel to the Sponsor or any of its Affiliates, and may include
any of its employees, and the Property Trustee shall have the
right at any time to seek instructions concerning the
administration of this Declaration from any court of competent
jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless such
Holder shall have provided to the Property Trustee security and
indemnity, reasonably satisfactory to the Property Trustee,
against the costs, expenses (including reasonable attorneys' fees
and expenses and the expenses of the Property Trustee's agents,
nominees or custodians) and liabilities that might be incurred by
it in complying with such request or direction, including such
reasonable advances as may be requested by the Property Trustee;
provided, however, that, nothing contained in this Section
3.10(a)(vi) shall be taken to relieve the Property Trustee, upon
the occurrence of an Event of Default (of which, other than in the
case of Events of Default under Sections 5.01(a) and 5.01(b) of
the Indenture, a Responsible Officer of the Property Trustee has
actual
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knowledge), of its obligation to exercise the rights and powers
vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Property Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit and,
if the Property Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the
books, records, and premises of the Debenture Issuer personally or
by agent or attorney at the sole cost of the Debenture Issuer and
shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation;
(viii) the Property Trustee may, at the expense of the
Sponsor, execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents,
custodians, nominees or attorneys and the Property Trustee shall
not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;
(ix) any authorized or required action taken by the Property
Trustee or its agents hereunder shall bind the Trust and the
Holders, and the signature of the Property Trustee or its agents
alone shall be sufficient and effective to perform any such action
and no third party shall be required to inquire as to the
authority of the Property Trustee to so act or as to its
compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the
Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other
action hereunder, the Property Trustee (i) may request
instructions from the Holders, which instructions may only be
given by the Holders of the same proportion in liquidation amount
of the Securities as would be entitled to direct the Property
Trustee under the terms of the Securities in respect of such
remedy, right or action, (ii) may refrain from enforcing such
remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith,
without negligence or willful
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misconduct, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by
this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Trustees described in this Declaration (except as required under the
Business Trust Act). As set forth in Section 5.2, the Delaware Trustee shall be
a Trustee for the sole and limited purpose of fulfilling the requirements of ss.
3807 of the Business Trust Act. In the event the Delaware Trustee shall at any
time be required to take any action or perform any duty hereunder, the Delaware
Trustee shall be entitled to the benefits of Section 3.9(b)(ii) to (viii),
inclusive, and Section 3.10. No implied covenants or obligations shall be read
into this Declaration against the Delaware Trustee.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Administrative Trustee, and
except as otherwise required by applicable law, the Business Trust Act or this
Declaration, each Administrative Trustee, individually, is authorized to execute
and deliver on behalf of the Trust any documents, agreements, instruments or
certificates that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.6; provided that any Registration Statements
contemplated by the Registration Rights Agreement and referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Administrative Trustees.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the Trust Property or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration, the Debentures or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless dissolved pursuant to the provisions of Article
VIII hereof, shall have existence up to September 15, 2033.
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SECTION 3.15 Mergers.
(a) The Trust may not merge with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c) and except with respect to the distribution of
Debentures to Holders pursuant to Section 8.1(a)(iii) of this Declaration or
Section 3 of Annex I.
(b) The Trust may, at the request of the Sponsor, with the consent
of the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, a trust organized as such under the
laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust
under the Securities; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor
Securities") so long as the Successor Securities rank the same
as the Securities rank in priority with respect to
Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Property
Trustee with respect to the Debentures;
(iii) the Successor Securities (excluding any securities
substituted for the Common Securities) are listed, quoted or
included for trading, or any Successor Securities will be listed,
quoted or included for trading upon notification of issuance, on
any national securities exchange or with any other organization on
which the Capital Securities are then listed, quoted or included;
(iv) if the Capital Securities (including any successor
securities) are rated by any nationally recognized statistical
rating organization prior to such transaction, such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Capital Securities (including any
Successor Securities) or if the Debentures are so rated, the
Debentures, to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges
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of the Holders (including the holders of any Successor Securities)
in any material respect (other than with respect to any dilution
of the interests of such Holders or holders, as the case may be,
in the Successor Entity);
(vi) the Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has
received an opinion of independent counsel to the Trust
experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the Holders (including
the holders of any Successor Securities) in any material
respect (other than with respect to any dilution of the
interests of such Holders or holders, as the case may be, in
the Successor Entity);
(B) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust
nor the Successor Entity will be required to register as an
Investment Company; and
(C) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust (or the
Successor Entity) will continue to be classified as a grantor
trust for United States federal income tax purposes;
(viii) the Sponsor or any permitted successor or assignee owns
all of the common securities of the Successor Entity and
guarantees the obligations of the Successor Entity under the
Successor Securities at least to the extent provided by the
Securities Guarantees; and
(ix) there shall have been furnished to the Property Trustee
an Officer's Certificate and an Opinion of Counsel, each to the
effect that all conditions precedent in this Declaration to such
transaction have been satisfied.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except
with the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the Successor Entity not to be classified as a grantor
trust for United States federal income tax purposes.
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ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
At the Closing Time, pursuant to the Common Securities
Subscription Agreement, the Sponsor will purchase all of the Common Securities
then issued by the Trust, in an amount equal to at least 3% of the total capital
of the Trust, at the same time as the Series A Capital Securities are issued and
sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital Securities,
the Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare the Offering Memorandum and to prepare for filing
by the Trust with the Commission any Registration Statement, including any
amendments thereto, as contemplated by the Registration Rights Agreement;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;
(c) if deemed necessary or advisable by the Sponsor, to prepare
for filing by the Trust an application to permit the Capital Securities to trade
or be quoted or listed in or on the PORTAL market, or any other securities
exchange, quotation system or the Nasdaq Stock Market's National Market;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A, including any amendments thereto, relating
to the registration of the Capital Securities under Section 12(g) of the
Exchange Act, if required; and
(e) to negotiate the terms of the Purchase Agreement and the
Registration Rights Agreement providing for the sale and registration of the
Capital Securities.
SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Debenture Issuer to pay
the principal of or premium (if any) or interest on the Debentures, to institute
a proceeding directly against the Debenture Issuer for enforcement of its
payment obligations in respect of the Debentures.
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SECTION 4.4 Right to Dissolve Trust.
The Sponsor will have the right at any time to dissolve the Trust
and, after satisfaction of liabilities to creditors of the Trust as required by
applicable law, to cause the Debentures to be distributed to the Holders in
liquidation of the Trust. Such right is subject to the Sponsor having received
(i) an Opinion of Counsel to the effect that such distribution will not cause
the Holders of Capital Securities to recognize gain or loss for United States
federal income tax purposes and (ii) any required regulatory approvals.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees
may be increased or decreased by vote of the Holders of a Majority in
Liquidation Amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee, in the case of a natural person,
shall be a person who is a resident of the State of Delaware or that, if not a
natural person, is an entity which has its principal place of business in the
State of Delaware (the "Delaware Trustee"); (2) there shall be at least one
Trustee who is an employee or officer of, or is affiliated with, the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements. Notwithstanding the above, unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Holders of a Majority in Liquidation Amount of the Common Securities acting
as a class at a meeting of the Holders of the Common Securities, and the
Administrative Trustees shall have power to appoint one or more Persons either
to act as a co-trustee, jointly with the Property Trustee, of all or any part of
the Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of this Declaration. In case an Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make any such
appointment of a co-trustee.
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SECTION 5.2 Delaware Trustee.
For so long as required by the Business Trust Act, the Delaware
Trustee shall be:
(a) a natural person who is a resident of the State of Delaware;
or
(b) if not a natural person, an entity which has its principal
place of business in the State of Delaware, and otherwise meets the requirements
of applicable law,
provided, however, that, if the Property Trustee has its principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
The initial Delaware Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the "Property
Trustee") which shall act as Property Trustee and which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and
surplus of at least ten million U.S. dollars ($10,000,000), and
subject to supervision or examination by federal, state,
territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law
or to the requirements of the supervising or examining authority
referred to above, then for the purposes of this Section
5.3(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible
to so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.6(c).
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(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the
Property Trustee and the Holders of the Common Securities (as if it were the
obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of ss. 310(b) of the Trust Indenture Act.
(d) The Capital Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first proviso contained in ss. 310 (b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
Trustee Generally.
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 Administrative Trustees.
The initial Administrative Trustees shall be:
Kenneth L. Tepper
Brian M. Hartline
Craig Scher
c/o USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
Telecopier: (215) 569-4214
Telephone: (215) 569-4200
(a) Except as expressly set forth in this Declaration and except
if a meeting of the Administrative Trustees is called with respect to any matter
over which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(b) Unless otherwise required by the applicable law, any
Administrative Trustee acting alone is authorized to execute on behalf of the
Trust any documents which the Administrative Trustees have the power and
authority to cause the Trust to execute pursuant to Section 3.6.
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(c) An Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purposes of signing any documents which the Administrative
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b) hereof and to Section 6(b) of Annex
I hereto, Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, by vote of the
Holders of a Majority in Liquidation Amount of the Common
Securities voting as a class at a meeting of the Holders of the
Common Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to
the Property Trustee or the Delaware Trustee, by vote of Holders
of a Majority in Liquidation Amount of the Capital Securities
voting as a class at a meeting of Holders of the Capital
Securities.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.6(a) until a Successor Property Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Property Trustee and delivered to the removed Property
Trustee, the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with this Section 5.6(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 5.2 and
5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the removed Delaware Trustee, the Property Trustee (if the
removed Delaware Trustee is not also the Property Trustee), the Administrative
Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the other Trustees, the Sponsor and the Trust, which resignation shall take
effect upon such delivery or upon such later date as is specified therein;
provided, however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
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(A) until a Successor Property Trustee has been appointed and
has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the
Sponsor, the Delaware Trustee (if the resigning Property
Trustee is not also the Delaware Trustee) and the resigning
Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the
Holders; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Property Trustee (if the resigning
Delaware Trustee is not also the Property Trustee), the Sponsor
and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an Event of
Default shall have occurred and be continuing after the issuance of the
Securities, the Holders of the Capital Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor Property Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
(g) At the time of resignation or removal of the Property Trustee
or the Delaware Trustee, the Sponsor shall pay to such Trustee any amounts that
may be owed to such Trustee pursuant to Section 10.4.
(h) Any successor Delaware Trustee appointed hereunder shall
promptly file an amendment to the Certificate of Trust with the Delaware
Secretary of State stating such Trustee's identity and residence or principal
place of business in the State of Delaware.
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SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number
of Trustees is not reduced pursuant to Section 5.l, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to dissolve, liquidate or annul the Trust or to
terminate this Declaration. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 5.6, the Administrative
Trustees in office, regardless of their number, shall have all the powers
granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 24 hours before such meeting. Notice of
any telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that, a Quorum is present, or without a meeting
by the unanimous written consent of the Administrative Trustees. In the event
there is only one Administrative Trustee, any and all action of such
Administrative Trustee shall be evidenced by a written consent of such
Administrative Trustee.
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SECTION 5.10 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the pur pose of executing any documents
contemplated in Section 3.6, including any registration statement or amendment
thereto filed with the Commission or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is not
prohibited by applicable law or contrary to the provisions of this Declaration.
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee
or any Administrative Trustee that is not a natural person, as the case may be,
may be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee or the Delaware Trustee, as the case may be, shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
the Property Trustee or the Delaware Trustee, as the case may be, shall be the
successor of the Property Trustee or the Delaware Trustee, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, provided such Person shall be otherwise
qualified and eligible under this Article, and provided further that any
successor of the Delaware Trustee shall file an amendment to the Certificate of
Trust with the Delaware Secretary State in accordance with Section 5.6(h).
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. If and to the extent that
the Debenture Issuer makes a payment of interest (including Compounded Interest
and Additional Sums), premium and/or principal on the Debentures held by the
Property Trustee or Liquidated Damages or any other payments pursuant to the
Registration Rights Agreement with respect to the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders in accordance with the terms of the Securities.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Administrative Trustees shall on behalf of the Trust issue
one class of capital securities representing undivided preferred beneficial
interests in the assets of the Trust having such terms as are set forth in Annex
I (the "Capital Securities") and one class of common securities representing
common undivided beneficial interests in the assets of the Trust having such
terms as are set forth in Annex I (the "Common Securities"). The Administrative
Trustees shall on behalf of the Trust issue one class of capital securities
representing undivided beneficial interests in the Trust having such terms as
set forth in Annex I (the "Series B Capital Securities") in exchange for the
Series A Capital Securities accepted for exchange in the Exchange Offer, which
Series B Capital Securities shall not bear the legends required by Section
9.2(i) unless the Holder of such Series A Capital Securities is either (A) a
broker-dealer who purchased such Series A Capital Securities directly from the
Trust for resale pursuant to Rule 144A or any other available exemption under
the Securities Act, (B) a Person participating in the distribution of the Series
A Capital Securities or (C) a Person who is an affiliate (as defined in Rule
144A) of the Trust. The Trust shall issue no securities or other interests in
the assets of the Trust other than the Capital Securities and the Common
Securities.
(b) The consideration received by the Trust for the issuance of
the Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and nonassessable.
(d) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by an
Administrative Trustee. In case any Administrative Trustee of the Trust who
shall have signed any of the Securities shall cease to be such Administrative
Trustee before the Securities so signed shall be delivered by the Trust, such
Securities nevertheless may be delivered as though the Person who signed such
Securities had not ceased to be such Administrative Trustee; and any Securities
may be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Administrative Trustees of the Trust,
although at the date of the execution and delivery of this Declaration any such
person was not an Administrative Trustee.
(b) One Administrative Trustee shall sign the Capital Securities
for the Trust by manual or facsimile signature. Unless otherwise determined by
an Administrative Trustee on behalf of the Trust, such signature shall, in the
case of Common Securities, be a manual signature.
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A Capital Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration. A Common Security shall be valid upon
execution by an Administrative Trustee without any act of the Property Trustee.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in Annex I hereto except as provided
in Section 7.6.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Capital Securities. An authenticating
agent may authenticate Capital Securities whenever the Property Trustee may do
so. Each reference in this Declaration to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee hereunder with respect to the Sponsor or an
Affiliate.
SECTION 7.3 Form and Dating.
The Capital Securities shall be evidenced by one or more
certificates substantially in the form of Exhibit A-1, and the Common Securities
shall be evidenced by one or more certificates substantially in the form of
Exhibit A-2. The Property Trustee's certificate of authentication shall be
substantially in the form set forth in Exhibit A-1. Certificates representing
the Securities may be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to an Administrative Trustee, as
evidenced by the execution thereof. The Securities may have letters, "CUSIP" or
other numbers, notations or other marks of identification or designation and
such legends or endorsements required by law, stock exchange rule, agreements to
which the Trust is subject, if any, or usage, provided that, any such notation,
legend or endorsement is in a form acceptable to the Administrative Trustees,
as evidenced by their execution thereof. The Trust at the direction of the
Sponsor, shall furnish any such legend not contained in Exhibit A-1 to the
Property Trustee in writing. Each Capital Security shall be dated the date of
its authentication. The terms and provisions of the Securities set forth in
Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part
of the terms of this Declaration and, to the extent applicable, the Property
Trustee and the Sponsor, by their execution and delivery of this Declaration,
expressly agree to such terms and provisions and to be bound thereby.
(a) Global Capital Security. Capital Securities offered and sold
to QIBs in reliance on Rule 144A, as provided in the Purchase Agreement, shall
be issued in the form of a single permanent global Capital Security in
definitive, fully registered form without distribution coupons with the
appropriate global legends and Restricted Securities Legend set forth in Exhibit
A-1 hereto (the "Global Capital Security"), which shall be deposited on behalf
of the purchasers of the Capital Securities represented thereby with the
Property Trustee, at its Wilmington, Delaware office, as custodian for the
Clearing Agency, and registered in the name of the Clearing Agency or a nominee
of the Clearing Agency, duly executed by the Trust and authenticated by the
Property Trustee as hereinafter provided. The number of Capital Securities
represented by the Global Capital
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Security may from time to time be increased or decreased by adjustments made on
the records of the Property Trustee and the Clearing Agency or its nominee as
hereinafter provided.
(b) Book-Entry Provisions. This Section 7.3(b) shall apply only to
the Global Capital Security and such other Capital Securities in global form as
may be authorized by the Trust to be deposited with or on behalf of the Clearing
Agency.
An Administrative Trustee shall execute and the Property Trustee
shall, in accordance with this Section 7.3, authenticate and make available for
delivery initially a single Global Capital Security that (i) shall be registered
in the name of Cede & Co., the nominee of the Clearing Agency, or other nominee
of such Clearing Agency and (ii) shall be delivered by the Property Trustee to
such Clearing Agency or pursuant to such Clearing Agency's written instructions
or, if no such written instructions are received by the Property Trustee, held
by the Property Trustee as custodian for the Clearing Agency.
Members of, or participants in, the Clearing Agency
("Participants") shall have no rights under this Declaration with respect to the
Global Capital Security held on their behalf by the Clearing Agency or by the
Property Trustee as the custodian of the Clearing Agency or under such Global
Capital Security, and the Clearing Agency may be treated by the Trust, the
Property Trustee and any agent of the Trust or the Property Trustee as the
absolute owner of such Global Capital Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Property Trustee or any agent of the Trust or the Property Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Clearing Agency or impair, as between the Clearing Agency and its
Participants, the operation of customary practices of such Clearing Agency
governing the exercise of the rights of a holder of a beneficial interest in the
Global Capital Security.
(c) Definitive Capital Securities. Except as provided in Section
7.9 or 9.2(f)(i), owners of beneficial interests in the Global Capital Security
will not be entitled to receive physical delivery of certificated Capital
Securities ("Definitive Capital Securities"). Purchasers of Securities who are
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) and who are not QIBs will receive Capital Securities in the form
of individual certificates in definitive, fully registered form without
distribution coupons and with the Restricted Securities Legend set forth in
Exhibit A-1 hereto ("Restricted Definitive Capital Securities"); provided,
however, that upon registration of transfer of such Restricted Definitive
Capital Securities to a QIB, such Restricted Definitive Capital Securities will,
unless the Global Capital Security has previously been exchanged, be exchanged
for an interest in the Global Capital Security pursuant to the provisions of
Section 9.2. Restricted Definitive Capital Securities will bear the Restricted
Securities Legend set forth on Exhibit A-1 unless removed in accordance with
this Section 7.3 or Section 9.2.
(d) Authorized Denominations. The Capital Securities are issuable
only in denominations of $1,000 and any integral multiple thereof.
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SECTION 7.4 Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in Wilmington, Delaware (i) an office or
agency where Capital Securities may be presented for registration of transfer
("Registrar"), (ii) an office or agency where Capital Securities may be
presented for payment ("Paying Agent") and (iii) an office or agency where
Securities may be presented for exchange ("Exchange Agent"). The Registrar shall
keep a register of the Capital Securities and of their transfer. The Trust may
appoint the Registrar, the Paying Agent and the Exchange Agent and may appoint
one or more co-registrars, one or more additional Paying Agents and one or more
additional Exchange Agents in such other locations as it shall determine. The
term "Registrar" includes any additional registrar, the term "Paying Agent"
includes any additional paying agent and the term "Exchange Agent" includes any
additional Exchange Agent. The Trust may change any Paying Agent, Registrar,
co-registrar or Exchange Agent without prior notice to any Holder. The Paying
Agent, Registrar and Exchange Agent shall be permitted to resign as such upon 30
days' written notice to the Property Trustee, the Administrative Trustees and
the Sponsor. The Trust shall notify the Property Trustee of the name and address
of any Agent not a party to this Declaration. If the Trust fails to appoint or
maintain another entity as Registrar, Paying Agent or Exchange Agent, the
Property Trustee shall act as such. The Trust or any of its Affiliates may act
as Paying Agent, Registrar, or Exchange Agent. The Trust shall act as Paying
Agent, Registrar and Exchange Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar,
Paying Agent and Exchange Agent for the Capital Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of liquidation amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, an Administrative Trustee shall execute and the Property
Trustee shall authenticate and make available for delivery a replacement
Security if the Property Trustee's requirements are met. An indemnity bond must
be provided by the Holder which, in the judgment of the Property Trustee, is
sufficient to protect the Trustees, the Sponsor, the Trust or any
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authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Trust may charge such Holder for the Trust's expenses in replacing
a Security. Every replacement Security is an additional benefit interest in the
Trust.
SECTION 7.7 Outstanding Capital Securities.
The Capital Securities outstanding at any time are all of the
Capital Securities authenticated by the Property Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.
A Capital Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.8 Capital Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Securities
which the Property Trustee actually knows are so owned shall be so disregarded.
SECTION 7.9 Temporary Securities.
(a) Until Definitive Capital Securities are ready for delivery,
the Trust may prepare and, in the case of the Capital Securities, the Property
Trustee shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of Definitive Capital Securities, but may have
variations that the Trust considers appropriate for temporary Securities.
Without unreasonable delay, the Trust shall prepare and, in the case of the
Capital Securities, the Property Trustee shall authenticate Definitive Capital
Securities in exchange for temporary Securities.
(b) The Global Capital Security deposited with the Clearing Agency
or with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form of
Definitive Capital Securities only if such transfer complies with Section 9.2
and (i) the Clearing Agency notifies the Sponsor that it is unwilling or unable
to continue as Clearing Agency for such Global Capital Security or if at any
time such Clearing Agency ceases to be a "clearing agency" registered under the
Exchange Act, and, in each case, a clearing agency is not appointed by the
Sponsor within 90 days of receipt of such notice or
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of becoming aware of such condition, (ii) a Default or an Event of Default has
occurred and is continuing or (iii) the Trust at its sole discretion elects to
cause the issuance of Definitive Capital Securities.
(c) Any Global Capital Security that is transferable to the
beneficial owners thereof in the form of Definitive Capital Securities pursuant
to this Section 7.9 shall be surrendered by the Clearing Agency to the Property
Trustee to be so transferred, in whole or from time to time in part, without
charge, and the Property Trustee shall authenticate and make available for
delivery, upon such transfer of each portion of such Global Capital Security, an
equal aggregate liquidation amount of Securities of authorized denominations in
the form of Definitive Capital Securities. Any portion of the Global Capital
Security transferred pursuant to this Section shall be registered in such names
as the Clearing Agency shall direct. Any Definitive Capital Security delivered
in exchange for an interest in the Restricted Global Capital Security shall,
except as otherwise provided by Sections 7.3 and 9.1, bear the Restricted
Securities Legend set forth in Exhibit A-l hereto.
(d) Subject to the provisions of Section 7.9(c), the Holder of the
Global Capital Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.
(e) In the event of the occurrence of any of the events specified
in Section 7.9(b), the Trust will promptly make available to the Property
Trustee a reasonable supply of certificated Capital Securities in fully
registered form without distribution coupons.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Capital Securities to the
Property Trustee for cancellation. The Registrar, Paying Agent and Exchange
Agent shall forward to the Property Trustee any Capital Securities surrendered
to them for registration of transfer, redemption, exchange or payment. The
Property Trustee shall promptly cancel all Capital Securities, surrendered for
registration of transfer, redemption, exchange, payment, replacement or
cancellation and shall dispose of canceled Capital Securities in accordance with
its customary procedures unless the Trust otherwise directs. The Trust may not
issue new Capital Securities to replace Capital Securities that it has paid or
that have been delivered to the Property Trustee for cancellation or that any
Holder has exchanged.
SECTION 7.11 CUSIP Numbers.
The Trust in issuing the Capital Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Property Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided that, any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be
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affected by any defect in or omission of such numbers. The Sponsor will promptly
notify the Property Trustee of any change in the CUSIP numbers.
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the
revocation of the Sponsor's charter and the expiration of 90 days
after the date of revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount of the
Debentures to the Holders, provided that, the Property Trustee has
received written notice from the Sponsor directing the Property
Trustee to dissolve the Trust (which direction is optional, and
except as otherwise expressly provided below, within the
discretion of the Sponsor) and provided, further, that such
direction and such distribution is conditioned on (a) the receipt
by the Sponsor of any and all required regulatory approvals, and
(b) the Sponsor's receipt and delivery to the Administrative
Trustees of an opinion of independent tax counsel experienced in
such matters, which opinion may rely on public or private rulings
of the Internal Revenue Service, to the effect that the Holders of
the Capital Securities will not recognize any gain or loss for
United States federal income tax purposes as a result of the
dissolution of the Trust and the distribution of Debentures;
(iv) upon the entry of a decree of judicial dissolution of the
Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall
have been paid to the Holders in accordance with the terms of the
Securities;
(vi) upon the redemption or repayment of the Debentures or at
such time as no Debentures are outstanding; or
(vii) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable upon completion of winding up of the
Trust following the occurrence of an event referred to in Section 8.1(a), the
Administrative Trustees shall
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terminate the Trust by filing a certificate of cancellation with the Delaware
Secretary of State in accordance with the Business Trust Act.
(c) The provisions of Section 3.9 and Article X shall survive the
dissolution of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(b) Subject to this Article IX, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(c) For so long as the Securities remain outstanding, the Sponsor
agrees (i) not to transfer ownership of the Common Securities of the Trust,
provided that any permitted successor of the Sponsor under the Indenture may
succeed to the Sponsor's ownership of the Common Securities, (ii) not to cause,
as Sponsor of the Trust, or to permit, as Holder of the Common Securities, the
dissolution, winding-up or liquidation of the Trust, except as provided in this
Declaration and (iii) to use its best efforts to cause the Trust (a) to remain a
business trust, except in connection with the distribution of Debentures to the
Holders in liquidation of the Trust, the redemption of all of the Securities, or
certain mergers, consolidations or amalgamations, each as permitted by this
Declaration, and (b) to otherwise continue to be classified as a grantor trust
for United States federal income tax purposes.
(d) The Registrar shall provide for the registration of Capital
Securities and of the transfer of Capital Securities, which will be effected
without charge, but only upon payment (with such indemnity as the Registrar may
require) in respect of any tax or other governmental charges that may be imposed
in relation to it. Upon surrender for registration of transfer of any Capital
Securities, an Administrative Trustee shall cause one or more new Capital
Securities to be issued in the name of the designated transferee or transferees.
Every Capital Security surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form satisfactory to the
Registrar duly executed by the Holder or such Holder's attorney duly authorized
in writing. Each Capital Security surrendered for registration of transfer shall
be delivered to the Registrar and canceled in accordance with Section 7.10. A
transferee of a Capital Security shall be entitled to the rights and subject to
the obligations of a Holder hereunder upon the receipt by such transferee of a
Capital Security. By acceptance of a Capital Security or any interest therein,
each transferee shall be deemed to have agreed to be bound by this Declaration.
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SECTION 9.2 Transfer Procedures and Restrictions.
(a) General. Except as otherwise provided in Section 9.2(b), if
Capital Securities are issued upon the transfer, exchange or replacement of
Capital Securities bearing the Restricted Securities Legend set forth in
Exhibit A-1 hereto, or if a request is made to remove such Restricted Securities
Legend on Capital Securities, the Capital Securities so issued shall bear the
Restricted Securities Legend, or the Restricted Securities Legend shall not be
removed, as the case may be, unless there is delivered to the Trust and the
Property Trustee such satisfactory evidence, which shall include an Opinion of
Counsel, as may be reasonably required by the Trust and the Property Trustee,
that neither the Restricted Securities Legend nor the restrictions on transfer
set forth therein are required to ensure that transfers thereof are made
pursuant to an exemption from the registration requirements of the Securities
Act or, with respect to Restricted Capital Securities, that such Securities are
not "restricted" within the meaning of Rule 144. Upon provision of such
satisfactory evidence, the Property Trustee, at the written direction of an
Administrative Trustee on behalf of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.
(b) Transfers After Effectiveness of a Registration Statement.
After the effectiveness of a Registration Statement with respect to any Capital
Securities, all requirements pertaining to legends on such Capital Securities
will cease to apply (other than the legend requiring that transfers of Capital
Securities be made in blocks having an aggregate liquidation amount of not less
than $100,000) (100 Capital Securities) and multiples of $1,000 in excess
thereof, and beneficial interests in the Global Capital Security without legends
will be available to transferees of such Capital Securities, upon exchange of
the transferring Holder's Restricted Definitive Capital Security or directions
to transfer such Holder's beneficial interest in the Global Capital Security, as
the case may be. No such transfer or exchange of a Restricted Definitive Capital
Security or of an interest in the Global Capital Security shall be effective
unless the transferor delivers to the Property Trustee a certificate in a form
substantially similar to that attached hereto as the form of "Assignment" in
Exhibit A-1. Except as otherwise provided in Section 9.2(m), after the
effectiveness of a Registration Statement, an Administrative Trustee on behalf
of the Trust shall issue and the Property Trustee, upon a written order of the
Trust signed by one Administrative Trustee, shall authenticate a Global Capital
Security without the Restricted Securities Legend (the "Unrestricted Global
Capital Security") to deposit with the Clearing Agency to evidence transfers of
beneficial interests from the (i) Global Capital Security and (ii) Restricted
Definitive Capital Securities.
(c) Transfer and Exchange of Definitive Capital Securities. When
Definitive Capital Securities are presented to the Registrar or co-registrar:
(x) to register the transfer of such Definitive Capital
Securities; or
(y) to exchange such Definitive Capital Securities which became
mutilated, destroyed, defaced, stolen or lost, for an equal number of
Definitive Capital Securities, the Registrar or co-registrar shall register
the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met;
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provided, however, that the Definitive Capital Securities surrendered for
registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Trust and the Registrar or co-registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(ii) in the case of Definitive Capital Securities that are
Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, certification(s) from such
Holder to that effect; or
(B) if such Restricted Capital Securities are being
transferred: (i) certification(s) in a form substantially
similar to that attached hereto as the form of "Assignment" in
Exhibit A-1, and (ii) if the Trust or Registrar so requests,
evidence reasonably satisfactory to them as to the compliance
with the restrictions set forth in the Restricted Securities
Legend.
(d) Restrictions on Transfer of a Definitive Capital Security for
a Beneficial Interest in the Global Capital Security. A Definitive Capital
Security may not be exchanged for a beneficial interest in the Global Capital
Security except upon satisfaction of the requirements set forth below. Upon
receipt by the Property Trustee of a Definitive Capital Security, duly endorsed
or accompanied by appropriate instruments of transfer, in form satisfactory to
the Property Trustee, together with:
(i) if such Definitive Capital Security is a Restricted
Capital Security, certification(s) in a form substantially similar
to that attached hereto as the form of "Assignment" in Exhibit
A-1; and
(ii) whether or not such Definitive Capital Security is a
Restricted Capital Security, written instructions directing the
Property Trustee to make, or to direct the Clearing Agency to
make, an adjustment on its books and records with respect to the
Global Capital Security to reflect an increase in the number of
the Capital Securities represented by such Global Capital
Security,
then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of Capital
Securities represented by the Global Capital Security to be increased
accordingly. If the Global Capital Security is not then outstanding, an
Administrative Trustee on behalf of the Trust shall issue and the Property
Trustee shall authenticate, upon written order of any Administrative Trustee, a
new Global Capital Security representing an appropriate number of Capital
Securities.
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(e) Transfer and Exchange of the Global Capital Security. Subject
to Section 9.2(f), the transfer and exchange of Global Capital Security or
beneficial interests therein shall be effected through the Clearing Agency in
accordance with this Declaration (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Clearing Agency therefor.
(f) Transfer of a Beneficial Interest in the Global Capital
Security for a Definitive Capital Security.
(i) Any Person having a beneficial interest in the Global
Capital Security may upon request, but only upon 20 days prior
notice to the Property Trustee, and if accompanied by the
information specified below, exchange such beneficial interest for
a Definitive Capital Security representing the same number of
Capital Securities. Upon receipt by the Property Trustee from the
Clearing Agency or its nominee on behalf of any Person having a
beneficial interest in the Global Capital Security of written
instructions or such other form of instructions as is customary
for the Clearing Agency or the Person designated by the Clearing
Agency as having such a beneficial interest in a Restricted
Capital Security and certification(s) from the transferor in a
form substantially similar to that attached hereto as the form of
"Assignment" in Exhibit A-1, which may be submitted by facsimile,
then the Property Trustee will cause the aggregate number of
Capital Securities represented by the Global Capital Security to
be reduced on its books and records and, following such reduction,
the Trust will execute and the Property Trustee will authenticate
and make available for delivery to the transferee a Definitive
Capital Security.
(ii) Definitive Capital Securities issued in exchange for a
beneficial interest in the Global Capital Security pursuant to
this Section 9.2(f) shall be registered in such names and in such
authorized denominations as the Clearing Agency, pursuant to
instructions from its Clearing Agency Participants or indirect
participants or otherwise, shall instruct the Property Trustee in
writing. The Property Trustee shall deliver such Capital
Securities to the Persons in whose names such Capital Securities
are so registered in accordance with such instructions of the
Clearing Agency.
(g) Restrictions on Transfer and Exchange of the Global Capital
Security. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (h) of this Section 9.2), the Global
Capital Security may not be transferred as a whole except by the Clearing Agency
to a nominee of the Clearing Agency or another nominee of the Clearing Agency or
by the Clearing Agency or any such nominee to a successor Clearing Agency or a
nominee of such successor Clearing Agency.
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(h) Authentication of Definitive Capital Securities. If at any
time:
(i) a Default or an Event of Default has occurred and is
continuing,
(ii) the Trust, in its sole discretion, notifies the Property
Trustee in writing that it elects to cause the issuance of
Definitive Capital Securities under this Declaration, or
(iii) the Clearing Agency notifies the Sponsor that it is
unwilling or unable to continue as Clearing Agency for such Global
Capital Security or if at any time such Clearing Agency ceases to
be a "clearing agency" registered under the Exchange Act, and, in
each case, a clearing agency is not appointed by the Sponsor
within 90 days of receipt of such notice or of becoming aware of
such condition,
then an Administrative Trustee on behalf of the Trust will execute, and the
Property Trustee, upon receipt of a written order of the Trust signed by one
Administrative Trustee requesting the authentication and delivery of Definitive
Capital Securities to the Persons designated by the Trust, will authenticate and
make available for delivery Definitive Capital Securities, equal in number to
the number of Capital Securities represented by the Global Capital Security, in
exchange for such Global Capital Security.
(i) Legend.
(i) Except as permitted by the following paragraph (ii),
each Capital Security Certificate evidencing the Global
Capital Security and each Definitive Capital Security (and all
Capital Securities issued in exchange therefor or substitution
thereof) shall bear a legend (the "Restricted Securities
Legend") in substantially the following form:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES
LAW. NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR
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OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE
LAST DATE ON WHICH USABANCSHARES, INC. (THE "CORPORATION") OR
ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS
CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY)
ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO
THE RIGHT OF USA CAPITAL TRUST I (THE "TRUST") AND THE
CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D)
TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER
FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO
THE OFFERING
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MEMORANDUM DATED MARCH 9, 1999. SUCH HOLDER FURTHER AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN
EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN
OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, (THE
"CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN
THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN
MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST
THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE
AND HOLDING OF CAPITAL SECURITIES IS NOT PROHIBITED BY SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH
PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE CAPITAL
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER
(i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF
SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE
CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF
OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR
ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN
TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH
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THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
In all circumstances, each Capital Security Certificate shall bear the following
legend:
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 CAPITAL SECURITIES) AND MULTIPLES OF $1,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000
SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING,
BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH
CAPITAL SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL
SECURITIES.
(ii) Upon any sale or transfer of a Restricted Capital
Security (including any Restricted Capital Security represented by
the Global Capital Security) pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144:
(A) in the case of any Restricted Capital Security that is a
Definitive Capital Security, the Registrar shall permit the
Holder thereof to exchange such Restricted Capital Security
for a Definitive Capital Security that does not bear the
Restricted Securities Legend and rescind any restriction on
the transfer of such Restricted Capital Security; and
(B) in the case of any Restricted Capital Security that is
represented by the Global Capital Security, the Registrar
shall permit the Holder of such Global Capital Security to
exchange such Global Capital Security for another Global
Capital Security that does not bear the Restricted Securities
Legend.
(j) Cancellation or Adjustment of Global Capital Security. At such
time as all beneficial interests in the Global Capital Security have either been
exchanged for Definitive Capital Securities to the extent permitted by this
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Capital Security shall be returned to the Clearing
Agency for cancellation or retained and canceled by the Property Trustee. At any
time prior
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to such cancellation, if any beneficial interest in the Global Capital Security
is exchanged for Definitive Capital Securities, Capital Securities represented
by such Global Capital Security shall be reduced and an adjustment shall be made
on the books and records of the Property Trustee and the Clearing Agency or its
nominee to reflect such reduction.
(k) Obligations with Respect to Transfers and Exchanges of Capital
Securities.
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Property Trustee shall authenticate
Definitive Capital Securities and the Global Capital Security at
the Registrar's or co-registrar's request in accordance with the
terms of this Declaration.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the
Trust or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) Capital Securities
during a period beginning at the opening of business 15 days
before the day of mailing of a notice of redemption or any notice
of selection of Capital Securities for redemption and ending at
the close of business on the day of such mailing or (b) any
Capital Security so selected for redemption in whole or in part,
except the unredeemed portion of any Capital Security being
redeemed in part.
(iv) Prior to the due presentation for registration of
transfer of any Capital Security, the Trust, the Property Trustee,
the Paying Agent, the Registrar or any co-registrar may deem and
treat the Person in whose name a Capital Security is registered as
the absolute owner of such Capital Security for the purpose of
receiving Distributions on such Capital Security and for all other
purposes whatsoever, and none of the Trust, the Property Trustee,
the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Capital Securities issued upon any registration of
transfer or exchange pursuant to the terms of this Declaration
shall evidence the same security and shall be entitled to the same
benefits under this Declaration as the Capital Securities
surrendered upon such registration of transfer or exchange.
(l) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any Capital Security Beneficial Owner, a Participant
in the Clearing Agency or other Person with respect to the
accuracy of the records of the Clearing Agency or its nominee or
of any Participant thereof, with respect to any ownership interest
in the Capital Securities or with respect to the delivery to any
Participant, beneficial
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owner or other Person (other than the Clearing Agency) of any
notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Capital Securities. All
notices and communications to be given to the Holders and all
payments to be made to Holders under the Capital Securities shall
be given or made only to or upon the order of the registered
Holders (which shall be the Clearing Agency or its nominee in the
case of the Global Capital Security). The rights of Capital
Security Beneficial Owners shall be exercised only through the
Clearing Agency subject to the applicable rules and procedures of
the Clearing Agency. The Property Trustee may conclusively rely
and shall be fully protected in relying upon information furnished
by the Clearing Agency or any agent thereof with respect to its
Participants and any Capital Security Beneficial Owners.
(ii) The Property Trustee and the Registrar shall have no
obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this
Declaration or under applicable law with respect to any transfer
of any interest in any Capital Security (including any transfers
between or among Clearing Agency Participants or Capital Security
Beneficial Owners in the Global Capital Security) other than to
require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Declaration, and to
examine the same to determine substantial compliance as to form
with the express requirements hereof.
(m) Exchange of Series A Capital Securities for Series B Capital
Securities. The Series A Capital Securities may be exchanged for Series B
Capital Securities pursuant to the terms of the Exchange Offer. The Property
Trustee shall make the exchange as follows:
The Sponsor shall present the Property Trustee with an Officers'
Certificate certifying the following:
(A) upon issuance of the Series B Capital Securities, the
transactions contemplated by the Exchange Offer have been
consummated; and
(B) the number of Series A Capital Securities properly
tendered in the Exchange Offer that are represented by a
Global Capital Security and the number of Series A Capital
Securities properly tendered in the Exchange Offer that
are represented by Definitive Capital Securities, the name
of each Holder of such Definitive Capital Securities, the
liquidation amount of Capital Securities properly tendered
in the Exchange Offer by each such Holder and the name
and address to which Definitive Capital Securities for
Series B Capital Securities shall be registered and sent
for each such Holder.
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The Property Trustee, upon receipt of (i) such Officers'
Certificate and (ii) an Opinion of Counsel (x) to the effect that the Series B
Capital Securities have been registered under Section 5 of the Securities Act
and the Indenture has been qualified under the Trust Indenture Act and (y) with
respect to the matters set forth in Section 3(p) of the Registration Rights
Agreement, shall authenticate (A) a Global Capital Security representing Series
B Capital Securities in aggregate liquidation amount equal to the aggregate
liquidation amount of Series A Capital Securities represented by a Global
Capital Security indicated in such Officers' Certificate as having been properly
tendered and (B) Definitive Capital Securities representing Series B Capital
Securities registered in the names of, and in the liquidation amounts indicated
in such Officers' Certificate.
If, upon consummation of the Exchange Offer, less than all the
outstanding Series A Capital Securities shall have been properly tendered and
not withdrawn, the Property Trustee shall make an endorsement on the Global
Capital Security representing Series A Capital Securities indicating the
reduction in the number and aggregate liquidation amount represented thereby as
a result of the Exchange Offer.
The Trust shall deliver such Definitive Capital Securities
representing Series B Capital Securities to the Holders thereof as indicated in
such Officers' Certificate.
(n) Minimum Transfers. Series A Capital Securities and, when
issued, Series B Capital Securities may only be transferred in minimum blocks of
$100,000 aggregate liquidation amount. Any transfer of Series A Capital
Securities or Series B Capital Securities in a block having an aggregate
liquidation amount of less than $100,000 shall be deemed to be voided and of no
legal effect whatsoever. Any such purported transferee shall be deemed not to be
a Holder of such Series A or Series B Capital Securities for any purpose,
including, but not limited to, the receipt of Distributions on such Capital
Securities, and such purported transferee shall be deemed to have no interest
whatsoever in such Capital Securities.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security shall
be registered on the books and records of the Trust as the sole owner and Holder
of such Security for purposes of receiving Distributions and for all other
purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Security on the part of any
Person, whether or not the Trust shall have actual or other notice thereof.
SECTION 9.4 Book-Entry Interests.
The Global Capital Security shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the nominee of the
Clearing Agency, and no Capital Security Beneficial Owner will receive physical
delivery of a definitive Capital Security certificate (a "Capital Security
Certificate") representing such Capital Security Beneficial Owner's interests in
such Global Capital Security, except as provided in Section 9.2 and Section 7.9.
Unless and until
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Definitive Capital Securities have been issued to the Capital Security
Beneficial Owners pursuant to Section 9.2 or Section 7.9:
(a) the provisions of this Section 9.4 shall be in full force and
effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Capital Security and receiving approvals, votes or
consents hereunder) as the sole Holder of the Global Capital Security and shall
have no obligation to the Capital Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict
with any other provisions of this Declaration, the provisions of this Section
9.4 shall control; and
(d) the rights of the Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Capital Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants, and the
Clearing Agency shall receive and transmit payments of Distributions on the
Global Capital Security to such Clearing Agency Participants; provided, however,
that solely for the purposes of determining whether the Holders of the requisite
amount of Capital Securities have voted on any matter provided for in this
Declaration, the Trustees, with respect to the Global Capital Security, may
conclusively rely on, and shall be protected in relying on, any written
instrument (including a proxy) delivered to the Trustees by the Clearing Agency
setting forth the Capital Security Beneficial Owners' votes or assigning the
right to vote on any matter to any other Persons either in whole or in part; and
the Clearing Agency will also make book-entry transfers among the Clearing
Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Capital Security
Holders is required to be given by a Trustee under this Declaration, such
Trustee shall give all such notices and communications specified herein to be
given to the Holder of the Global Capital Security to the Clearing Agency and
shall have no notice obligations to the Capital Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.
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ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the
Securities Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders,
which shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any deficit
upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and
obligations of the Trust (other than in respect of the Securities) to the extent
not satisfied out of the Trust's assets.
(c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence (or, in
the case of the Property Trustee, negligence) or willful misconduct with respect
to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.
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SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Person and any Indemnified Person, or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair
and reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests,
and shall have no duty or obligation to give any consideration to
any interest of or factors affecting the Trust or any other
Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard imposed by
this Declaration or by applicable law.
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SECTION 10.4 Indemnification.
(a) (i) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Trust) by reason of the fact that he is or
was a Company Indemnified Person, against expenses (including attorneys' fees
and expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Trust to procure a judgment in its favor by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the case,
such Person is fairly and reasonably entitled to indemnity for such expenses,
which such Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action without
prejudice or the settlement of an action without admission of liability) in
defense of any action, suit or proceeding referred to in paragraphs (i) and (ii)
of this Section 10.4(a), or in defense of any claim, issue or matter therein, he
shall be indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor only as
authorized in the specific case upon a determination that indemnification of the
Company Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Administrative Trustees by a majority
vote of a Quorum consisting of such Administrative Trustees who were not parties
to such action, suit or proceeding, (2) if such a Quorum is not obtainable, or,
even if obtainable, if a Quorum of
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disinterested Administrative Trustees so directs, by independent legal counsel
in a written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) actually
and reasonably incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Sponsor
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Company Indemnified Person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Sponsor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrative Trustees
by a majority vote of a Quorum of disinterested Administrative Trustees, (ii) if
such a Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Administrative Trustees so directs, by independent legal counsel
in a written opinion or (iii) by the Common Security Holder of the Trust, that,
based upon the facts known to the Administrative Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company Indemnified
Person acted in bad faith or in a manner that the Common Security Holder did not
believe to be in or not opposed to the best interests of the Trust, or, with
respect to any criminal proceeding, that such Company Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Administrative Trustees,
independent legal counsel or Common Security Holder reasonably determine that a
Company Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall
not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors of the Sponsor or Capital
Security Holders of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. All
rights to indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Sponsor and each Company Indemnified Person
who serves in such capacity at any time while this Section 10.4(a) is in effect.
Any repeal or modification of this Section 10.4(a) shall not affect any rights
or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified Person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Debenture
Issuer would have the power to indemnify him against such liability under the
provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request
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of such constituent entity as a director, trustee, officer, employee or agent of
another entity, shall stand in the same position under the provisions of this
Section 10.4(a) with respect to the resulting or surviving entity as he would
have with respect to such constituent entity if its separate existence had
continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a Person who has ceased to
be a Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii)
the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee or the Delaware Trustee (each of the Persons in (i) through
(iv), including the Property Trustee and the Delaware Trustee in their
respective individual capacities, being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any and all loss, liability, damage, claim, action, suit or expense including
taxes (other than taxes based on the income of such Fiduciary Indemnified
Person) incurred without negligence (or gross negligence, in the case of the
Delaware Trustee) or bad faith on the part of such Fiduciary Indemnified Person,
arising out of or in connection with the acceptance or administration of the
Trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending against or investigating any
claim or liability in connection with the exercise or performance of any of the
powers or duties of such Fiduciary Indemnified Person hereunder. The obligation
to indemnify as set forth in this Section 10.4(b) shall survive the resignation
or removal of the Property Trustee or the Delaware Trustee and the satisfaction
and discharge of this Declaration.
(c) The Sponsor agrees to pay the Property Trustee and the
Delaware Trustee, from time to time, such compensation for all services rendered
by the Property Trustee and the Delaware Trustee hereunder as shall be
separately agreed upon in writing by the Sponsor and the Property Trustee or the
Delaware Trustee, as the case may be, and, except as otherwise expressly
provided herein, to reimburse the Property Trustee and the Delaware Trustee upon
its or their request for all reasonable expenses (including legal fees and
expenses), disbursements and advances incurred or made by the Property Trustee
or the Delaware Trustee, as the case may be, in accordance with the provisions
of this Declaration, except any such expense, disbursement or advance as may be
attributable to its or their negligence (or gross negligence, in the case of the
Delaware Trustee) or bad faith.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee (subject to Section 5.3(c)) may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders shall have no rights by virtue of this Declaration in and
to such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture,
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even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Property Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The books of account
and the records of the Trust shall be examined by and reported upon as of the
end of each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Administrative Trustees.
(b) The Administrative Trustees shall cause to be duly prepared
and delivered to each of the Holders any annual United States federal income tax
information statement required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrative Trustees shall endeavor to
deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly prepared
and filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.
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SECTION 11.3 Banking.
The Trust may maintain one or more bank accounts in the name and
for the sole benefit of the Trust; provided, however, that all payments of funds
in respect of the Debentures held by the Property Trustee shall be made directly
to the Property Trustee Account and no other funds of the Trust shall be
deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Administrative Trustees; provided, however,
that the Property Trustee shall designate the signatories for the Property
Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Property Trustee, on
behalf of the Trust, such forms or certificates as are necessary to establish an
exemption from withholding with respect to each Holder, and any representations
and forms as shall reasonably be requested by the Trust to assist it in
determining the extent of, and in fulfilling, its withholding obligations. The
Administrative Trustees shall cause to be filed required forms with applicable
jurisdictions and, unless an exemption from withholding is properly established
by a Holder, shall remit amounts withheld with respect to the Holder to
applicable jurisdictions. To the extent that the Trust is required to withhold
and pay over any amounts to any authority with respect to Distributions or
allocations to any Holder, the amount withheld shall be deemed to be a
Distribution in the amount of the withholding to the Holder. In the event of any
claim of excess withholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount required to be withheld was not withheld
from actual Distributions made, the Trust may reduce subsequent Distributions by
the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration (including
Section 7 of Annex I hereto) or by any applicable terms of the Securities, this
Declaration may only be amended by a written instrument approved and executed
by:
(i) the Sponsor and the Administrative Trustees (or, if there
are more than two Administrative Trustees, a majority of the
Administrative Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
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(b) No amendment shall be made, and any such purported amendment
shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such
amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of
the Property Trustee, the Property Trustee shall have first
received:
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the
Securities); and
(B) an Opinion of Counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities) and that all conditions precedent to
the execution and delivery of such amendment have been
satisfied;
provided, however, that the Property Trustee shall not be required to sign any
such amendment; and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor
trust;
(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act;
or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act.
(c) At such time after the Trust has issued any Securities that
remain outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any Holder (other than an amendment pursuant to
(g)(ii) below) may be effected only with such additional requirements as may be
set forth in the terms of such Securities;
(d) Section 10.1(c) and this Section 12.1 shall not be amended
without the consent of all of the Holders;
(e) Article Four shall not be amended without the consent of the
Holders of a Majority in Liquidation Amount of the Common Securities;
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(f) The rights of the Holders of the Common Securities under
Article V to increase or decrease the number of, and appoint and remove Trustees
shall not be amended without the consent of the Holders of a Majority in
Liquidation Amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration may be
amended without the consent of the Holders to:
(i) cure any ambiguity, correct or supplement any provision in
this Declaration that may be inconsistent with any other provision
of this Declaration or to make any other provisions with respect
to matters or questions arising under this Declaration which shall
not be inconsistent with the other provisions of the Declaration;
and
(ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that
the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Securities are
outstanding or to ensure that the Trust will not be required to
register as an Investment Company under the Investment Company
Act;
(iii) to modify, eliminate or add any provisions of the
Declaration to such extent as shall be necessary to enable the
Trust and the Sponsor to conduct an Exchange Offer in the manner
contemplated by the Registration Rights Agreement;
provided, however, that in the case of clause (i) above, such action shall not
adversely affect in any material respect the interests of the Holders, and any
such amendments of this Declaration shall become effective when notice thereof
is given to the Holders.
SECTION 12.2 Meetings of the Holders; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Administrative Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration, the
terms of the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading. The Administrative Trustees shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 10% in Liquidation Amount of such class of Securities. Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in writing stating that the signing Holders wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders calling a meeting shall specify in writing the Capital
Security Certificates held by the Holders exercising the right to call a meeting
and only those Securities specified shall be counted for purposes of determining
whether the required percentage set forth in the second sentence of this
paragraph has been met.
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(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting shall be given to all the
Holders having a right to vote thereat at least seven days and not
more than 60 days before the date of such meeting. Whenever a
vote, consent or approval of the Holders is permitted or required
under this Declaration or the rules of any stock exchange on which
the Capital Securities are listed or admitted for trading, such
vote, consent or approval may be given at a meeting of the
Holders; any action that may be taken at a meeting of the Holders
may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by the Holders owning not less
than the minimum amount of Securities in liquidation amount that
would be necessary to authorize or take such action at a meeting
at which all Holders having a right to vote thereon were present
and voting; prompt notice of the taking of action without a
meeting shall be given to the Holders entitled to vote who have
not consented in writing; and the Administrative Trustees may
specify that any written ballot submitted to the Security Holder
for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the
Administrative Trustees;
(ii) each Holder may authorize any Person to act for it by
proxy on all matters in which a Holder is entitled to participate,
including waiving notice of any meeting, or voting or
participating at a meeting; no proxy shall be valid after the
expiration of eleven months from the date thereof unless otherwise
provided in the proxy; every proxy shall be revocable at the
pleasure of the Holder executing it; and, except as otherwise
provided herein, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation
Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the
Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Capital Securities are
then listed or trading, otherwise provides, the Administrative
Trustees, in their sole discretion, shall establish all other
provisions relating to meetings of Holders, including notice of
the time, place or purpose of any meeting at which any matter is
to be voted on by any Holders, waiver of any such notice, action
by consent without a meeting, the establishment of a record date,
quorum requirements, voting in person or by proxy or any other
matter with respect to the exercise of any such right to vote.
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ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) the Property Trustee is a Delaware banking corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with trust power and authority to execute and deliver, and to carry
out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Property
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee; and this Declaration has been duly
executed and delivered by the Property Trustee and under Delaware law (excluding
any securities laws) constitutes a legal, valid and binding obligation of the
Property Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by
the Property Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or registration with
or notice to, any federal or Delaware State banking authority governing the
trust powers of the Property Trustee is required for the execution, delivery or
performance by the Property Trustee of this Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) the Delaware Trustee is a Delaware banking corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with trust power and authority to execute and deliver, and to carry
out and perform its obligations under the terms of, this Declaration;
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(b) the execution, delivery and performance by the Delaware
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee; and this Declaration has been duly
executed and delivered by the Delaware Trustee and under Delaware law (excluding
any securities laws) constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by
the Delaware Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Delaware Trustee; and
(d) no consent, approval or authorization of, or registration with
or notice to, any federal or Delaware banking authority governing the trust
powers of the Delaware Trustee is required for the execution, delivery or
performance by the Delaware Trustee of this Declaration; and
(e) the Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware, and is a Person that
satisfies for the Trust Section 3807(a) of the Business Trust Act.
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement.
The Holders of the Capital Securities, the Debentures and the
Capital Securities Guarantee are entitled to the benefits of the Registration
Rights Agreement. In certain limited circumstances set forth in the Registration
Rights Agreement, the Debenture Issuer shall be required to pay Liquidated
Damages with respect to the Debentures. Unless otherwise stated, the term
"Distribution", as used in this Declaration, includes such Liquidated Damages.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.
All notices provided for in this Declaration shall be in writing,
duly signed by the party giving such notice, and shall be delivered, telecopied
or mailed by first class mail, overnight courier service or confirmed telecopy,
as follows:
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(a) if given to the Trust, in care of the Administrative Trustees
at the Trust's mailing address set forth below (or such other address as the
Trust may give notice of to the Property Trustee, the Delaware Trustee and the
Holders):
USA Capital Trust I
c/o USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
Telecopier: (215) 569-4214
Telephone: (215) 569-4200
Attention: Administrative Trustee
(b) if given to the Delaware Trustee, at the mailing address set
forth below (or such other address as the Delaware Trustee may give notice of to
the Property Trustee and the Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telecopier: 302-651-8882
Telephone: 302-651-1000
Attention: Corporate Trust Administration
(c) if given to the Property Trustee, at the Property Trustee's
mailing address set forth below (or such other address as the Property Trustee
may give notice of to the Delaware Trustee and the Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telecopier: 302-651-8882
Telephone: 302-651-1000
Attention: Corporate Trust Administration
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
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USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
Telecopier: (215) 569-4214
Telephone: (215) 569-4200
Attention: Chief Financial Officer
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 15.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to conflict of laws principles thereof.
SECTION 15.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
SECTION 15.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 15.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 15.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application
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of such provision to Persons or circumstances other than those to which it is
held invalid, shall not be affected thereby.
SECTION 15.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one or more of such counterpart signature
pages. All of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to
be executed as of the day and year first above written.
/s/ Kenneth L. Tepper
--------------------------------------------
Kenneth L. Tepper
as Administrative Trustee
/s/ Brian M. Hartline
--------------------------------------------
Brian M. Hartline
as Administrative Trustee
/s/ Craig Scher
--------------------------------------------
Craig Scher
as Administrative Trustee
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /s/ Patricia A. Evans
--------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
WILMINGTON TRUST COMPANY,
as Property Trustee
By: /s/ Patricia A. Evans
--------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
USABANCSHARES, INC.
as Sponsor and Debenture Issuer
By: /s/ Kenneth L. Tepper
--------------------------------------------
Name: Kenneth L. Tepper
Title: President and Chief Executive Officer
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ANNEX I
TERMS OF SERIES A/SERIES B
9.50% CAPITAL SECURITIES
9.50% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of March 9, 1999 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Securities are set out below (each
capitalized term used but not defined herein has the meaning set forth in the
Declaration or, if not defined in such Declaration, as defined in the Offering
Memorandum referred to below in Section 2(c) of this Annex I):
1. Designation and Number.
(a) Capital Securities. 10,000 Series A Capital Securities of the
Trust and 10,000 Series B Capital Securities of the Trust, both Series together,
with an aggregate liquidation amount with respect to the assets of the Trust of
ten million dollars ($10,000,000) and each with a liquidation amount with
respect to the assets of the Trust of $1,000 per security are hereby designated
for purposes of identification only as Series A 9.50% Capital Securities and
Series B 9.50% Capital Securities, respectively, (collectively, the "Capital
Securities"). The certificates evidencing the Capital Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice or to conform to the rules of any exchange or
quotation system on or in which the Capital Securities are listed, traded or
quoted.
(b) Common Securities. 310 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of three
hundred and ten thousand dollars ($310,000) and with a liquidation amount with
respect to the assets of the Trust of $1,000 per security, are hereby designated
for the purposes of identification only as "9.50% Common Securities"
(collectively, the "Common Securities"). The certificates evidencing the Common
Securities shall be substantially in the form of Exhibit A-2 to the Declaration,
with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions on each Security will be payable at a fixed rate
per annum of 9.50% (the "Coupon Rate") of the liquidation amount of $1,000 per
Security (the "Liquidation Amount"), such rate being the rate of interest
payable on the Debentures to be held by the Property Trustee. Distributions in
arrears for more than one semi-annual period will bear additional Distributions
thereon compounded semi-annually at the Coupon Rate (to the extent permitted by
applicable law). Pursuant to the Registration Rights Agreement, in certain
limited circumstances the Debenture Issuer will be required to pay Liquidated
Damages (as defined in the Registration Rights Agreement) with respect to the
Debentures. The term "Distributions," as used herein, includes
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distributions of any such Liquidated Damages, payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds legally available therefor.
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from March 9, 1999 and will be payable
semi-annually in arrears on March 15 and September 15 of each year, commencing
September 15, 1999 (each, a "Distribution Date"), except as otherwise described
below. Distributions will be computed on the basis of a 360-day year consisting
of twelve 30-day months and for any period less than a full calendar month on
the basis of the actual number of days elapsed in such month. As long as no
Event of Default has occurred and is continuing under the Indenture, and no
funds remain in the Reserve Account (as defined in the Indenture), the Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period at any time and from time to time on the
Debentures for a period not exceeding 10 consecutive semi-annual periods,
including the first such semi-annual period during such period (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, provided that no Extension Period shall end on a date
other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Notwithstanding such deferral,
Distributions will continue to accumulate with additional Distributions thereon
(to the extent permitted by applicable law but not at a rate greater than the
rate at which interest is then accruing on the Debentures) at the Coupon Rate
compounded semi-annually during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period, provided that
such extension does not cause such Extension Period, together with all such
previous and further extensions within such Extension Period, to exceed 10
consecutive semi-annual periods, including the first semi-annual period during
such Extension Period, end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Debenture Issuer may commence a new Extension Period, subject to the above
requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the close of
business on the Last Business Day of the month immediately preceding the month
in which the relevant Distribution Date occurs, which Distribution Dates
correspond to the Interest Payment Dates for the Debentures. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
such payment in respect of the Capital Securities will be made as described
under the heading "Description of Capital Securities --Form, Denomination,
Book-Entry Procedures and Transfer" in the Offering Memorandum dated March 9,
1999 of the Debenture Issuer and the Trust relating to the Securities and the
Debentures. The relevant record dates for the Common Securities shall be the
same as the record dates for the Capital Securities. Distributions payable on
any Securities that are not punctually paid on any Distribution Date, as a
result of the Debenture Issuer having failed to make a payment under the
Debentures, will cease to be payable to the Holder on the relevant record date,
and such defaulted Distribution will instead be payable to the Person in whose
name such Securities are registered on the special record date or other
specified date determined in accordance with the Indenture. If any
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date on which Distributions are payable on the 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 interest or other payment
in respect of any such delay), with the same force and effect as if made on such
date.
(d) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders.
3. Liquidation Distribution Upon Dissolution.
In the event of any dissolution of the Trust, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing to the Holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, a Like Amount (as defined
below) of the Debentures, unless such distribution is determined by the Property
Trustee not to be practicable, in which event such Holders will be entitled to
receive out of the assets of the Trust legally available for distribution to
Holders, after satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to the aggregate of the liquidation amount of
$1,000 per Security plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to the principal amount
of Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures upon the liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Securities of
the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part, at
maturity or otherwise (either at the option of the Debenture Issuer or pursuant
to a Special Event, as described below), the proceeds from such repayment shall
be simultaneously applied by the Property Trustee (subject to the Property
Trustee having received written notice no later than 45 days prior to such
repayment) to redeem a Like Amount of the Securities at a redemption price equal
to (i) in the case of the repayment of the Debentures on the Maturity Date, the
Maturity Redemption Price (as defined below), (ii) in the case of the optional
prepayment of the Debentures prior to the Initial Optional Redemption Date and
upon the occurrence and continuation of a Special Event, the Special Event
Redemption Price (as defined below), and (iii) in the case of the optional
prepayment of the Debentures on or after the Initial Optional Redemption Date,
the Optional Redemption Price (as defined below). The Maturity Redemption Price,
the Special Event Redemption Price and the
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Optional Redemption Price are referred to collectively as the "Redemption
Price." Holders will be given not less than 30 nor more than 60 days prior
written notice of such redemption.
(b) (i) The "Maturity Redemption Price," with respect to a
redemption of Securities, shall mean an amount equal to the principal of and
accrued and unpaid interest on the Debentures as of the Maturity Date thereof.
(ii) In the case of an optional redemption, if fewer than all
the outstanding Securities are to be so redeemed, the Common Securities and the
Capital Securities shall be redeemed Pro Rata and the Capital Securities to be
redeemed will be determined as described in Section 4(g)(ii) below. Upon the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction, the Debentures thereafter will be subject to optional redemption,
in whole, but not in part, on or after the Initial Optional Redemption Date.
The Debenture Issuer shall have the right (subject to the
conditions in the Indenture) to elect to redeem the Debentures, in whole or in
part, at any time on or after March 15, 2009 (the "Initial Optional Redemption
Date"), and, simultaneous with such redemption, to cause a Like Amount of the
Securities to be redeemed by the Trust at the Optional Redemption Price on a Pro
Rata basis or a method deemed fair and appropriate by the Property Trustee.
"Optional Redemption Price" shall mean a price equal to the percentage of the
liquidation amount of Securities to be redeemed plus accumulated and unpaid
Distributions thereon, if any, to the date of such redemption if redeemed during
the 12-month period beginning March 15 of the years indicated below:
Percentage of
Year Principal
-------------------------------------------------------
2009 104.750%
-------------------------------------------------------
2010 104.275%
-------------------------------------------------------
2011 103.800%
-------------------------------------------------------
2012 103.325%
-------------------------------------------------------
2013 102.850%
-------------------------------------------------------
2014 102.375%
-------------------------------------------------------
2015 101.900%
-------------------------------------------------------
2016 101.425%
-------------------------------------------------------
2017 100.950%
-------------------------------------------------------
2018 100.475%
-------------------------------------------------------
2019 and thereafter 100.000%
-------------------------------------------------------
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(c) If at any time an Investment Company Event, a Regulatory
Capital Event or a Tax Event (each as defined below, and each a "Special Event")
occurs, the Debenture Issuer shall have the right (subject to the conditions set
forth in the Indenture) at any time prior to the Initial Optional Redemption
Date, to redeem the Debentures in whole, but not in part, within the 90 days
following the occurrence of such Special Event (the "90 Day Period"), and,
simultaneous with such redemption, to cause a Like Amount of the Securities to
be redeemed by the Trust at the Special Event Redemption Price on a Pro Rata
basis.
"Investment Company Event" shall mean the receipt by the Debenture
Issuer and the Trust of an opinion of independent securities counsel experienced
in such matters to the effect that as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws or any
regulation thereunder of the United States or any rules, guidelines or policies
of any applicable regulatory authority for the Debenture Issuer or (b) 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 original
issuance of the Securities, the Trust is, or within 90 days of the date of such
opinion will be, considered an Investment Company that is required to be
registered under the Investment Company Act.
"Make-Whole Amount" shall mean an amount equal to the greater of
(x) 100% of the principal of Debentures or (y) the sum, as determined by a
Quotation Agent (as defined in the Indenture), of the present values of the
remaining scheduled payments of principal and interest on the Debentures,
discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined in the Indenture), plus, in the case of each of clauses (x) and (y),
accrued and unpaid interest thereon, if any, to the date of redemption.
"Regulatory Capital Event" shall mean the receipt by the Debenture
Issuer and the Trust of an opinion of independent bank regulatory counsel
experienced in such matters to the effect that as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any rules, guidelines or
policies of an applicable regulatory authority for the Debenture Issuer or
BankPhiladelphia, its wholly owned subsidiary, or (b) 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 original issuance
of the Securities, the Capital Securities do not constitute, or within 90 days
of the date of such opinion will not constitute, Tier 1 Capital for purposes of
capital adequacy guidelines of the Federal Reserve Board (or any successor
regulatory authority with jurisdiction over bank holding companies), or any
capital adequacy guidelines as then in effect and applicable to the Debenture
Issuer; provided, however, that the distribution of the Debentures in connection
with the liquidation of the Trust by the Debenture Issuer shall not in and of
itself constitute a Regulatory Capital Event unless such liquidation shall have
occurred in connection with a Tax Event.
"Special Event Redemption Price" shall mean, with respect to any
redemption of Securities following a Special Event, an amount in cash equal to
the Make-Whole Amount.
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"Tax Event" shall occur upon receipt by the Debenture Issuer and
the Trust of an opinion of independent tax 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 original issuance of the Securities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Debentures, (ii) the interest payable by the
Debenture Issuer on the Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Debenture Issuer, in whole or in part,
for United States federal income tax purposes, or (iii) the Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
(d) [Omitted]
(e) On and from the date fixed by the Administrative Trustees for
any distribution of Debentures and liquidation of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee), as the Holder of the
Capital Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution, and (iii)
any certificates representing Securities not held by the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee) will be deemed to
represent beneficial interests in a Like Amount of Debentures until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(f) The Trust may not redeem fewer than all the outstanding
Securities unless all accumulated and unpaid Distributions have been paid on all
Securities for all semi-annual Distribution periods terminating on or before the
date of redemption.
(g) The procedure with respect to redemptions or distributions of
Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder to be
redeemed or exchanged not fewer than 30 nor more than 60 days before
the date fixed for redemption or exchange thereof which, in the case of
a redemption, will be the date fixed for redemption of the Debentures.
For purposes of the calculation of the date of redemption or exchange
and the dates on which notices are given pursuant to this Section
4(g)(i), a Redemption/Distribution Notice shall be deemed to be given
on the day such notice is first mailed by first-class mail, postage
prepaid, to Holders. Each Redemption/Distribution Notice shall be
addressed to the Holders at the address of each such Holder appearing
in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder
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shall affect the validity of the redemption or exchange proceedings
with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities
are to be redeemed, the particular Securities to be redeemed shall be
selected on a Pro Rata basis or a method deemed fair and appropriate by
the Property Trustee (based upon Liquidation Amounts) not more than 60
nor less than 30 days prior to the date fixed for redemption from the
outstanding Securities not previously called for redemption; provided,
however, that with respect to Holders that would be required to hold
less than 100 but more than zero Securities as a result of such
redemption, the Trust shall redeem Securities of each such Holder so
that after such redemption such Holder shall hold either 100 Securities
or such Holder no longer holds any Securities, and shall use such
method (including, without limitation, by lot) as the Trust shall deem
fair and appropriate; provided, further, that any such redemption may
be made on the basis of the aggregate Liquidation Amount of Securities
held by each Holder thereof and may be made by making such adjustments
as the Trust deems fair and appropriate in order that fractional
Securities shall not thereafter remain outstanding. In respect of
Capital Securities registered in the name of and held of record by the
Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee) or any nominee, the distribution of the proceeds of such
redemption will be made to the Clearing Agency and disbursed by such
Clearing Agency in accordance with the procedures applied by such
agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice (which notice will be irrevocable), then
(A) with respect to Capital Securities issued in book-entry form, by
12:00 noon, Wilmington, Delaware time, on the redemption date, provided
that the Debenture Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity of
the Debentures by 10:00 a.m., Wilmington, Delaware time, on the
Maturity Date or the date of redemption, as the case requires, the
Property Trustee will deposit irrevocably with the Clearing Agency or
its nominee (or successor Clearing Agency or its nominee) immediately
available funds sufficient to pay the applicable Redemption Price with
respect to such Capital Securities and will give the Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to
the relevant Clearing Agency Participants, and (B) with respect to
Capital Securities issued in certificated form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Property Trustee will irrevocably
deposit with the paying agent for the Capital Securities (if other than
the Property Trustee) funds sufficient to pay the applicable Redemption
Price to the Holders by check mailed to the address of the relevant
Holder appearing on the books and records of the Trust on the
redemption date, and provided, further, that any such payment shall
become due only upon surrender by the Holder of the related
certificated Capital Securities. If a Redemption/ Distribution Notice
shall have been given and funds deposited as required, if applicable,
then immediately prior to the close of business on the date of such
deposit, or on the redemption date, as applicable, Distributions will
cease to accumulate on the Securities so called for redemption and all
rights of Holders so called for redemption will cease, except
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<PAGE>
the right of the Holders of such Securities to receive the Redemption
Price, but without interest on such Redemption Price, and such
Securities shall cease to be outstanding.
(iv) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of
Holders on the close of business on a regular record date in respect of
a Distribution Date occurring on or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of (i) any
Securities beginning on the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Securities for
redemption or (ii) any Securities selected for redemption except the unredeemed
portion of any Security being redeemed. If any date fixed for redemption of
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay). If payment
of the Redemption Price in respect of any Securities is improperly withheld or
refused and not paid either by the Property Trustee or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accumulate from the original redemption date to the
actual date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the Property
Trustee on behalf of the Trust to (A) in respect of Capital Securities
issued in book-entry form, the Clearing Agency or its nominee (or any
successor Clearing Agency or its nominee), (B) in respect of Capital
Securities issued in certificated form, to the Holders thereof, and (C)
in respect of the Common Securities, to the Holders thereof.
(vi) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws and banking
laws), the Sponsor or any of its subsidiaries may at any time and from
time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement.
5. Voting Rights - Capital Securities.
(a) Except as provided under Sections 5(b), 6(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights.
(b) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent
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<PAGE>
of each holder of Debentures affected thereby, no such consent shall be given by
the Property Trustee without the prior approval of each Holder of the Capital
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of the Capital Securities except by subsequent
vote of such Holders. The Property Trustee shall notify each Holder of Capital
Securities of any notice of default with respect to the Debentures. In addition
to obtaining the foregoing approvals of such Holders of the Capital Securities,
prior to taking any of the foregoing actions, the Trustees shall obtain an
opinion of counsel experienced in such matters to the effect that the Trust will
continue to be classified as a grantor trust for United States federal income
tax purposes after taking any such action into account.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or, in the case of redemption, on the redemption date), then a Holder of
Capital Securities may institute a proceeding directly against the Debenture
Issuer for enforcement of payment to such Holder of the principal of or premium,
if any, or interest on a Like Amount of Debentures (a "Direct Action") on or
after the respective due date specified in the Debentures. In connection with
such Direct Action, the Common Securities Holder will be subordinated to the
rights of the Holders of Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the second preceding sentence, and, except as set forth in
the first sentence of Section 3.8(e) of the Declaration, the Holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may be
given at a separate meeting of Holders of Capital Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which Holders of Capital Securities are entitled to vote to be mailed
to each Holder of record of Capital Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consent.
No vote or consent of the Holders of the Capital Securities will
be required for the Trust to redeem and cancel Capital Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
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6. Voting Rights - Common Securities.
(a) Except as provided under Sections 6(b), 6(c), and 7 or as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the Holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
Holders of a Majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the Holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Sponsor as the Holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Declaration.
(c) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Common Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that the Trust will continue to be classified as a grantor
trust for United States federal income tax purposes after taking any such action
into account.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Common Securities may institute a Direct Action directly against the Debenture
Issuer for enforcement of payment to such Holder of the principal of or premium,
if any, or interest on a Like Amount of Debentures on or after the respective
due date specified in the Debentures. In connection with such Direct Action, the
rights of the Common Securities Holder will be subordinated to the rights of the
Holders of Capital Securities in respect of any payment from the Debenture
Issuer in such Direct Action. Except as provided in the second preceding
sentence, the Holders of Common Securities will not be able to exercise directly
any other remedy available to the holders of the Debentures.
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Any approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which Holders of Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of record of Common Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. Amendments to Declaration.
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees without the consent of the
Holders (i) to cure any ambiguity, correct or supplement any provisions in the
Declaration that may be inconsistent with any other provisions, or to make any
other provisions with respect to matters or questions arising under the
Declaration which shall not be inconsistent with the other provisions of the
Declaration; or (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified for United States federal income tax purposes as a grantor trust
at all times that any Securities are outstanding or to ensure that the Trust
will not be required to register as an Investment Company under the Investment
Company Act; or (iii) to modify, eliminate or add any provisions of the
Declaration to such extent as shall be necessary to enable the Trust and the
Sponsor to conduct an Exchange Offer in the manner contemplated by the
Registration Rights Agreement; provided, however, that in the case of an
amendment pursuant to clause (i) above, such action shall not adversely affect
in any material respect the interests of any Holder, and any such amendments of
the Declaration shall become effective when notice thereof is given to the
Holders. The Declaration may also be amended by the Trustees and the Sponsor
with (i) the consent of Holders representing a Majority in Liquidation Amount of
all outstanding Securities, and (ii) receipt by the Trustees of an Opinion of
Counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an Investment Company under the Investment
Company Act; provided, however, that, without the consent of each Holder of
Trust Securities, the Declaration may not be amended to (i) change the amount or
timing of any Distribution on, or the payment required to be made in respect of,
the Trust Securities as of a specified date or (ii) restrict the right of a
Holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date.
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8. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the Capital
Securities pro rata according to the aggregate liquidation amount of Capital
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Capital Securities outstanding and then, only after satisfaction
of all amounts owed to the Holders of the Capital Securities, to each Holder of
Common Securities pro rata according to the aggregate liquidation amount of
Common Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Common Securities outstanding. In any such proration,
the Trust may make such adjustments as may be appropriate in order that only
securities in authorized denominations shall be redeemed (subject to the minimum
block requirements of Section 9.2(n) of the Declaration).
9. Ranking.
The Capital Securities rank pari passu with the Common Securities
and payment thereon shall be made Pro Rata with the Common Securities, except
that, if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and any other payments
to which they are entitled at such time.
10. Acceptance of Capital Securities Guarantee, Common Securities
Guarantee. Indenture and Debentures.
Each Holder of Capital Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Capital Securities
Guarantee, the Common Securities Guarantee, the Indenture and the Debentures, as
applicable, including the subordination provisions therein.
11. No Preemptive Rights.
The issuance of Capital Securities and the issuance of Common
Securities is not subject to preemptive or other similar rights. The Holders
shall have no preemptive or similar rights to subscribe for any additional
securities.
12. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee or the Common Securities Guarantee, as applicable, and the
Indenture (including any supplemental indenture) to a Holder without charge upon
written request to the Trust at its principal place of business.
I-12
<PAGE>
Exhibit 4.6
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH USABANCSHARES, INC.
(THE "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS
COMMON SECURITY (OR ANY PREDECESSOR OF THIS COMMON SECURITY) ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS COMMON SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS COMMON SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF USA CAPITAL TRUST I (THE "TRUST") AND
THE CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (D) TO REQUIRE THAT TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE
TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED
MARCH 9, 1999. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS COMMON SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
<PAGE>
Certificate Evidencing Common Securities
of
USA Capital Trust I
9.50% Common Securities
(liquidation amount $1,000 per Common Security)
USA Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
USABancShares, Inc. (the "Holder") is the registered owner of three hundred and
ten (310) common securities of the Trust representing undivided beneficial
interests in the assets of the Trust designated the 9.50% Common Securities
(liquidation amount $1,000 per Common Security) (the "Common Securities").
Subject to the terms of the Declaration (as defined below), the Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this Certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of March 9, 1999, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common Securities
as set forth in Annex I to the Declaration. Capitalized terms used but not
defined herein shall have the meaning given them in the Declaration. The Sponsor
will provide a copy of the Declaration, the Common Securities Guarantee and the
Indenture (including any supplemental indenture) to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of indirect beneficial ownership in the
Debentures.
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate
this 9th day of March, 1999.
USABANCSHARES CAPITAL TRUST I
By: /s/ Brian M. Hartline
----------------------
Name: Brian M. Hartline
Administrative Trustee
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions on each Common Security will be payable at a
fixed rate per annum of 9.50% (the "Coupon Rate") of the liquidation amount of
$1,000 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any and
all such interest, if any, payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
legally available therefor.
Distributions on the Common Securities will be cumulative,
will accrue from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from March 9, 1999 and will be payable
semi-annually in arrears, on March 15 and September 15 of each year, commencing
September 15, 1999, except as otherwise described below. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and
for any period less than a full calendar month on the basis of the actual number
of days elapsed in such month. As long as no Event of Default has occurred and
is continuing under the Indenture, and no funds remain in the Reserve Account
(as defined in the Indenture), the Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
at any time and from time to time on the Debentures for a period not exceeding
10 consecutive calendar semi-annual periods, including the first such
semi-annual period during such extension period (each an "Extension Period"),
provided that no Extension Period shall end on a date other than an Interest
Payment Date for the Debentures or extend beyond the Maturity Date of the
Debentures. As a consequence of such deferral, Distributions will also be
deferred. Notwithstanding such deferral, Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded semi-annually during any such Extension Period. Prior
to the termination of any Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided
that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not (i) exceed 10 consecutive
semi-annual periods, including the first semi-annual period during such
Extension Period, (ii) end on a date other than an Interest Payment Date for the
Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments
of accrued Distributions will be payable to Holders as they appear on the books
and records of the Trust on the record date immediately preceding the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.
Subject to the receipt by the Sponsor of any and all required
regulatory approvals and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of the
Sponsor, at any time dissolve the Trust and cause the Debentures to be
distributed to the Holders of the Securities in liquidation of the Trust or,
simultaneously with any
<PAGE>
redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
Under certain circumstances, the right of the Holders of the
Common Securities shall be subordinate to the rights of the Holders of the
Capital Securities, as provided in the Declaration.
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
___________________________________________________________ agent to transfer
this Common Security Certificate on the books of the Trust. The agent may
substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
<PAGE>
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without
transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(3) [ ] transferred to an institutional "accredited
investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act
of 1933 that is acquiring the Common Securities for
its own account, or for the account of such an
institutional "accredited investor," for investment
purposes and not with a view to, or for offer or
sale in connection with, any distribution in
violation of the Securities Act of 1933; or
(4) [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933; or
(5) [ ] transferred pursuant to an effective Registration
Statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Common Securities evidenced by this certificate in the name of any Person
other than the registered Holder thereof; provided, however, that if box (3) or
(4) is checked, the Registrar may require, prior to registering any such
transfer of the Capital Securities, such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; provided, further, that (i)
if box (2) is checked, the transferee must also certify in the form attached
that it is a "qualified institutional buyer" as defined in Rule 144A or (ii) if
box (3) is checked, the transferee must also provide to the Registrar a
Transferee Letter of Representation in the form attached to the Offering
Memorandum of the Trust, dated March 9, 1999 (as modified to reflect the
transfer of Common Securities).
__________________________
Signature
<PAGE>
CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER
The undersigned transferee of Common Securities hereby certifies that
(i) the undersigned is a "qualified institutional buyer" (a "QIB") as defined in
Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, (ii) the
undersigned is aware that the transfer of the Common Securities to the
undersigned is being made in reliance on Rule 144A and (iii) the undersigned is
acquiring the Common Securities for its own account or for the account of
another QIB over which the undersigned exercises its sole investment discretion.
The undersigned also understands and acknowledges that the Common
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Common Securities and the
terms of the Amended and Restated Declaration of Trust of USA Capital Trust I,
dated as of March 9, 1999, as the same may be amended from time to time.
____________________
Signature
<PAGE>
Exhibit 4.7
FORM OF SERIES B CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY,
INSERT: THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF
THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF CAPITAL SECURITIES
<PAGE>
IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH
RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE CAPITAL
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER: (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF A PLAN, OR ANY OTHER
PERSON OR ENTITY USING THE ASSETS OF ANY PLAN TO FINANCE SUCH PURCHASE; OR (B)
SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF
CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000
SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR
ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH
CAPITAL SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO
INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
<PAGE>
Certificate Number: ________ Aggregate Liquidation
Amount: $ ________________
CUSIP Number: _________
Certificate Evidencing Series B Capital Securities
of
USA Capital Trust I
Series B 9.50% Capital Securities
(liquidation amount $1,000 per Capital Security)
USA Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
_________________ is the registered owner of_____________ Series B Capital
Securities of the Trust (liquidation amount of $1,000 per Capital Security),
representing undivided preferred beneficial interests in the assets of the Trust
designated the Series A 9.50% Capital Securities (liquidation amount $1,000 per
Capital Security) (the "Capital Securities"). The Capital Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust, dated as of March 9,
1999, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Capital Securities as set forth in
Annex I to the Declaration. Capitalized terms used but not defined herein shall
have the meaning given them in the Declaration. The Sponsor will provide a copy
of the Declaration, the Capital Securities Guarantee and the Indenture
(including any supplemental indenture) to a Holder without charge upon written
request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of indirect beneficial ownership in the
Debentures.
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate
this ____ day of __________, ______.
USA CAPITAL TRUST I
By:_____________________________________
Name: Brian Hartline
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series B 9.50% Capital Securities of USA Capital
Trust I referred to in the within-mentioned Declaration.
Dated:____________ _______, ____
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Property Trustee
By:_____________________________________
Authorized Signature
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions on each Capital Security will be payable at a
fixed rate per annum of 9.50% (the "Coupon Rate") of the liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any
interest, and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds legally available therefor.
Distributions on the Capital Securities will be cumulative,
will accumulate from the most recent date to which Distributions have been paid
or, if no Distributions have been paid, from March 9, 1999 and will be payable
semi-annually in arrears, on March 15 and September 15 of each year, commencing
September 15, 1999, except as otherwise described below. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
the month. As long as no Event of Default has occurred and is continuing under
the Indenture, and no funds remain in the Reserve Account (as defined in the
Indenture), the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), provided that no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, semi-annual Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded semi-annually during any such Extension Period. Prior
to the termination of any Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided
that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not (i) exceed 10 consecutive
semi-annual periods, including the first semi-annual period during such
Extension Period, (ii) end on a date other than an Interest Payment Date for the
Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments
of accumulated Distributions will be payable to Holders as they appear on the
books and records of the Trust on the record date immediately preceding the end
of the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
Subject to receipt by the Sponsor of any and all required
regulatory approvals and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of the
Sponsor, at any time dissolve the Trust and cause, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, the
Debentures to be distributed to the
<PAGE>
Holders of the Securities in liquidation of the Trust or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
<PAGE>
-----------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:____________________
Signature:_________________________
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee:___________________________________
- --------------------
Signature must be guaranteed by an "eligible guarantor institution" that is a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
<PAGE>
In connection with any transfer of any of the Capital Securities evidenced by
this Certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without
transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended; or
(3) [ ] transferred to an institutional "accredited investor"
within the meaning of subparagraph (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act of 1933,
as amended, that is acquiring the Capital Securities
for its own account, or for the account of such an
institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale
in connection with, any distribution in violation of
the Securities Act of 1933, as amended; or
(4) [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933, as amended; or
(5) [ ] transferred pursuant to an effective registration
statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Capital Securities evidenced by this Certificate in the name of any Person
other than the Holder hereof; provided, however, that if box (3) or (4) is
checked, the Registrar may require, prior to registering any such transfer of
the Capital Securities, such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended, such as
the exemption provided by Rule 144 under such Act; provided, further, that (i)
if box (2) is checked, the transferee must also certify in the form attached
hereto that it is a "qualified institutional buyer" as defined in Rule 144A or
(ii) if box (3) is checked, the transferee must also provide to the Registrar a
Transferee Letter of Representation in the form attached to the Offering
Memorandum of the Trust dated March 9, 1999; provided, further, that after the
date that a Registration Statement has been filed and so long as such
Registration Statement continues to be effective, the Registrar may only permit
transfers for which box (5) has been checked.
_______________________________
Signature
<PAGE>
CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER
The undersigned transferee of Capital Securities hereby certifies that
(i) the undersigned is a "qualified institutional buyer" (a "QIB") as defined in
Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, (ii) the
undersigned is aware that the transfer of the Capital Securities to the
undersigned is being made in reliance on Rule 144A and (iii) the undersigned is
acquiring the Capital Securities for its own account or for the account of
another QIB over which the undersigned exercises its sole investment discretion.
The undersigned also understands and acknowledges that the Capital
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Capital Securities and the
terms of the Amended and Restated Declaration of Trust of USA Capital Trust I,
dated as of March 9, 1999, as the same may be amended from time to time.
________________________
Signature
<PAGE>
Exhibit 4.8
FORM OF SERIES A CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY,
INSERT: THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF
THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH
USABANCSHARES, INC. (THE "CORPORATION") OR ANY
<PAGE>
"AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY
PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE CORPORATION, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF USA CAPITAL TRUST I (THE "TRUST") AND THE CORPORATION
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D) TO
REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE
SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED MARCH 9,
1999. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF CAPITAL SECURITIES IS NOT PROHIBITED BY SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER
OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO
HAVE
<PAGE>
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (A) IT IS NOT AN
EMPLOYEE BENEFIT PLAN WITHIN SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION
4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF A
PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY PLAN TO FINANCE SUCH
PURCHASE; OR (B) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO
APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF
CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000
SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR
ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH
CAPITAL SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO
INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
<PAGE>
Certificate Number: ________ Aggregate Liquidation
Amount: $ ________________
CUSIP Number: _________
Certificate Evidencing Series A Capital Securities
of
USA Capital Trust I
Series A 9.50% Capital Securities
(liquidation amount $1,000 per Capital Security)
USA Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
_________________ is the registered owner of_____________ Series A Capital
Securities of the Trust (liquidation amount of $1,000 per Capital Security),
representing undivided preferred beneficial interests in the assets of the Trust
designated the Series A 9.50% Capital Securities (liquidation amount $1,000 per
Capital Security) (the "Capital Securities"). The Capital Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust, dated as of March 9,
1999, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Capital Securities as set forth in
Annex I to the Declaration. Capitalized terms used but not defined herein shall
have the meaning given them in the Declaration. The Sponsor will provide a copy
of the Declaration, the Capital Securities Guarantee and the Indenture
(including any supplemental indenture) to a Holder without charge upon written
request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of indirect beneficial ownership in the
Debentures.
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate
this ____ day of __________, ______.
USA CAPITAL TRUST I
By:____________________________________
Name: Brian Hartline
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series A 9.50% Capital Securities of USA Capital
Trust I referred to in the within-mentioned Declaration.
Dated: ____________ ______, ____
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Property Trustee
By:____________________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions on each Capital Security will be payable at a
fixed rate per annum of 9.50% (the "Coupon Rate") of the liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any
interest, and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds legally available therefor.
Distributions on the Capital Securities will be cumulative,
will accumulate from the most recent date to which Distributions have been paid
or, if no Distributions have been paid, from March 9, 1999 and will be payable
semi-annually in arrears, on March 15 and September 15 of each year, commencing
September 15, 1999, except as otherwise described below. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
the month. As long as no Event of Default has occurred and is continuing under
the Indenture, and no funds remain in the Reserve Account (as defined in the
Indenture), the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), provided that no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, semi-annual Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded semi-annually during any such Extension Period. Prior
to the termination of any Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided
that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not (i) exceed 10 consecutive
semi-annual periods, including the first semi-annual period during such
Extension Period, (ii) end on a date other than an Interest Payment Date for the
Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments
of accumulated Distributions will be payable to Holders as they appear on the
books and records of the Trust on the record date immediately preceding the end
of the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
Subject to receipt by the Sponsor of any and all required
regulatory approvals and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of the
Sponsor, at any time dissolve the Trust and cause, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, the
Debentures to be distributed to the
<PAGE>
Holders of the Securities in liquidation of the Trust or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
<PAGE>
---------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:_________________
Signature:________________________
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee:________________________________
- -------------------
Signature must be guaranteed by an "eligible guarantor institution" that is a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
In connection with any transfer of any of the Capital Securities evidenced by
this Certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without
transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended; or
(3) [ ] transferred to an institutional "accredited investor"
within the meaning of subparagraph (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act of 1933,
as amended, that is acquiring the Capital Securities
for its own account, or for the account of such an
institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale
in connection with, any distribution in violation of
the Securities Act of 1933, as amended; or
(4) [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933, as amended; or
(5) [ ] transferred pursuant to an effective registration
statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Capital Securities evidenced by this Certificate in the name of any Person
other than the Holder hereof; provided, however, that if box (3) or (4) is
checked, the Registrar may require, prior to registering any such transfer of
the Capital Securities, such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended, such as
the exemption provided by Rule 144 under such Act; provided, further, that (i)
if box (2) is checked, the transferee must also certify in the form attached
hereto that it is a "qualified institutional buyer" as defined in Rule 144A or
(ii) if box (3) is checked, the transferee must also provide to the Registrar a
Transferee Letter of Representation in the form attached to the Offering
Memorandum of the Trust dated March 9, 1999; provided, further, that after the
date that a Registration Statement has been filed and so long as such
Registration Statement continues to be effective, the Registrar may only permit
transfers for which box (5) has been checked.
________________________________
Signature
<PAGE>
CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER
The undersigned transferee of Capital Securities hereby certifies that
(i) the undersigned is a "qualified institutional buyer" (a "QIB") as defined in
Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, (ii) the
undersigned is aware that the transfer of the Capital Securities to the
undersigned is being made in reliance on Rule 144A and (iii) the undersigned is
acquiring the Capital Securities for its own account or for the account of
another QIB over which the undersigned exercises its sole investment discretion.
The undersigned also understands and acknowledges that the Capital
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Capital Securities and the
terms of the Amended and Restated Declaration of Trust of USA Capital Trust I,
dated as of March 9, 1999, as the same may be amended from time to time.
_______________________
Signature
<PAGE>
Exhibit 4.9
====================================================================
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
USABANCSHARES, INC.
Dated as of _________, 1999
====================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
<S> <C>
SECTION 1.1 Definitions and Interpretation..................................................................2
------------------------------
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application................................................................5
SECTION 2.2 Lists of Holders of Securities..................................................................5
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee.............................................6
SECTION 2.4 Periodic Reports by the Guarantor...............................................................6
SECTION 2.5 Evidence of Compliance with Conditions Precedent................................................6
SECTION 2.6 Waiver of Events of Default.....................................................................7
SECTION 2.7 Notice of Events of Default.....................................................................7
SECTION 2.8 Conflicting Interests...........................................................................7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee..................................7
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee.........................................9
SECTION 3.3 Not Responsible for Recitals or Issuance of Capital Securities Guarantee......................11
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility..............................................11
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities
Guarantee Trustee..............................................................................12
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee......................................................................................13
SECTION 5.2 Waiver of Notice and Demand....................................................................13
SECTION 5.3 Obligations Not Affected.......................................................................13
SECTION 5.4 Rights of Holders..............................................................................14
SECTION 5.5 Guarantee of Payment...........................................................................15
SECTION 5.6 Subrogation....................................................................................15
SECTION 5.7 Independent Obligations........................................................................15
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
<S> <C>
SECTION 6.1 Limitation of Transactions.....................................................................15
SECTION 6.2 Ranking........................................................................................16
ARTICLE VII
TERMINATION
SECTION 7.1 Termination....................................................................................17
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation....................................................................................17
SECTION 8.2 Compensation and Indemnification...............................................................17
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.........................................................................18
SECTION 9.2 Amendments.....................................................................................18
SECTION 9.3 Notices........................................................................................18
SECTION 9.4 Exchange Offer.................................................................................19
SECTION 9.5 Benefit........................................................................................19
SECTION 9.6 Governing Law..................................................................................20
</TABLE>
(ii)
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust
Indenture Act of Section of Guarantee
1939, as amended Agreement
- ---------------- ---------
<S> <C>
310(a) ..................................................................... 4.1(a)
310(b) ..................................................................... 4.1(c), 2.8
310(c) ..................................................................... Inapplicable
311(a) ..................................................................... 2.2(b)
311(b) ..................................................................... 2.2(b)
311(c) ..................................................................... Inapplicable
312(a) ..................................................................... 2.2(a)
312(b) ..................................................................... 2.2(b)
313 ..................................................................... 2.3
314(a) ..................................................................... 2.4
314(b) ..................................................................... Inapplicable
314(c) ..................................................................... 2.5
314(d) ..................................................................... Inapplicable
314(e) ..................................................................... 1.1, 2.5, 3.2(a)
314(f) ..................................................................... 2.1, 3.2
315(a) ..................................................................... 3.1(d)
315(b) ..................................................................... 2.7
315(c) ..................................................................... 3.1(c)
315(d) ..................................................................... 3.1(d)
315(e) ..................................................................... Inapplicable
316(a) ..................................................................... 1.1, 2.6, 5.4
316(b) ..................................................................... 5.3
316(c) ..................................................................... 9.2
317(a) ..................................................................... Inapplicable
317(b) ..................................................................... Inapplicable
318(a) ..................................................................... 2.1(a)
318(b) ..................................................................... Inapplicable
318(c) ..................................................................... 2.1(b)
</TABLE>
- -------------------------
* This Cross-Reference Table does not constitute part of this Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
(iii)
<PAGE>
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
This CAPITAL SECURITIES GUARANTEE AGREEMENT (the "Capital Securities
Guarantee"), dated as of ___________, 1999, is executed and delivered by
USABancShares, Inc. (the "Guarantor"), a Pennsylvania corporation, and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Capital Securities Guarantee Trustee" or "Trustee"), for the benefit of the
Holders (as defined herein), from time to time, of the Capital Securities (as
defined herein) of USA Capital Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of March 9, 1999, by and among the trustees of the
Issuer named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Issuer, the Issuer
issued on March 9, 1999, 10,000 capital securities, having an aggregate
liquidation amount of $10,000,000, such capital securities being designated the
Series A 9.50% Capital Securities (collectively, the "Series A Capital
Securities").
WHEREAS, pursuant to an Exchange Offer (as defined in the Declaration,
the Issuer is issuing on the date hereof _____ capital securities, having an
aggregate liquidation amount of $_______, such capital securities being
designated the Series B 9.50% Capital Securities (collectively, the "Series B
Capital Securities") in exchange for the same liquidation amount of Series A
Capital Securities; and
WHEREAS, as incentive for the Holders to exchange the Series A Capital
Securities for the Series B Capital Securities, the Guarantor desires
irrevocably and unconditionally to agree, to the extent set forth in this Series
B Capital Securities Guarantee, to pay to the Holders the Guarantee Payments (as
defined below), and the Guarantor agrees to make certain other payments on the
terms and conditions set forth herein; and
WHEREAS, the Guarantor has executed and delivered guarantee agreements
(the "Series A Capital Securities Guarantee" and the "Common Securities
Guarantee") with substantially identical terms to this Series B Capital
Securities Guarantee, for the benefit of the holders of the Series A Capital
Securities and the Common Securities (as defined herein), respectively, except
that if an Event of Default (as defined in the Declaration) has occurred and is
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinated, to the extent
and in the manner set forth in the Common Securities Guarantee, to the rights of
holders of Series A Capital Securities and the Series B Capital Securities to
receive Guarantee Payments under this Series B Capital Securities Guarantee and
the Series A Capital Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the purchase by each Holder which
purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the
Guarantor executes and delivers this Series B Capital Securities Guarantee for
the benefit of the Holders.
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Capital Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Series B Capital Securities
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this Series B Capital Securities Guarantee have the same meaning
when used in this Series B Capital Securities Guarantee unless otherwise defined
in this Series B Capital Securities Guarantee,
(c) a term defined anywhere in this Series B Capital
Securities Guarantee has the same meaning throughout;
(d) all references to "the Series B Capital Securities
Guarantee" or "this Series B Capital Securities Guarantee" are to this Series B
Capital Securities Guarantee as modified, supplemented or amended from time to
time;
(e) all references in this Series B Capital Securities
Guarantee to Articles and Sections are to Articles and Sections of this Series B
Capital Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Series B Capital Securities Guarantee, unless
otherwise defined in this Series B Capital Securities Guarantee or unless the
context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" shall mean any day other than a Saturday or a Sunday, or
a day on which banking institutions in New York, New York are authorized or
required by law or executive order to close.
"Capital Securities Guarantee Trustee" shall mean Wilmington Trust
Company, until a Successor Capital Securities Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the provisions of this
Series B Capital Securities Guarantee and thereafter means each such Successor
Capital Securities Guarantee Trustee.
"Common Securities" shall mean the securities representing common
undivided beneficial interests in the assets of the Issuer.
- 2 -
<PAGE>
"Corporate Trust Office" shall mean the office of the Capital
Securities Guarantee Trustee at which the corporate trust business of the
Capital Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this
Agreement is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001; Attention: Corporate Trust Administration.
"Covered Person" shall mean any Holder or beneficial owner of Capital
Securities.
"Debentures" shall mean the series of subordinated debt securities of
the Guarantor designated the Series B 9.50% Junior Subordinated Deferrable
Interest Debentures due March 15, 2029, held by the Property Trustee (as defined
in the Declaration) of the Issuer.
"Event of Default" shall mean a default by the Guarantor on any of its
payment or other obligations under this Series B Capital Securities Guarantee;
provided, however, that, except with respect to a default in payment of any
Guarantee Payment, no default by the Guarantor hereunder shall constitute an
Event of Default unless the Guarantor shall have received written notice of the
default and shall not have cured such default within 60 days after receipt
thereof.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Series B Capital
Securities, to the extent not paid or made by or on behalf of the Issuer: (i)
any accumulated and unpaid Distributions (as defined in the Declaration) that
are required to be paid on such Series B Capital Securities, to the extent the
Issuer has funds on hand legally available therefor at such time, (ii) the
redemption price, including all accumulated and unpaid Distributions to the date
of redemption (the "Redemption Price"), to the extent the Issuer has funds on
hand legally available therefor at such time, with respect to any Series B
Capital Securities called for redemption by the Issuer, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for Series B Capital Securities as provided in the Declaration), the
lesser of (a) the aggregate of the liquidation amount and all accumulated and
unpaid Distributions on the Series B Capital Securities to the date of payment,
to the extent the Issuer has funds on hand legally available therefor at such
time, and (b) the amount of assets of the Issuer remaining available for
distribution to Holders after satisfaction of liabilities to creditors of the
Issuer as required by applicable law (in either case, the "Liquidation
Distribution"). If an Event of Default has occurred and is continuing, no
Guarantee Payments under the Common Securities Guarantee with respect to the
Common Securities or any guarantee payment under the Common Securities Guarantee
or any Other Common Securities Guarantee shall be made until the Holders of
Series B Capital Securities shall be paid in full the Guarantee Payments to
which they are entitled under this Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Series B Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Series B Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Person actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee to be an Affiliate of the
Guarantor.
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"Indemnified Person" shall mean the Capital Securities Guarantee
Trustee (including in its individual capacity), any Affiliate of the Capital
Securities Guarantee Trustee, or any officers, directors, shareholders, members,
partners, employees, representatives, nominees, custodians or agents of the
Capital Securities Guarantee Trustee.
"Indenture" shall mean the Indenture, dated as of March 9, 1999,
between the Guarantor, as issuer of Debentures (the "Debenture Issuer"), and
Wilmington Trust Company, as debenture trustee (the "Debenture Trustee"),
pursuant to which the Debentures are to be issued to the Property Trustee of the
Issuer.
"Majority in Liquidation Amount of the Series B Capital Securities"
shall mean, except as provided by the Declaration or by the Trust Indenture Act,
a vote by Holder(s) of more than 50% of the aggregate liquidation amount of all
Series B Capital Securities.
"Officers' Certificate" shall mean, with respect to any person, a
certificate signed by the chairman, a vice chairman, the chief executive
officer, the president, an executive or senior vice president, a vice president,
the treasurer or an assistant treasurer of the Guarantor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Series B Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in the Officer's
Certificate are based;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same meaning as
"Other Guarantees" as defined in the Common Securities Guarantee.
"Other Debentures" shall mean all junior subordinated debentures, other
than the Debentures, issued by the Guarantor from time to time and sold to
trusts other than the Issuer to be established by the Guarantor (if any), in
each case similar to the Issuer.
"Other Guarantees" shall mean all guarantees, other than this Capital
Securities Guarantee, to be issued by the Guarantor with respect to capital
securities (if any) similar to the Series B Capital Securities issued by other
trusts to be established by the Guarantor (if any), in each case similar to the
Issuer.
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"Person" shall mean a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 9, 1999, by and among the Guarantor, the Issuer and
the Initial Purchasers named therein as such agreement may be amended, modified
or supplemented from time to time.
"Responsible Officer" shall mean, with respect to the Capital
Securities Guarantee Trustee, any officer assigned to the Corporate Trust
Office, including any managing director, principal, vice president, assistant
vice president, assistant treasurer, assistant secretary or any other officer of
the Capital Securities Guarantee Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Capital Securities
Guarantee, and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Successor Capital Securities Guarantee Trustee" shall mean a successor
Capital Securities Guarantee Trustee possessing the qualifications to act as
Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended.
"Trust Securities" shall mean the Common Securities and the Series B
Capital Securities and Series A Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Series B Capital Securities Guarantee is subject to
the provisions of the Trust Indenture Act that are required to be part of this
Series B Capital Securities Guarantee and shall, to the extent applicable, be
governed by such provisions; and
(b) If and to the extent that any provision of this Series B
Capital Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Capital Securities
Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise
the registrar of the Capital Securities) with a list, in such form as the
Capital Securities Guarantee Trustee may reasonably require, of the names
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and addresses of the Holders ("List of Holders") as of such date, (i) within
fourteen (14) days after each record date for payment of Distributions, and (ii)
at any other time within 30 days of receipt by the Guarantor of a written
request for a List of Holders as of a date no more than 14 days before such List
of Holders is given to the Capital Securities Guarantee Trustee; provided,
however, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Capital Securities Guarantee Trustee by the
Guarantor. The Capital Securities Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with
its obligations under Sections 31l(a), 31l(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
Within 60 days after March 15 of each year, commencing March 15, 2000,
the Capital Securities Guarantee Trustee shall provide to the Holders of the
Capital Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Capital Securities Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports by the Guarantor
The Guarantor shall provide to and/or file with the Capital Securities
Guarantee Trustee, the Securities and Exchange Commission and/or the Holders,
such documents, reports and information (if any) as are required by Section 314
of the Trust Indenture Act and the compliance certificate required by Section
314 of the Trust Indenture Act in the form, in the manner and at the times
required by Section 314 of the Trust Indenture Act. Delivery to and filing with
the Capital Securities Guarantee Trustee of such reports, information and
documents is for informational purposes only and the Capital Securities
Guarantee Trustee's receipt of such shall not constitute constructive notice of
any information contained therein or determinable from information contained
therein, including the Guarantor's compliance with any of its covenants
hereunder (as to which the Capital Securities Guarantee Trustee is entitled to
rely exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Securities Guarantee Trustee
such evidence of compliance with the conditions precedent, if any, provided for
in this Series B Capital Securities Guarantee (including any covenants
compliance with which constitutes a condition precedent) that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
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SECTION 2.6 Waiver of Events of Default
The Holders of a Majority in Liquidation Amount of Series B Capital
Securities may, by vote, on behalf of all Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Series B Capital Securities
Guarantee, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
SECTION 2.7 Notice of Events of Default
(a) The Capital Securities Guarantee Trustee shall, within 10
Business Days after the occurrence of an Event of Default with respect to this
Capital Securities Guarantee actually known to a Responsible Officer of the
Capital Securities Guarantee Trustee, transmit by mail, first class postage
prepaid, to all Holders of the Capital Securities, notices of all such Events of
Default, unless such Events of Default have been cured before the giving of such
notice; provided, that, except in the case of an Event of Default arising from
the non-payment of any Guarantee Payment, the Capital Securities Guarantee
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Capital Securities Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital Securities
Guarantee Trustee shall have received written notice from the Guarantor, or a
Responsible Officer charged with the administration of this Series B Capital
Securities Guarantee shall have obtained actual knowledge, of such Event of
Default.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described in this
Capital Securities Guarantee for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee
Trustee
(a) This Series B Capital Securities Guarantee shall be held
by the Capital Securities Guarantee Trustee for the benefit of the Holders, and
the Capital Securities Guarantee Trustee shall not transfer this Series B
Capital Securities Guarantee to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee
Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of
its appointment
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to act as Successor Capital Securities Guarantee Trustee. The right, title and
interest of the Capital Securities Guarantee Trustee shall automatically vest in
any Successor Capital Securities Guarantee Trustee, and such vesting and
succession of title shall be effective whether or not conveyancing documents
have been executed and delivered pursuant to the appointment of such Successor
Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer has occurred and is continuing, the Capital Securities Guarantee Trustee
shall enforce this Series B Capital Securities Guarantee for the benefit of the
Holders.
(c) The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default (of which, other than in the case of Events
of Default under Sections 5.01(a) and 5.01(b) of the Indenture, a Responsible
Officer of the Property Trustee has actual knowledge) and after the curing of
all such Events of Default that may have occurred, shall undertake to perform
only such duties as are specifically set forth in this Series B Capital
Securities Guarantee, and no implied covenants or obligations shall be read into
this Series B Capital Securities Guarantee against the Capital Securities
Guarantee Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Series B Capital Securities Guarantee, and use the same degree of care and
skill in its exercise thereof, as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs.
(d) No provision of this Series B Capital Securities Guarantee
shall be construed to relieve the Capital Securities Guarantee Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default
(of which, other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the
Property Trustee has actual knowledge) and after the curing or waiving
of all such Events of Default that may have occurred:
(A) the duties and obligations of the Capital Securities
Guarantee Trustee shall be determined solely by the express provisions
of this Series B Capital Securities Guarantee, and the Capital
Securities Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Series B Capital Securities Guarantee, and no implied
covenants or obligations shall be read into this Series B Capital
Securities Guarantee against the Capital Securities Guarantee Trustee;
and
(B) in the absence of bad faith on the part of the Capital
Securities Guarantee Trustee, the Capital Securities Guarantee Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Capital Securities Guarantee Trustee and
conforming to the requirements of this Series B Capital Securities
Guarantee; provided, however, that in the case of any such certificates
or opinions that by any provision hereof are specifically required
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to be furnished to the Capital Securities Guarantee Trustee, the
Capital Securities Guarantee Trustee shall be under a duty to examine
the same to determine whether or not on their face they conform to the
requirements of this Series B Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall
not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Capital
Securities Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall
not be liable with respect to any action taken or omitted to be taken
by it in good faith in accordance with the direction of the Holders of
a Majority in Liquidation Amount of the Series B Capital Securities
relating to the time, method and place of conducting any proceeding for
any remedy available to the Capital Securities Guarantee Trustee, or
exercising any trust or power conferred upon the Capital Securities
Guarantee Trustee under this Series B Capital Securities Guarantee; and
(iv) no provision of this Series B Capital Securities
Guarantee shall require the Capital Securities Guarantee Trustee to
expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of
any of its rights or powers, if the Capital Securities Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Series B Capital Securities Guarantee or indemnity,
reasonably satisfactory to the Capital Securities Guarantee Trustee,
against such risk or liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) the Capital Securities Guarantee Trustee may
conclusively rely, and shall be fully protected in acting or refraining from
acting, upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor
contemplated by this Series B Capital Securities Guarantee may be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Series
B Capital Securities Guarantee, the Capital Securities Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Securities Guarantee
Trustee (unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and conclusively rely upon an
Officers' Certificate, which, upon receipt of such request, shall be promptly
delivered by the Guarantor;
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(iv) the Capital Securities Guarantee Trustee shall
have no duty to see to any recording, filing or registration of any instrument
or other document (or any rerecording, refiling or registration thereof);
(v) the Capital Securities Guarantee Trustee may
consult with counsel of its selection, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion; and such counsel
may be counsel to the Guarantor or any of its Affiliates and may include any of
its employees; the Capital Securities Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this Series B
Capital Securities Guarantee from any court of competent jurisdiction;
(vi) the Capital Securities Guarantee Trustee shall
be under no obligation to exercise any of the rights or powers vested in it by
this Series B Capital Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Capital Securities
Guarantee Trustee such security and indemnity, reasonably satisfactory to the
Capital Securities Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Capital Securities
Guarantee Trustee's agents, nominees or custodians) and liabilities that might
be incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Capital Securities Guarantee
Trustee, provided, however, that nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Capital Securities Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights and
powers vested in it by this Series B Capital Securities Guarantee;
(vii) the Capital Securities Guarantee Trustee shall
have no obligation to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Capital Securities Guarantee
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Capital Securities Guarantee Trustee may,
at the expense of the Guarantor, execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents,
nominees, custodians or attorneys, and the Capital Securities Guarantee Trustee
shall not be responsible for any misconduct or negligence on the part of any
such person appointed with due care by it hereunder;
(ix) any action taken by the Capital Securities
Guarantee Trustee or its agents hereunder shall bind the Holders, and the
signature of the Capital Securities Guarantee Trustee or its agents alone shall
be sufficient and effective to perform any such action; and no third party shall
be required to inquire as to the authority of the Capital Securities Guarantee
Trustee to so act or as to its compliance with any of the terms and provisions
of this Series B Capital Securities Guarantee, both of which shall be
conclusively evidenced by the Capital Securities Guarantee Trustee's or its
agent's taking such action;
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(x) whenever in the administration of this Series B
Capital Securities Guarantee the Capital Securities Guarantee Trustee shall deem
it desirable to receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Capital Securities Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
Liquidation Amount of the Series B Capital Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively relying
on or acting in accordance with such instructions; and
(xi) the Capital Securities Guarantee Trustee shall
not be liable for any action taken, suffered, or omitted to be taken by it in
good faith, without negligence, and reasonably believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this Series B
Capital Securities Guarantee.
(b) No provision of this Series B Capital Securities Guarantee
shall be deemed to impose any duty or obligation on the Capital Securities
Guarantee Trustee to perform any act or acts or exercise any right, power, duty
or obligation conferred or imposed on it in any jurisdiction in which it shall
be illegal, or in which the Capital Securities Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Capital Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Series B
Capital Securities Guarantee
The recitals contained in this Series B Capital Securities Guarantee
shall be taken as the statements of the Guarantor, and the Capital Securities
Guarantee Trustee does not assume any responsibility for their correctness. The
Capital Securities Guarantee Trustee makes no representation as to the validity
or sufficiency of this Series B Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities Guarantee
Trustee that shall
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any state or territory thereof
or of the District of Columbia, or a corporation or other Person permitted by
the Securities and Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 10 million U.S.
dollars ($10,000,000), and subject to supervision or examination by federal,
state, territorial or District of Columbia
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authority; it being understood that if such corporation or other Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above, then,
for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
(b) If at any time the Capital Securities Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Capital
Securities Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor
shall in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities
Guarantee Trustee
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office
until a Successor Capital Securities Guarantee Trustee shall have been appointed
or until its removal or resignation. The Capital Securities Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery of an instrument of removal or resignation, the
Capital Securities Guarantee Trustee resigning or being removed may petition any
court of competent jurisdiction for appointment of a Successor Capital
Securities Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Capital Securities
Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Capital Securities Guarantee
Trustee.
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(f) Upon termination of this Series B Capital Securities
Guarantee or removal or resignation of the Capital Securities Guarantee Trustee
pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities
Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee
accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Series B
Capital Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor
under this Series B Capital Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Series B Capital
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Series B Capital Securities or
the extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Series B Capital Securities (other than an
extension of time for payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Debentures permitted by the Indenture);
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(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Series B Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Series
B Capital Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred;
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor;
it being the intent of this Section 5.3 that the obligations of the Guarantor
with respect to the Guarantee Payments shall be absolute and unconditional under
any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in Liquidation Amount of the
Series B Capital Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Series B Capital Securities Guarantee or
exercising any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Series B Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Series B Capital Securities Guarantee, any Holder of Capital
Securities may institute a legal proceeding directly against the Guarantor to
enforce the Capital Securities Guarantee Trustee's rights under this Series B
Capital Securities Guarantee, without first instituting a legal proceeding
against the Issuer, the Capital Securities Guarantee Trustee or any other person
or entity. The Guarantor waives any right or remedy to require that any action
be brought first against the Issuer or any other person or entity before
proceeding directly against the Guarantor.
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SECTION 5.5 Guarantee of Payment
This Series B Capital Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of the Holders
of Capital Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Series B Capital Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Series B Capital
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Series B Capital Securities Guarantee. If any amount shall
be paid to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such amount
to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Series B
Capital Securities, and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this Series
B Capital Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Series B Capital Securities remain outstanding, the
Guarantor shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock (which includes common and preferred stock), (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Guarantor (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Guarantor of the debt securities of any subsidiary of the Guarantor
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Debentures (other than (a) dividends or distributions
in shares of, or options, warrants, rights to subscribe for or purchase shares
of, common stock of the Guarantor, (b) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Series B
Capital Securities Guarantee and the Series B Capital Securities Guarantee, (d)
as a result of a reclassification of the Guarantor's capital stock or the
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<PAGE>
exchange or the conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock, (e) the
purchase of fractional interests in shares of the Guarantor's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (f) purchases of common stock related
to the issuance of common stock or rights under any of the Guarantor's benefit
or compensation plans for its directors, officers or employees or any of the
Guarantor's dividend reinvestment plans) if at such time (l) there shall have
occurred any event of which the Guarantor has actual knowledge that (A) is, or
with the giving of notice or the lapse of time, or both, would be, an Event of
Default and (B) in respect of which the Guarantor shall not have taken
reasonable steps to cure, (2) if such Debentures are held by the Property
Trustee, the Guarantor shall be in default with respect to its payment of any
obligations under this Series B Capital Securities Guarantee or (3) the
Guarantor shall have given notice of its election of the exercise of its right
to commence an Extended Interest Payment Period as provided in the Indenture and
shall not have rescinded such notice, and such Extended Interest Payment Period,
or an extension thereof, shall have commenced and be continuing.
SECTION 6.2 Ranking
This Series B Capital Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to Senior Indebtedness (as defined in the Indenture), to the same extent
and in the same manner that the Debentures are subordinated to Senior
Indebtedness pursuant to the Indenture, (ii) pari passu with the Debentures.
Other Debentures, the Series B Capital Securities Guarantee, the Common
Securities Guarantee, and any Other Guarantee and any Other Common Securities
Guarantee, and (iii) senior to the Guarantor's capital stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Series B Capital Securities Guarantee shall terminate (i) upon
full payment of the Redemption Price (as defined in the Declaration) of all
Series B Capital Securities, (ii) upon liquidation of the Issuer, the full
payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders and the holders of Common
Securities or (iii) upon exchange of all of the Series B Capital Securities for
the Series B Capital Securities in the Exchange Offer and the execution and
delivery of the Series B Capital Securities Guarantee. Notwithstanding the
foregoing, this Series B Capital Securities Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid under the Series B Capital Securities or
under this Series B Capital Securities Guarantee.
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<PAGE>
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Series
B Capital Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Series B Capital Securities Guarantee or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.
SECTION 8.2 Compensation and Indemnification
The Guarantor agrees to pay to the Capital Securities Guarantee Trustee
such compensation for its services as shall be mutually agreed upon by the
Guarantor and the Capital Securities Guarantee Trustee. The Guarantor shall
reimburse the Capital Securities Guarantee Trustee upon request for all
reasonable out-of-pocket expenses incurred by it, including the reasonable
compensation and expenses of the Capital Securities Guarantee Trustee's agents
and counsel, except any expense as may be attributable to the negligence or bad
faith of the Capital Securities Guarantee Trustee.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The provisions of this
Section 8.2 shall survive the termination of this Series B Capital Securities
Guarantee and shall survive the resignation or removal of the Capital Securities
Guarantee Trustee.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Series B Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Series B Capital Securities Guarantee may only be amended with
the prior approval of the Holders of a Majority in Liquidation Amount of the
Series B Capital Securities (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined). The provisions of
the Declaration with respect to consents and amendments thereof (whether at a
meeting or otherwise) shall apply to the giving of such approval).
SECTION 9.3 Notices
All notices provided for in this Series B Capital Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other address
as the Issuer may give notice of to the Capital Securities Guarantee Trustee and
the Holders):
USA Capital Trust I
c/o USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
Attention: Administrative Trustee
Telecopy: (215) 569-4214
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<PAGE>
(b) If given to the Capital Securities Guarantee Trustee, at
the Capital Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Capital Securities Guarantee Trustee may give notice
of to the Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopy: (302) 651-8882
Telephone:(302) 651-1000
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Capital Securities Guarantee Trustee and the Holders):
USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
Attention: Chief Financial Officer
Telecopy: (215) 469-4214
(d) If given to any Holder, at the address set forth on the
books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Capital Securities Guarantee is solely for the benefit of the
Holders and, subject to Section 3.1(a), is not separately transferable from the
Capital Securities.
SECTION 9.6 Governing Law
THIS Series B CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
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<PAGE>
This Capital Securities Guarantee is executed as of the day and year
first above written.
USABANCSHARES, INC.
as Guarantor
By:
---------------------------------------------
Name: Kenneth L. Tepper
Title: President and Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Capital Securities Guarantee Trustee
By:
---------------------------------------------
Name:
Title:
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<PAGE>
Exhibit 4.10
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated March 9, 1999
among
USABANCSHARES, INC.
USA CAPITAL TRUST I
and
SANDLER O'NEILL & PARTNERS, L.P.
as Initial Purchaser
================================================================================
<PAGE>
Exhibit 4.10
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of March 9, 1999 among USABANCSHARES, INC., a Pennsylvania corporation
(the "Corporation"), USA CAPITAL TRUST I, a business trust formed under the laws
of the state of Delaware (the "Trust"), and SANDLER O'NEILL & PARTNERS, L.P.
(the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement dated March 9,
1999 (the "Purchase Agreement"), among the Corporation, as issuer of the Series
A 9.50% Junior Subordinated Deferrable Interest Debentures due March 15, 2029
(the "Subordinated Debentures"), the Trust and the Initial Purchaser, which
provides for, among other things, the sale by the Trust to the Initial Purchaser
of 10,000 of the Trust's Series A 9.50% Capital Securities, liquidation amount
$1,000 per Capital Security (the "Capital Securities"), the proceeds of which
will be used by the Trust to purchase Subordinated Debentures. The Capital
Securities, together with the Subordinated Debentures and the Corporation's
guarantee of the Capital Securities (the "Capital Securities Guarantee"), are
collectively referred to as the "Securities". In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Corporation and the Trust
have agreed to provide to the Initial Purchaser and their direct and indirect
transferees the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Additional Distributions" shall have the meaning set forth in Section 2(e)
hereof.
"Advice" shall have the meaning set forth in the last paragraph of Section
3 hereof.
"Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.
"Applicable Period" shall have the meaning set forth in Section 3(t)
hereof.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in New York, New York, Wilmington, Delaware or
Philadelphia, Pennsylvania are authorized or required by law or executive order
to close.
"Closing Time" shall mean the Closing Time as defined in the Purchase
Agreement.
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<PAGE>
"Corporation" shall have the meaning set forth in the preamble to this
Agreement and also includes the Corporation's successors and permitted assigns.
"Declaration" or "Declaration of Trust" shall mean the Amended and Restated
Declaration of Trust of USA Capital Trust I, dated as of March 9, 1999, by the
trustees named therein and the Corporation as sponsor.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Trust; provided, however, that such depositary must
have an address in the Borough of Manhattan, in The City of New York.
"Effectiveness Period" shall have the meaning set forth in Section 2(b)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Exchange Offer" shall mean the offer by the Corporation and the Trust to
the Holders to exchange all of the Registrable Securities (other than Private
Exchange Securities) for a like principal amount of Exchange Securities
pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a) hereof.
"Exchange Securities" shall mean (i) with respect to the Subordinated
Debentures, the Series B 9.50% Junior Subordinated Deferrable Interest
Debentures due March 15, 2029 (the "Exchange Debentures") containing terms
substantially identical to the Subordinated Debentures (except that they will
not contain terms with respect to the transfer restrictions under the Securities
Act (other than requiring minimum transfers thereof to be in blocks of $100,000
aggregate principal amount), and will not provide for any Liquidated Damages
thereon), (ii) with respect to the Capital Securities, the Trust's Series B 9.50
% Capital Securities, liquidation amount $1,000 per Capital Security (the
"Exchange Capital Securities") which will have terms substantially identical to
the Capital Securities (except they will not contain terms with respect to
transfer restrictions under the Securities Act (other than requiring minimum
transfers thereof to be in blocks of $100,000 aggregate liquidation amount), and
will not provide for any increase in Additional Distributions thereon) and (iii)
with respect to the Capital Securities Guarantee, the Corporation's guarantee
(the "Exchange Capital Securities Guarantee") of the Exchange Capital Securities
which will have terms substantially identical to the Capital Securities
Guarantee.
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<PAGE>
"Holder" shall mean the Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its respective successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Securities under the Indenture or Declaration of Trust.
"Indenture" shall mean the Indenture relating to the Subordinated
Debentures and the Exchange Debentures dated as of March 9, 1999 between the
Corporation, as issuer, and Wilmington Trust Company, as trustee, as the same
may be amended from time to time in accordance with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the preamble to
this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n) hereof.
"Issue Date" shall mean March 9, 1999, the date of original issuance of the
Securities.
"Liquidated Damages" shall have the meaning set forth in Section 2(e)
hereof.
"Majority Holders" shall mean the Holders of a majority of the aggregate
liquidation amount of outstanding Capital Securities.
"Participating Broker-Dealer" shall have the meaning set forth in Section
3(t) hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability corporation, or a government or
agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a) hereof.
"Private Exchange Securities" shall have the meaning set forth in Section
2(a) hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble to
this Agreement.
"Records" shall have the meaning set forth in Section 3(n) hereof.
"Registrable Securities" shall mean the Securities and, if issued, the
Private Exchange Securities; provided, however, that Securities or Private
Exchange Securities, as the case may be, shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such Securities or
Private Exchange Securities for the exchange or resale thereof, as the case may
be, shall
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<PAGE>
have been declared effective under the Securities Act and such Securities or
Private Exchange Securities, as the case may be, shall have been disposed of
pursuant to such Registration Statement, (ii) such Securities or Private
Exchange Securities, as the case may be, shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force, but not Rule
144A) under the Securities Act or are eligible to be sold without restriction as
contemplated by Rule 144(k), (iii) such Securities or Private Exchange
Securities, as the case may be, shall have ceased to be outstanding or (iv) with
respect to the Securities, such Securities shall have been exchanged for
Exchange Securities upon consummation of the Exchange Offer and are thereafter
freely tradeable by the holder thereof (other than an Affiliate of the
Corporation).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Corporation with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Securities in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of one counsel for all
underwriters or Holders as a group in connection with blue sky qualification of
any of the Exchange Securities or Registrable Securities) and compliance with
the rules of the NASD, (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus and any amendments or supplements
thereto, and in preparing or assisting in preparing, printing and distributing
any underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, (v) the fees and disbursements of counsel for the
Corporation and of the independent certified public accountants of the
Corporation, including the expenses of any "cold comfort" letters required by or
incident to such performance and compliance, (vi) the fees and expenses of the
Trustee and its counsel and any exchange agent or custodian, (vii) all fees and
expenses incurred in connection with the listing, if any, of any of the Exchange
Securities or the Registrable Securities on any securities exchange or
exchanges, and (viii) the reasonable fees and expenses of any special experts
retained by the Corporation in connection with any Registration Statement.
"Registration Statement" shall mean any registration statement of the
Corporation and the Trust which covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Rule 144(k) Period" shall mean the period of two years (or such shorter
period as may hereafter be referred to in Rule 144(k) under the Securities Act
(or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble to this
Agreement.
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<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Shelf Registration" shall mean a registration effected pursuant to Section
2(b) hereof.
"Shelf Registration Event" shall have the meaning set forth in Section 2(b)
hereof.
"Shelf Registration Event Date" shall have the meaning set forth in Section
2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
of the Corporation and the Trust pursuant to the provisions of Section 2(b)
hereof which covers all of the Registrable Securities or all of the Private
Exchange Securities, as the case may be, on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
"Trustees" shall mean any and all trustees with respect to (i) the Capital
Securities under the Declaration, (ii) the Subordinated Debentures under the
Indenture and (iii) the Capital Securities Guarantee.
2. Registration Under the Securities Act.
(a) Exchange Offer. Except as set forth in Section 2(b) below, the
Corporation and the Trust shall, for the benefit of the Holders, (i) cause to be
filed with the SEC within 150 days after the Issue Date an Exchange Offer
Registration Statement on an appropriate form under the Securities Act relating
to the Exchange Offer, (ii) cause such Exchange Offer Registration Statement to
be declared effective under the Securities Act by the SEC not later than the
date which is 180 days after the Issue Date, and (iii) keep such Exchange Offer
Registration Statement effective for not less than 30 calendar days (or longer
if required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders. Upon the effectiveness of the Exchange Offer Registration
Statement, the Corporation and the Trust shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
eligible and electing to exchange Registrable Securities for a like principal
amount of Exchange Debentures or a like liquidation amount of Exchange Capital
Securities, together with the Exchange Capital Securities Guarantee, as
applicable (assuming that such Holder (i) is not an Affiliate of the Trust or
the Corporation, (ii) is not a broker-dealer tendering Registrable Securities
acquired directly from the Corporation for its own account, (iii) acquires the
Exchange Securities in the ordinary course of such Holder's business and (iv)
has no arrangements or understandings with any Person to participate in the
Exchange Offer for the purpose of distributing the Exchange Securities) to
transfer such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and under state securities
or blue sky laws (other than requiring minimum transfers in blocks having an
aggregate principal or liquidation amount, as the case may be, of $100,000).
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<PAGE>
In connection with the Exchange Offer, the Corporation and the Trust shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than 30 days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law) (such period referred to herein as the
"Exchange Period");
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last Business Day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Securities delivered for exchange, and a
statement that such Holder is withdrawing his election to have such Securities
exchanged;
(v) notify each Holder that any Security not tendered by such Holder
in the Exchange Offer will remain outstanding and continue to accrue interest or
accumulate distributions, as the case may be, but will not retain any rights
under this Agreement (except in the case of the Initial Purchaser and
Participating Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If the Initial Purchaser determines upon advice of its outside counsel
that it is not eligible to participate in the Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment in the
initial distribution, as soon as practicable upon receipt by the Corporation and
the Trust of a written request from such Initial Purchaser, the Corporation and
the Trust, as applicable, shall issue and deliver to such Initial Purchaser in
exchange (the "Private Exchange") for the Securities held by such Initial
Purchaser, a like liquidation amount of Capital Securities of the Trust or, in
the event the Trust is liquidated and Subordinated Debentures are distributed, a
like principal amount of the Subordinated Debentures of the Corporation,
together with the Exchange Capital Securities Guarantee, in each case that are
identical (except that such securities may bear a customary legend with respect
to restrictions on transfer pursuant to the Securities Act) to the Exchange
Securities (the "Private Exchange Securities") and which are issued pursuant to
the Indenture, the Declaration or the Guarantee (which provides that the
Exchange Securities will not be subject to the transfer restrictions set forth
in the Indenture or the Declaration, as applicable) (other than requiring
minimum transfers in blocks having an aggregate principal or liquidation amount,
as the case may be, of $100,000), and that the Exchange Securities, the Private
Exchange Securities and the Securities will vote and consent together on all
matters as one class and that neither the Exchange Securities, the Private
Exchange Securities nor the Securities will have the right to vote or consent as
a separate class on any matter). The Private Exchange Securities shall be of the
same series as the Exchange Securities and the Corporation and the Trust will
seek to cause the CUSIP Service Bureau to issue the same CUSIP Numbers for the
Private Exchange Securities as for the Exchange Securities issued pursuant to
the Exchange Offer.
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As soon as practicable after the close of the Exchange Offer and, if
applicable, the Private Exchange, the Corporation and the Trust, as the case
requires, shall:
(i) accept for exchange all Securities or portions thereof tendered
and not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(ii) deliver, or cause to be delivered, to the applicable Trustee for
cancellation all Securities or portions thereof so accepted for exchange by the
Corporation; and
(iii) issue, and cause the applicable Trustee under the Indenture, the
Declaration or the Guarantee, as applicable, to promptly authenticate and
deliver to each Holder, new Exchange Securities or Private Exchange Securities,
as applicable, equal in principal amount to the principal amount of the
Subordinated Debentures or equal in liquidation amount to the liquidation amount
of the Capital Securities (together with the guarantee thereof) as are
surrendered by such Holder.
Distributions on each Exchange Capital Security and Private Exchange
Security and interest on each Exchange Debenture issued pursuant to the Exchange
Offer and in the Private Exchange will accrue from the last date on which a
Distribution or interest was paid on the Capital Security or the Subordinated
Debenture surrendered in exchange therefor or, if no Distribution or interest
has been paid on such Capital Security or Subordinated Debenture, from the Issue
Date. To the extent not prohibited by any law or applicable interpretation of
the staff of the SEC, the Corporation and the Trust shall use their reasonable
best efforts to complete the Exchange Offer as provided above, and shall comply
with the applicable requirements of the Securities Act, the Exchange Act and
other applicable laws in connection with the Exchange Offer. The Exchange Offer
shall not be subject to any conditions, other than that the Exchange Offer does
not violate applicable law or any applicable interpretation of the staff of the
SEC. Each Holder of Registrable Securities who wishes to exchange such
Registrable Securities for Exchange Securities in the Exchange Offer will be
required to make certain customary representations in connection therewith,
including, in the case of any Holder of Capital Securities, representations that
(i) it is not an Affiliate of the Trust or the Corporation, (ii) the Exchange
Securities to be received by it were acquired in the ordinary course of its
business and (iii) at the time of the Exchange Offer, it has no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Capital Securities. The Corporation and the
Trust shall inform the Initial Purchaser, after consultation with the applicable
Trustees, of the names and addresses of the Holders to whom the Exchange Offer
is made, and the Initial Purchaser shall have the right to contact such Holders
and otherwise facilitate the tender of Registrable Securities in the Exchange
Offer.
Upon consummation of the Exchange Offer in accordance with this Section
2(a), the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities and Exchange Securities held by Participating
Broker-Dealers, and the Corporation and the Trust shall have no further
obligation to register the Registrable Securities (other than Private Exchange
Securities) held by any Holder pursuant to Section 2(b) of this Agreement.
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<PAGE>
(b) Shelf Registration. In the event that (i) the Corporation, the Trust or
the Majority Holders reasonably determine, after conferring with counsel (which
may be in-house counsel), that the Exchange Offer Registration provided in
Section 2(a) above is not available under applicable law and regulations and
currently prevailing interpretations of the staff of the SEC, (ii) the
Corporation shall determine in good faith that there is a reasonable likelihood
that, or a material uncertainty exists as to whether, consummation of the
Exchange Offer would result in (x) the Trust becoming subject to federal income
tax with respect to income received or accrued on the Subordinated Debentures or
the Exchange Debentures (collectively, the "Debentures"), (y) interest payable
by the Corporation on the Debentures not being deductible by the Corporation for
United States federal income tax purposes or (z) the Trust becoming subject to
more than a de minimus amount of other taxes, duties or governmental charges,
(iii) the Exchange Offer Registration Statement is not declared effective within
180 days of the Issue Date or (iv) upon the request of the Initial Purchaser
with respect to any Registrable Securities held by it, if such Initial Purchaser
is not permitted, in the reasonable written opinion of Elias, Matz, Tiernan &
Herrick L.L.P., pursuant to applicable law or applicable interpretations of the
staff of the SEC, to participate in the Exchange Offer and thereby receive
securities that are freely tradeable without restriction under the Securities
Act and applicable blue sky or state securities laws (any of the events
specified in (i)-(iv) being a "Shelf Registration Event" and the date of
occurrence thereof, the "Shelf Registration Event Date"), then in addition to or
in lieu of conducting the Exchange Offer contemplated by Section 2(a), as the
case may be, the Corporation and the Trust shall cause to be filed as promptly
as practicable after such Shelf Registration Event Date, as the case may be,
and, in any event, within 45 days after such Shelf Registration Event Date
(which shall be no earlier than 75 days after the Closing Time), a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities (except in the case of clause (iv) above in which case
the Shelf Registration Statement need cover only the Registrable Securities held
by the Initial Purchaser, and shall use its reasonable best efforts to have such
Shelf Registration Statement declared effective by the SEC as soon as
practicable. No Holder of Registrable Securities shall be entitled to include
any of its Registrable Securities in any Shelf Registration pursuant to this
Agreement unless and until such Holder furnishes to the Corporation and the
Trust in writing, within 15 days after receipt of a request therefor, such
information as the Corporation and the Trust may, after conferring with counsel
with regard to information relating to Holders that would be required by the SEC
to be included in such Shelf Registration Statement or Prospectus included
therein, reasonably request for inclusion in any Shelf Registration Statement or
Prospectus included therein. Each Holder as to which any Shelf Registration is
being effected agrees to furnish to the Corporation and the Trust all
information with respect to such Holder necessary to make the information
previously furnished to the Corporation by such Holder not materially
misleading.
The Corporation and the Trust agree to use their reasonable best efforts to
keep the Shelf Registration Statement continuously effective and usable for
resales for (a) the Rule 144(k) Period in the case of a Shelf Registration
Statement filed pursuant to Section 2(b)(i), (ii) or (iii) or (b) 180 days in
the case of a Shelf Registration Statement filed pursuant to Section 2(b)(iv)
(subject in each case to extension pursuant to the last paragraph of Section 3
hereof), or for such shorter period which will terminate when all of the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or cease to be outstanding
(the "Effectiveness Period"). The Corporation and the Trust shall not permit any
securities other than Registrable Securities to be included in the Shelf
Registration. The Corporation and the Trust
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will, in the event a Shelf Registration Statement is declared effective, provide
to each Holder a reasonable number of copies of the Prospectus which is a part
of the Shelf Registration Statement and notify each such Holder when the Shelf
Registration has become effective. The Corporation and the Trust further agree,
if necessary, to supplement or amend the Shelf Registration Statement, if
required by the rules, regulations or instructions applicable to the
registration form used by the Corporation for such Shelf Registration Statement
or by the Securities Act or by any other rules and regulations thereunder for
shelf registrations, and the Corporation and the Trust agree to furnish to the
Holders of Registrable Securities copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
(c) Expenses. The Corporation, as issuer of the Subordinated Debentures,
shall pay all Registration Expenses in connection with any Registration
Statement filed pursuant to Section 2(a) and/or 2(b) hereof and will reimburse
the Initial Purchaser for the reasonable fees and disbursements of Elias, Matz,
Tiernan & Herrick L.L.P., counsel for the Initial Purchaser, incurred in
connection with the Exchange Offer and, if applicable, the Private Exchange, or
any one other counsel designated in writing by the Majority Holders to act as
counsel for the Holders of the Registrable Securities in connection with a
Shelf Registration Statement, which other counsel shall be reasonably
satisfactory to the Corporation. Except as provided herein, each Holder shall
pay all expenses of its counsel and any of its other advisors or experts,
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
after it has been declared effective, the offering of Registrable Securities
pursuant to such Exchange Offer Registration Statement or Shelf Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. The Corporation and
the Trust will be deemed not to have used their reasonable best efforts to cause
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as the case may be, to become, or to remain, effective during the requisite
period if either of them voluntarily takes any action that would result in any
such Registration Statement not being declared effective or that would result in
the Holders of Registrable Securities covered thereby not being able to exchange
or offer and sell such Registrable Securities during that period unless such
action is required by applicable law.
(e) Liquidated Damages. In the event that:
(i) neither the Exchange Offer Registration Statement is filed with
the SEC on or prior to the 150th day after the Issue Date nor a Shelf
Registration Statement is filed with the SEC on or prior to the 45th day after
the Shelf Registration Event Date in respect of a Shelf Registration Event
attributable to any of the events set forth in Sections 2(b)(i), (ii) and (iii)
(provided that in no event shall such date be earlier than 75 days after the
Issue Date), then
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commencing on the day after the applicable required filing date, liquidated
damages ("Liquidated Damages") shall accrue on the principal amount of the
Subordinated Debentures, and additional distributions ("Additional
Distributions") shall accumulate on the liquidation amount of the Trust
Securities (as such term is defined in the Declaration), each at a rate of .25%
per annum; or
(ii) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the SEC on or prior to the 180th
day after the Issue Date (in the case of an Exchange Offer Registration
Statement) or on or prior to the later of (A) the 30th day after the date such
Shelf Registration Statement was required to be filed and (B) the 180th day
after the Issue Date (in the case of a Shelf Registration Statement, in respect
of a Shelf Registration Event attributable to any of the events set forth in
Sections 2(b)(i), (ii) and (iii)), then, commencing on the 181st day after the
Issue Date (in the case of an Exchange Offer Registration Statement) or the
later of (A) the 31st day after the day such Shelf Registration Statement was
required to be filed and (B) the 181st day after the Issue Date (in the case of
a Shelf Registration Statement, in respect of a Shelf Registration Event
attributable to any of the events set forth in Sections 2(b)(i), (ii) and
(iii)), Liquidated Damages shall accrue on the principal amount of the
Subordinated Debentures, and Additional Distributions shall accumulate on the
liquidation amount of the Trust Securities, each at a rate of .25% per annum; or
(iii) (A) the Trust has not exchanged Exchange Capital Securities or
the Corporation has not exchanged Exchange Capital Securities Guarantees or
Exchange Subordinated Debentures for all Capital Securities, Guarantees or
Subordinated Debentures, as the case may be, validly tendered, in accordance
with the terms of the Exchange Offer on or prior to the 45th day after the date
on which the Exchange Offer Registration Statement was declared effective or (B)
if applicable, the Shelf Registration Statement in respect of a Shelf
Registration Event attributable to any of the events set forth in Sections
2(b)(i), (ii) and (iii) has been declared effective and such Shelf Registration
Statement ceases to be effective or usable for resales (whether as a result of
an event contemplated by Section 3(e) or otherwise) at any time prior to the
expiration of the Rule 144(k) Period (other than after such time as all
Securities have been disposed of thereunder or otherwise cease to be Registrable
Securities), then Liquidated Damages shall accrue on the principal amount of
Subordinated Debentures, and Additional Distributions shall accumulate on the
liquidation amount of the Trust Securities, each at a rate of .25% per annum
commencing on (x) the 46th day after such effective date, in the case of (A)
above or (y) the day such Shelf Registration Statement ceases to be effective or
usable for resales in the case of (B) above;
provided, however, that neither the Liquidated Damages rate on the Subordinated
Debentures, nor the Additional Distribution rate on the liquidation amount of
the Trust Securities, may exceed in the aggregate .25% per annum; provided,
further, however, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (i) above),
(2) upon the effectiveness of the Exchange Offer Registration Statement or a
Shelf Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Capital Securities, Exchange Capital Securities Guarantees
and Exchange Debentures for all Capital Securities, Guarantees and Subordinated
Debentures validly tendered (in the case of clause (iii)(A) above), or at such
time as the Shelf Registration Statement which had ceased to remain effective or
usable for resales again becomes effective and usable for resales (in the case
of clause (iii)(B) above),
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Liquidated Damages on the principal amount of the Subordinated Debentures and
Additional Distributions on the liquidation amount of the Trust Securities as a
result of such clause (or the relevant subclause thereof) shall cease to accrue
and accumulate.
Any amounts of Liquidated Damages and Additional Distributions due pursuant
to Section 2(e)(i), (ii) or (iii) above will be payable in cash on the next
succeeding March 15 and September 15, as the case may be, to Holders on the
relevant record dates for the payment of interest and distributions pursuant to
the Indenture and the Declaration, respectively.
(f) Specific Enforcement. Without limiting the remedies available to the
Holders, the Corporation and the Trust acknowledge that any failure by the
Corporation or the Trust to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Holders for
which there is no adequate remedy at law, that it would not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, any Holder may obtain such relief as may be required to specifically
enforce the Corporation's and the Trust's obligations under Section 2(a) and
Section 2(b) hereof.
(g) Distribution of Subordinated Debentures. Notwithstanding any other
provisions of this Agreement, in the event that Subordinated Debentures are
distributed to holders of Capital Securities in liquidation of the Trust
pursuant to the Declaration, (i) all references in this Section 2 and in Section
3 to Securities, Registrable Securities and Exchange Securities shall not
include the Capital Securities and Capital Securities Guarantee or Exchange
Capital Securities and Exchange Capital Securities Guarantee issued or to be
issued in exchange therefor in the Exchange Offer and (ii) all requirements for
action to be taken by the Trust in this Section 2 and in Section 3 shall cease
to apply and all requirements for action to be taken by the Corporation in this
Section 2 and in Section 3 shall apply to the Subordinated Debentures and
Exchange Debentures issued or to be issued in exchange therefor in the Exchange
Offer.
3. Registration Procedures. In connection with the obligations of the
Corporation and the Trust with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Corporation and the Trust shall:
(a) prepare and file with the SEC a Registration Statement or Registration
Statements as prescribed by Sections 2(a) and 2(b) hereof within the relevant
time period specified in Section 2 hereof on the appropriate form under the
Securities Act, which form (i) shall be selected by the Corporation and the
Trust, (ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Securities by the selling Holders thereof and, in the
case of an Exchange Offer, be available for the exchange of Registrable
Securities, and (iii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith; and use its best efforts to cause
such Registration Statement to become effective and remain effective (and, in
the case of a Shelf Registration Statement, usable for resales) in accordance
with Section 2 hereof; provided, however, that if (1) such filing is pursuant to
Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a)
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<PAGE>
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Corporation and the Trust shall furnish to and afford the Holders of the
Registrable Securities and each such Participating Broker-Dealer, as the case
may be, covered by such Registration Statement, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed. The Corporation and the
Trust shall not file any Registration Statement or Prospectus or any amendments
or supplements thereto in respect of which the Holders must be afforded an
opportunity to review prior to the filing of such document if the Majority
Holders or such Participating Broker-Dealer, as the case may be, their counsel
or the managing underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the Applicable
Period, as the case may be; and cause each Prospectus to be supplemented, if so
determined by the Corporation or the Trust or requested by the SEC, by any
required prospectus supplement and as so supplemented to be filed pursuant to
Rule 424 (or any similar provision then in force) under the Securities Act, and
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder applicable to it with respect to the
disposition of all securities covered by each Registration Statement during the
Effectiveness Period or the Applicable Period, as the case may be, in accordance
with the intended method or methods of distribution by the selling Holders
thereof described in this Agreement (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities included in the Shelf Registration Statement, at least
three Business Days prior to filing, that a Shelf Registration Statement with
respect to the Registrable Securities is being filed and advising such Holder
that the distribution of Registrable Securities will be made in accordance with
the method selected by the Majority Holders; and (ii) furnish to each Holder of
Registrable Securities included in the Shelf Registration Statement and to each
underwriter of an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or underwriter may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities; and (iii)
consent to the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities included in the Shelf
Registration Statement in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto;
(d) in the case of a Shelf Registration, use its reasonable best efforts to
register or qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions by the time the applicable
Registration Statement is declared effective by the SEC as any Holder of
Registrable Securities covered by a Registration Statement and
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<PAGE>
each underwriter of an underwritten offering of Registrable Securities shall
reasonably request in writing in advance of such date of effectiveness, and do
any and all other acts and things which may be reasonably necessary or advisable
to enable such Holder and underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Corporation and the Trust shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(d), (ii)
file any general consent to service of process in any jurisdiction where it
would not otherwise be subject to such service of process or (iii) subject
itself to taxation in any such jurisdiction if it is not then so subject;
(e) (1) in the case of a Shelf Registration or (2) if Participating
Broker-Dealers from whom the Corporation or the Trust has received prior written
notice that they will be utilizing the Prospectus contained in the Exchange
Offer Registration Statement as provided in Section 3(t) hereof, are seeking to
sell Exchange Securities and are required to deliver Prospectuses, promptly
notify each Holder of Registrable Securities, or such Participating
Broker-Dealers, as the case may be, their counsel and the managing underwriters,
if any, and promptly confirm such notice in writing (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC or any
state securities authority for amendments and supplements to a Registration
Statement or Prospectus or for additional information after the Registration
Statement has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the qualification of the Registrable Securities or the
Exchange Securities to be offered or sold by any Participating Broker-Dealer in
any jurisdiction described in paragraph 3(d) hereof or the initiation of any
proceedings for that purpose, (iv) in the case of a Shelf Registration, if,
between the effective date of a Registration Statement and the closing of any
sale of Registrable Securities covered thereby, the representations and
warranties of the Corporation and the Trust contained in the Purchase Agreement,
any securities sales agreement or other similar agreement cease to be true and
correct in all material respects, (v) of the happening of any event or the
failure of any event to occur or the discovery of any facts or otherwise, during
the Effectiveness Period which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or which
causes such Registration Statement or Prospectus to omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (vi) the Corporation and the
Trust's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities included within the coverage of such Shelf Registration
Statement, without charge, one conformed copy of each Registration Statement
relating to such Shelf Registration and
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any post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling Holders
of Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends (other than with respect to restrictions requiring minimum
transfers in blocks having an aggregate principal or liquidation amount, as the
case may be, of $100,000) and in such denominations (consistent with the
provisions of the Indenture and the Declaration) and registered in such names as
the selling Holders or the underwriters may reasonably request at least two
Business Days prior to the closing of any sale of Registrable Securities
pursuant to such Shelf Registration Statement;
(i) in the case of a Shelf Registration or an Exchange Offer Registration,
upon the occurrence of any circumstance contemplated by Section 3(e)(ii),
3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, use its reasonable best efforts to
prepare a supplement or post-effective amendment to such Registration Statement
or the related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; and to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event, and
each Holder hereby agrees to suspend use of the Prospectus until the Corporation
has amended or supplemented the Prospectus to correct such misstatement or
omission;
(j) obtain a CUSIP number for all Exchange Capital Securities and the
Capital Securities (and if the Trust has made a distribution of the Subordinated
Debentures to the Holders of the Capital Securities, the Subordinated Debentures
or the Exchange Debentures) as the case may be, not later than the effective
date of a Registration Statement, and provide the Trustee with printed
certificates for the Exchange Securities or the Registrable Securities, as the
case may be, in a form eligible for deposit with the Depositary;
(k) cause the Indenture, the Declaration, the Guarantee and the Exchange
Guarantee to be qualified under the Trust Indenture Act of 1939 (the "TIA") in
connection with the registration of the Exchange Securities or Registrable
Securities, as the case may be, and effect such changes to such documents as may
be required for them to be so qualified in accordance with the terms of the TIA
and execute, and use its best efforts to cause the relevant trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such documents to be so
qualified in a timely manner;
(l) in the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) as are customary in underwritten offerings
and take all such other appropriate actions in connection therewith as are
reasonably requested by the holders of at
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least 25% in aggregate principal or liquidation amount, as the case may be, of
the Registrable Securities in order to expedite or facilitate the registration
or the disposition of the Registrable Securities;
(m) in the case of a Shelf Registration, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, if requested by (x) the Initial Purchaser, in the case where such
Initial Purchaser holds Securities acquired by it as part of its initial
allotment and (y) Holders of at least 25% in aggregate principal or liquidation
amount, as the case may be, of the Registrable Securities covered thereby: (i)
make such representations and warranties to Holders of such Registrable
Securities and the underwriters (if any), with respect to the business of the
Trust, the Corporation and its subsidiaries as then conducted and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, as are customarily made
by issuers of debt securities to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Corporation and the Trust and updates thereof (which may be in the form of a
reliance letter) in form and substance reasonably satisfactory to the managing
underwriters (if any) and the Holders of a majority in principal amount of the
Registrable Securities being sold, addressed to each selling Holder and the
underwriters (if any) covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such underwriters (it being agreed that the matters to be covered
by such opinion may be subject to customary qualifications and exceptions);
(iii) obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters from the independent
certified public accountants of the Corporation and the Trust (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Corporation and the Trust or of any business acquired by the Corporation
and the Trust for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by such
underwriters in accordance with Statement on Auditing Standards No. 72; and (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set forth
in Section 4 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount or liquidation amount, as
the case may be, of Registrable Securities covered by such Registration
Statement and the managing underwriters and agents) customary for such
agreements with respect to all parties to be indemnified pursuant to said
Section (including, without limitation, such underwriters and selling Holders).
The above shall be done at each closing under such underwriting agreement, or as
and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or (2) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2(a) is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, make reasonably available for inspection by any selling
Holder of such Registrable Securities or Participating
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Broker-Dealer, as applicable, who certifies to the Corporation and the Trust
that it has a current intention to sell Registrable Securities pursuant to the
Shelf Registration, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating Broker-Dealer, as
the case may be, or underwriter (collectively, the "Inspectors"), at the offices
where normally kept, during the Corporation's normal business hours, all
financial and other records, pertinent corporate documents and properties of the
Trust, the Corporation and its subsidiaries (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Trust, the Corporation and its subsidiaries to supply all relevant
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement. Records which the Corporation and
the Trust determine, in good faith, to be confidential and any Records which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or omission in such Registration Statement, (ii)
subject to the last sentence of this Section 3(n), the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or is necessary in connection with any action, suit or proceeding
or (iii) the Information in such Records has been made generally available to
the public (other than by an Inspector or a selling Holder in breach of its
obligations hereunder). Each selling Holder of such Registrable Securities and
each such Participating Broker-Dealer will be required to agree in writing that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Trust or the Corporation unless and until
such is made generally available to the public through no fault of an Inspector
or a selling Holder. Each selling Holder of such Registrable Securities and each
such Participating Broker-Dealer will be required to further agree in writing
that it will, upon learning that disclosure of such Records is sought in a court
of competent jurisdiction, or in connection with any action, suit or proceeding
give notice to the Corporation and allow the Corporation at its expense to
undertake appropriate action to prevent disclosure of the Records deemed
confidential;
(o) comply with all applicable rules and regulations of the SEC so long as
any provision of this Agreement shall be applicable and make generally available
to its securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Corporation after the effective date of a Registration Statement, which
statements shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private Exchange, if
requested by a Trustee, obtain an opinion of counsel to the Corporation
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or the
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Private Exchange, as the case may be, substantially to the effect that (i) the
Corporation and the Trust, as the case requires, has duly authorized, executed
and delivered the Exchange Securities and Private Exchange Securities, and (ii)
each of the Exchange Securities or the Private Exchange Securities, as the case
may be, constitutes a legal, valid and binding obligation of the Corporation or
the Trust, as the case requires, enforceable against the Corporation or the
Trust, as the case requires, in accordance with its respective terms (in each
case, with customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to be consummated, upon
delivery of the Registrable Securities by Holders to the Corporation or the
Trust, as applicable (or to such other Person as directed by the Corporation or
the Trust, respectively), in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be, the Corporation or the Trust, as
applicable, shall mark, or cause to be marked, on such Registrable Securities
delivered by such Holders that such Registrable Securities are being cancelled
in exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall such Registrable Securities be marked as paid
or otherwise satisfied;
(r) cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD;
(s) take all other steps necessary to effect the registration of the
Registrable Securities covered by a Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," which section shall be reasonably acceptable to the Initial
Purchaser or another representative of the Participating Broker-Dealers, and
which shall contain a summary statement of the positions taken or policies made
by the staff of the SEC with respect to the potential "underwriter" status of
any broker-dealer (a "Participating Broker-Dealer") that holds Registrable
Securities acquired for its own account as a result of market-making activities
or other trading activities and that will be the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such
broker-dealer in the Exchange Offer, whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or
policies, in the reasonable judgment of the Initial Purchaser or such other
representative, represent the prevailing views of the staff of the SEC,
including a statement that any such broker-dealer who receives Exchange
Securities for Registrable Securities pursuant to the Exchange Offer may be
deemed a statutory underwriter and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has
delivered to the Corporation the notice referred to in Section 3(e), without
charge, as many copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and any amendment
or supplement thereto, as such Participating Broker-Dealer may reasonably
request (each of the Corporation and the Trust hereby consents to the use of
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<PAGE>
the Prospectus forming part of the Exchange Offer Registration Statement or any
amendment or supplement thereto by any Person subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
in connection with the sale or transfer of the Exchange Securities covered by
the Prospectus or any amendment or supplement thereto), (iii) use its reasonable
best efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein in order to permit such
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as such
Persons must comply with such requirements under the Securities Act and
applicable rules and regulations in order to resell the Exchange Securities;
provided, however, that such period shall not be required to exceed 90 days (or
such longer period if extended pursuant to the last sentence of Section 3
hereof) (the "Applicable Period"), and (iv) include in the transmittal letter or
similar documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Securities, the broker-dealer will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Corporation and the Trust agree to deliver to the Initial Purchaser or to
another representative of the Participating Broker-Dealers, if requested
by the Initial Purchaser or such other representative of Participating
Broker-Dealers, on behalf of the Participating Broker-Dealers upon
consummation of the Exchange Offer (i) an opinion of counsel in form and
substance reasonably satisfactory to the Initial Purchaser or such other
representative of the Participating Broker-Dealers, covering the matters
customarily covered in opinions requested in connection with Exchange Offer
Registration Statements and such other matters as may be reasonably
requested (it being agreed that the matters to be covered by such opinion
may be subject to customary qualifications and exceptions), (ii) an
officers' certificate containing certifications substantially similar to
those set forth in Section 5(f) of the Purchase Agreement and such
additional certifications as are customarily delivered in a public offering
of debt securities and (iii) as well as upon the effectiveness of the
Exchange Offer Registration Statement, a comfort letter, in each case, in
customary form if permitted by Statement on Auditing Standards No. 72.
The Corporation or the Trust may require each seller of Registrable
Securities as to which any registration is being effected to furnish to the
Corporation or the Trust, as applicable, such
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<PAGE>
information regarding such seller as may be required by the staff of the SEC to
be included in a Registration Statement. The Corporation or the Trust may
exclude from such registration the Registrable Securities of any seller who
fails to furnish such information within a reasonable time after receiving such
request. The Corporation shall have no obligation to register under the
Securities Act the Registrable Securities of a seller who so fails to furnish
such information.
In the case of a Shelf Registration Statement, or if Participating
Broker-Dealers who have notified the Corporation and the Trust that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, are seeking to sell Exchange Securities and
are required to deliver Prospectuses, each Holder agrees that, upon receipt of
any notice from the Corporation or the Trust of the happening of any event of
the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to a Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or
until it is advised in writing (the "Advice") by the Corporation and the Trust
that the use of the applicable Prospectus may be resumed, and, if so directed by
the Corporation and the Trust, such Holder will deliver to the Corporation or
the Trust (at the Corporation's or the Trust's expense, as the case requires)
all copies in such Holder's possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
or Exchange Securities, as the case may be, current at the time of receipt of
such notice. If the Corporation or the Trust shall give any such notice to
suspend the disposition of Registrable Securities or Exchange Securities, as the
case may be, pursuant to a Registration Statement, the Corporation and the Trust
shall use their reasonable best efforts to file and have declared effective (if
an amendment) as soon as practicable an amendment or supplement to the
Registration Statement and shall extend the period during which such
Registration Statement is required to be maintained effective and usable for
resales pursuant to this Agreement by the number of days in the period from and
including the date of the giving of such notice to and including the date when
the Corporation and the Trust shall have made available to the Holders (x)
copies of the supplemented or amended Prospectus necessary to resume such
dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Corporation and the Trust shall, jointly and
severally, indemnify and hold harmless the Initial Purchaser, each Holder, each
underwriter who participates in an offering of the Registrable Securities, each
Participating Broker-Dealer, each Person, if any, who controls any of such
parties within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act and each of their respective partners, directors, officers,
employees and agents, as follows:
(i) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto),
covering Registrable Securities or Exchange Securities, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material
20
<PAGE>
fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(ii) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, if (subject to Section 4(d) below) such settlement is effected
with the prior written consent of the Corporation; and
(iii) from and against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by such
Holder, such Participating Broker-Dealer, or any underwriter (except to
the extent otherwise expressly provided in Section 4(c) hereof)),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided, however, that (i) this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished in writing to the
Corporation or the Trust by such Holder, such Participating Broker-Dealer or any
underwriter with respect to such Holder, Participating Broker-Dealer or any
underwriter, as the case may be, expressly for use in a Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) and (ii) the Company and the Trust shall not be liable to any such
Holder, Participating Broker-Dealer, any underwriter or controlling person, with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary Prospectus to the extent that any such loss,
liability, claim, damage or expense of any Holder, Participating Broker-Dealer,
any underwriter or controlling person results from the fact that such Holder,
any underwriter or Participating Broker-Dealer sold Securities to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final Prospectus as then amended or supplemented if the
Corporation had previously furnished copies thereof to such Holder, underwriter
or Participating Broker-Dealer and the loss, liability, claim, damage or expense
of such Holder, underwriter, Participating Broker-Dealer or controlling person
results from an untrue statement or omission of a material fact contained in the
preliminary Prospec tus which was corrected in the final Prospectus. Any amounts
advanced by the Company or the Trust to an indemnified party pursuant to this
Section 4 as a result of such losses shall be returned to the Corporation or the
Trust if it shall be finally determined by such a court in a judgment not
subject to appeal or final review that such indemnified party was not entitled
to indemnification by the Corporation or the Trust.
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<PAGE>
(b) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Corporation, the Trust, any underwriter and the other selling
Holders and each of their respective directors, officers (including each officer
of the Corporation and the Trust who signed the Registration Statement),
employees and agents and each Person, if any, who controls the Corporation, the
Trust, any underwriter or any other selling Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
and all loss, liability, claim, damage and expense whatsoever described in the
indemnity contained in Section 4(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in a Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Corporation or the Trust by such selling
Holder with respect to such Holder expressly for use in such Registration
Statement (or any amendment thereto), or any such Prospectus (or any amendment
or supplement thereto); provided, however, that in the case of a Shelf
Registration Statement, no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Registrable Securities pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, enclosing a copy of all papers properly served on such
indemnified party, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have under this
Section 4, except to the extent that it is materially prejudiced by such
failure. An indemnifying party may participate at its own expense in the defense
of such action, or, if it so elects within a reasonable time after receipt of
such notice, assume the defense of any suit brought to enforce any such claim;
but if it so elects to assume the defense, such defense shall be conducted by
counsel chosen by it and approved by the indemnified party or parties which
approval shall not be unreasonably withheld. In the event that an indemnifying
party elects to assume the defense of any such suit and retain such counsel, the
indemnified party or parties shall bear the fees and expenses of any additional
counsel thereafter retained by such indemnified party or parties; provided,
however, that the indemnified party or parties shall have the right to employ
counsel (in addition to local counsel) to represent the indemnified party or
parties who may be subject to liability arising out of any action in respect of
which indemnity may be sought against the indemnifying party if, in the
reasonable judgment of counsel for the indemnified party or parties, there may
be legal defenses available to such indemnified party or parties which are
different from or in addition to those available to the indemnifying party, in
which event the fees and expenses of appropriate separate counsel shall be borne
by the indemnifying party. In no event shall the indemnifying parties be liable
for the fees and expenses of more than one counsel (in addition to local
counsel), separate from its own counsel, for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional written release in form and substance satisfactory to
the indemnified parties of each indemnified party from all liability arising
22
<PAGE>
out of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have validly requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Corporation, the Trust,
and the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Corporation, the Trust, and the Holders, as incurred; provided
that no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person
that was not guilty of such fraudulent misrepresentation. As between the
Corporation, the Trust, and the Holders, such parties shall contribute to such
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative fault of the Corporation and Trust, on the
one hand, and the Holders, on the other hand, with respect to the statements or
omissions which resulted in such loss, liability, claim, damage or expense, or
action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Corporation and the Trust, on the one
hand, and of the Holders, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Corporation or the Trust, on the one
hand, or by or on behalf of the Holders, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Corporation, the Trust and the Holders of the
Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 4 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the relevant equitable considerations. For purposes of this Section 4, each
Affiliate of a Holder, and each director, officer, employee, agent and Person,
if any, who controls a Holder or such Affiliate within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Holder, and each director of each of the
Corporation or the Trust, each officer of each of the Corporation or the Trust
who signed the Registration Statement, and each Person, if any, who controls
each of the Corporation and the Trust within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as each of the Corporation or the Trust.
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5. Participation in an Underwritten Registration. No Holder may participate
in an underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Registrable Securities on the basis provided in the underwriting
arrangement approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Selection of Underwriters. The Holders of Registrable Securities covered
by the Shelf Registration Statement who desire to do so may sell the securities
covered by such Shelf Registration in an underwritten offering, subject to the
provisions of section 3(l) hereof. In any such underwritten offering, the
underwriter or underwriters and manager or managers that will administer the
offering will be selected by the Holders of a majority in aggregate principal
amount or liquidation amount, as applicable, of the Registrable Securities
included in such offering; provided, however, that such underwriters and
managers must be reasonably satisfactory to the Corporation and the Trust.
7. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Corporation or the Trust is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act
and any Registrable Securities remain outstanding, each of the Corporation and
the Trust, as the case may be, will file the reports required to be filed by it
under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the
rules and regulations adopted by the SEC thereunder, provided that if it ceases
to be so required to file such reports, it will, upon the request of any Holder
of Registrable Securities (a) make publicly available such information as is
necessary to permit sales of its securities pursuant to Rule 144 under the
Securities Act, (b) deliver such information to a prospective purchaser as is
necessary to permit sales of its securities pursuant to Rule 144A under the
Securities Act, and (c) take such further action that is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such rule may be amended from time to time, (ii)
Rule 144A under the Securities Act, as such rule may be amended from time to
time, or (iii) any similar rules or regulations hereafter adopted by the SEC.
Upon the request of any Holder of Registrable Securities, the Corporation and
the Trust will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) No Inconsistent Agreements. The Corporation or the Trust has not
entered into, nor will the Corporation or the Trust on or after the date of this
Agreement enter into, any agreement which is inconsistent with the rights
granted to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Corporation's or the Trust's other issued
and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents
24
<PAGE>
to departures from the provisions hereof may not be given, unless the
Corporation and the Trust has obtained the written consent of Holders of at
least a majority in aggregate principal amount of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
departure; provided that no amendment, modification or supplement or waiver or
consent to the departure with respect to the provisions of Section 4 hereof
shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder of Registrable Securities.
Notwithstanding the foregoing sentence, (i) this Agreement may be amended,
without the consent of any Holder of Registrable Securities, by written
agreement signed by the Corporation, the Trust and the Initial Purchaser, to
cure any ambiguity, correct or supplement any provision of this Agreement that
may be inconsistent with any other provision of this Agreement or to make any
other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with other provisions of this
Agreement, (ii) this Agreement may be amended, modified or supplemented, and
waivers and consents to departures from the provisions hereof may be given by
written agreement signed by the Corporation, the Trust and the Initial Purchaser
to the extent that any such amendment, modification, supplement, waiver or
consent is, in their reasonable judgment, necessary or appropriate to comply
with applicable law (including any interpretation of the Staff of the SEC) or
any change therein and (iii) to the extent any provision of this Agreement
relates to the Initial Purchaser, such provision may be amended, modified or
supplemented, and waivers or consents to departures from such provisions may be
given, by written agreement signed by the Initial Purchaser, the Corporation and
the Trust.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if
to a Holder, at the most current address given by such Holder to the Corporation
or the Trust by means of a notice given in accordance with the provisions of
this Section 7(d), which address initially is, with respect to the Initial
Purchaser, the address set forth in the Purchase Agreement; and (ii) if to the
Corporation or the Trust, initially at the Corporation's address set forth in
the Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of the Initial
Purchaser, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation
25
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of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities, such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Initial Purchaser and any Participating
Broker-Dealer shall be a third party beneficiary of the agreements made
hereunder between the Corporation and the Trust, on the one hand, and the
Holders, on the other hand, and shall have the right to enforce such agreements
directly to the extent it deems such enforcement necessary or advisable to
protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE
STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE
TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY,
ON BEHALF OF ITSELF AND THE SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE
TRUST), IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
USABANCSHARES, INC.
By: /s/ Kenneth L. Tepper
------------------------------------
Name: Kenneth L. Tepper
Title: President and Chief Executive
Officer
USA CAPITAL TRUST I
By: /s/ Kenneth L. Tepper
------------------------------------
Name: Kenneth L. Tepper
Title: Administrative Trustee
By: /s/ Brian M. Hartline
------------------------------------
Name: Brian M. Hartline
Title: Administrative Trustee
By: /s/ Craig Scher
------------------------------------
Name: Craig Scher
Title: Administrative Trustee
Confirmed and accepted as of
the date first above
written:
SANDLER O'NEILL & PARTNERS, L.P.
By: SANDLER O'NEILL & PARTNERS CORP.,
the sole general partner
By: /s/ Catherine A. Lawton
-------------------------
Name: Catherine A. Lawton
Vice President
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Exhibit 5.1
[LETTERHEAD OF KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP]
Board of Directors
USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
May 11, 1999
Gentlemen:
In connection with the registration under the Securities Act of 1933,
as amended (the "Act"), of $10,000,000 aggregate principal amount of Series B
Junior Subordinated Deferrable Interest Debentures (the "Debt Securities") of
USABancShares, Inc., a Delaware corporation (the "Corporation"), $10,000,000
aggregate liquidation amount of Series B 9.50% Capital Securities (the "Capital
Securities") of USA Capital Trust I, a business trust created under the laws of
the State of Delaware (the "Issuer"), and the Guarantee with respect to the
Capital Securities (the "Guarantee") to be executed and delivered by the
Corporation for the benefit of the holders from time to time of the Capital
Securities, we, as your counsel, have examined such corporate records,
certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, when:
(i) the Registration Statement relating to the Debt
Securities, the Capital Securities and the Guarantee has become effective under
the Act;
(ii) the Guarantee Agreement relating to the Guarantee with
respect to the Capital Securities of the Issuer has been duly executed and
delivered;
(iii) the Debt Securities have been duly executed and
authenticated in accordance with the Indenture and issued and delivered as
contemplated in the Registration Statement; and
(iv) the Capital Securities have been duly executed in
accordance with the Amended and Restated Declaration of Trust of the Issuer and
issued and delivered as contemplated
<PAGE>
Board of Directors
May 11, 1999
Page 2
in the Registration Statement, the Debt Securities and the Guarantee relating to
the Capital Securities of the Issuer will constitute valid and legally binding
obligations of the Corporation, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
We understand that you have received an opinion regarding the Capital
Securities from Richards, Layton & Finger, P.A., special Delaware counsel for
the Corporation and the Issuer. We are expressing no opinion with respect to the
matters contained in such opinion.
Also, we have relied as to certain matters on information obtained from
public officials, officers of the Corporation and other sources believed by us
to be responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Validity
of the Exchange Securities" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
/s/ Klehr, Harrison, Harvey, Branzburg & Ellers LLP
<PAGE>
Exhibit 5.2
[Letterhead of Richards, Layton & Finger]
May 12, 1999
USABancShares, Inc.
USA Capital Trust I
1535 Locust Street
Philadelphia, PA 19102
Re: USA Capital Trust I
-------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for USABancShares, Inc., a
Pennsylvania corporation (the "Company") and USA Capital Trust I, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust (the "Certificate of Trust"),
as filed with the office of the Secretary of State of the State of Delaware (the
"Secretary of State") on March 4, 1999;
(b) The Declaration of Trust of the Trust, dated as of March 4, 1999,
among the Company, Wilmington Trust Company, a Delaware banking corporation
("Wilmington Trust"), as trustee (the "Delaware Trustee"), and Kenneth L.
Tepper, Brian M. Hartline and Craig Scher, as administrative trustees (the
"Administrative Trustees");
(c) The Registration Statement (the "Registration Statement") on Form
S-4, including a preliminary prospectus with respect to the Trust (the
"Prospectus"), relating to the Capital Securities of the Trust representing
preferred undivided beneficial ownership interests in the assets of the Trust
(each, a "Capital Security" and collectively, the "Capital Securities"), to be
filed by the Company and the Trust with the Securities and Exchange Commission;
1
<PAGE>
(d) The Amended and Restated Declaration of Trust for the Trust, dated
as of March 9, 1999, among the Company, the Delaware Trustee, Wilmington Trust,
as Property Trustee, the Administrative Trustees and the holders, from time to
time, of the undivided beneficial ownership interests in the assets of such
Trust (including Annex 1 and Exhibits A-1 and A-2 thereto), attached as an
exhibit to the Registration Statement (the ADeclaration of Trust@; and
(e) A Certificate of Good Standing for the Trust, dated May 12, 1999,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Declaration of Trust.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our own
but rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
of Trust constitutes the entire agreement among the parties thereto with respect
to the subject matter thereof, including with respect to the creation, operation
and termination of the Trust, and that the Declaration of Trust and the
Certificate of Trust are in full force and effect and have not been amended,
(ii) except to the extent provided in paragraph 1 below, the due organization or
due formation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its organization or formation, (iii) the legal capacity of natural
persons who are parties to the documents examined by us, (iv) that each of the
parties to the documents examined by us has the power and authority to execute
and deliver, and to perform its obligations under, such documents, (v) the due
authorization, execution and delivery by all parties thereto of all documents
examined by us, (vi) the receipt by each Person to whom a Series B Capital
Security is to be issued by the Trust (collectively, the ACapital Security
Holders@) of a Series B Capital Security Certificate for such Series B Capital
Security in exchange for its Series A Capital Security, in accordance with the
Declaration of Trust and the Registration Statement, and (vii) that the Series B
Capital Securities are
2
<PAGE>
authenticated, issued and sold to the Capital Security Holders in accordance
with the Declaration of Trust and the Registration Statement. We have not
participated in the preparation of the Registration Statement or the Prospectus
and assume no responsibility for their contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
ss. 3801 et seq.
2. The Series B Capital Securities of the Trust will represent valid
and, subject to the qualifications set forth in paragraph 3 below, fully paid
and nonassessable undivided beneficial interests in the assets of the Trust.
3. The Capital Security Holders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Capital Security
Holders may be obligated to make payments as set forth in the Declaration of
Trust.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading ALegal Opinions@ in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Richards, Layton & Finger
<PAGE>
Exhibit 8
[LETTERHEAD OF KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP]
Board of Directors
USABancShares, Inc.
1535 Locust Street
Philadelphia, PA 19102
May 11, 1999
Gentlemen:
As special federal tax counsel to USA Capital Trust I (the "Issuer")
and USABancShares, Inc. in connection with the exchange offer by the Issuer of
$10,000,000 of its 9.50% Capital Securities pursuant to the prospectus (the
"Prospectus") contained in the Registration Statement for the Exchange Offer,
and assuming the operative documents described in the Prospectus will be
performed in accordance with the terms described therein, we hereby confirm to
you our opinion as set forth under the heading "Certain Federal Income Tax
Consequences" in the Prospectus, subject to the limitations set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Certain
Federal Income Tax Consequences" in the Prospectus. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act.
Very truly yours,
/s/ Klehr, Harrison, Harvey, Branzburg & Ellers LLP
<PAGE>
Exhibit 21
Subsidiaries of the Corporation
1. BankPhiladelphia, a Pennsylvania chartered stock savings bank.
2. USACapital, Inc., a Pennsylvania corporation.
3. USACredit, Inc., a Pennsylvania corporation.
4. USAHoldings, Inc., a Pennsylvania corporation.
5. USA Capital Trust I, a Delaware business trust.
6. USABanc.com, Inc., a Pennsylvania corporation.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We have issued our report dated March 22, 1999 accompanying the
consolidated financial statements of USABancShares, Inc. and Subsidiaries
included in the Annual Report on Form 10-KSB for the year ended December 31,
1998, which is included in this Registration Statement and Prospectus. We
consent to the incorporation by reference of the aforementioned report in the
Registration Statement and Prospectus.
/s/ Grant Thornton LLP
May 10, 1999
Philadelphia, Pennsylvania
<PAGE>
Exhibit 25.1
Registration No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
USABANCSHARES, INC.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-2806495
(State of incorporation) (I.R.S. employer identification no.)
1535 Locust Street
Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Series B Junior Subordinated Deferrable Interest Debentures
of USABancShares, Inc.
(Title of the indenture securities)
===============================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 11th day
of May, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Emmett R. Harmon By: /s/ Norma P. Closs
------------------------ -------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
Exhibit 25.2
Registration No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
USABANCSHARES, INC.
USA CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Pennsylvania 23-2806495
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
1535 Locust Street
Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Series B Capital Securities of USA Capital Trust I
(Title of the indenture securities)
===============================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(c) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(d) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 11th day
of May, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Emmett R. Harmon By: /s/ Norma P. Closs
-------------------------- ------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
Exhibit 25.3
Registration No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
USABANCSHARES, INC.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-2806495
(State of incorporation) (I.R.S. employer identification no.)
1535 Locust Street
Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
USABancShares, Inc. Series B Guarantee with respect
to Series B Capital Securities
(Title of the indenture securities)
===============================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 11th day
of May, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Emmett R. Harmon By: /s/ Norma P. Closs
--------------------------- ------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
<PAGE>
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
2
<PAGE>
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any
3
<PAGE>
foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and
from any of the bonds, mortgages, debentures, notes, shares
of capital stock, securities, obligations, contracts,
evidences of indebtedness and other property held and owned
by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property, any and all the rights,
powers and privileges of individual owners thereof,
including the right to vote thereon; to invest and deal in
and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges
or deeds of trust or mortgages of or upon the whole or any
part of the property held or owned by the Corporation, and
to sell and pledge such bonds, as and when the Board of
Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal
property of any name and nature and any estate or interest
therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes,
4
<PAGE>
drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of
stock which the Corporation shall have authority to issue
is forty-one million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications,
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limitations and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
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(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
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<PAGE>
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits,
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with the term of office of one class expiring each year. At the
annual meeting of stockholders in 1982, directors of the first class
shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding
annual meeting and directors of the third class shall be elected to
hold office for a term expiring at the third succeeding annual
meeting. Any vacancies in the Board of Directors for any reason, and
any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a
quorum, and any directors so chosen shall hold office until the next
annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the
next election of the class for which such director shall have been
chosen and until his successor shall be elected and qualified. No
decrease in the number of directors shall shorten the term of any
incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of
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<PAGE>
shares of stock of the Corporation which are beneficially owned by
each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or
10
<PAGE>
not adopted by them, provided however, that any such additional
By-Laws, alterations or repeal may be adopted only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the
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<PAGE>
outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Stockholder,
or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
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succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2)
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whether a person is an Affiliate or Associate of another,
(3) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in
paragraph (3) of section (c), or (4) whether the assets
subject to any business combination or the consideration
received for the issuance or transfer of securities by the
Corporation, or any Subsidiary has an aggregate fair market
value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be
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<PAGE>
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
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(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
5
<PAGE>
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE>
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
7
<PAGE>
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
8
<PAGE>
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE>
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: May 11, 1999 By: /s/ Norma P. Closs
------------------------
Name: Norma P. Closs
Title: Vice President
11
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember
banks and savings banks with state publication
requirements. It has not been approved by any
state banking authorities. Refer to your
appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------- --------------
Name of Bank City
in the State of DELAWARE, at the close of business on December 31, 1998.
----------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............................................. 194,839
Interest-bearing balances....................................................................... 0
Held-to-maturity securities.............................................................................. 73,911
Available-for-sale securities............................................................................ 1,228,194
Federal funds sold and securities purchased under agreements to resell................................... 203,500
Loans and lease financing receivables:
Loans and leases, net of unearned income ....................................................... 4,167,235
LESS: Allowance for loan and lease losses ..................................................... 66,897
LESS: Allocated transfer risk reserve ......................................................... 0
Loans and leases, net of unearned income, allowance, and reserve................................ 4,100,338
Assets held in trading accounts.......................................................................... 0
Premises and fixed assets (including capitalized leases)................................................. 139,079
Other real estate owned.................................................................................. 1,532
Investments in unconsolidated subsidiaries and associated companies...................................... 1,052
Customers' liability to this bank on acceptances outstanding............................................. 0
Intangible assets........................................................................................ 3,047
Other assets............................................................................................. 98,867
Total assets............................................................................................. 6,044,359
</TABLE>
CONTINUED ON NEXT PAGE
1
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...................................................................................... 4,474,659
Noninterest-bearing ................. 1,037,549
Interest-bearing..................... 3,437,110
Federal funds purchased and Securities sold under agreements to repurchase............................... 390,060
Demand notes issued to the U.S. Treasury................................................................. 18,944
Trading liabilities (from Schedule RC-D)................................................................. 0
Other borrowed money:.................................................................................... ///////
With original maturity of one year or less...................................................... 555,000
With original maturity of more than one year.................................................... 43,000
Bank's liability on acceptances executed and outstanding................................................. 0
Subordinated notes and debentures........................................................................ 0
Other liabilities (from Schedule RC-G)................................................................... 90,951
Total liabilities........................................................................................ 5,572,614
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................................................ 0
Common Stock............................................................................................. 500
Surplus (exclude all surplus related to preferred stock)................................................. 62,118
Undivided profits and capital reserves................................................................... 403,264
Net unrealized holding gains (losses) on available-for-sale securities................................... 5,863
Total equity capital..................................................................................... 471,745
Total liabilities, limited-life preferred stock, and equity capital...................................... 6,044,359
</TABLE>
2
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
USA CAPITAL TRUST I
Offer to Exchange its
9.50% Series B Capital Securities
(Liquidation Amount $1,000 per Capital
Security) which have been registered under the
Securities Act of 1933
for any and all of its outstanding
9.50% Series A Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Pursuant to the Prospectus
dated May __, 1999
-------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE __, 1999,
UNLESS THE OFFER IS EXTENDED.
-------------------------------------------
The Exchange Agent for the Exchange Offer is:
Wilmington Trust Company
By Registered or Certified Mail By Hand or Overnight Delivery
- ------------------------------- -----------------------------
Wilmington Trust Company Wilmington Trust Company
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, DE 19890-0001 Wilmington, DE 19890-0001
Attn: Kristen Long, Corporate Attn: Kristen Long, Corporate
and Trust Operations and Trust Operations
Confirm by telephone or for information call:
(302) 651-1562
Facsimile Transmission (Eligible Institutions Only):
(302) 651-1079
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
<PAGE>
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Original
Capital Securities (as defined below) either if (i) Original Capital Securities
are to be forwarded herewith or (ii) tenders of Original Capital Securities are
to be made by book-entry transfer to an account maintained by Wilmington Trust
Company (the"Exchange Agent") at The Depository Trust Company ("DTC") pursuant
to the procedures set forth in "The Exchange Offer--Procedures for Tendering
Original Capital Securities" in the Prospectus.
Holders of Original Capital Securities whose certificates (the
"Certificates") for such Original Capital Securities are not immediately
available or who cannot deliver their Certificates and all other required
documents to the Exchange Agent on or prior to the expiration date (as indicated
in the Prospectus) or who cannot complete the procedures for book-entry transfer
on or prior to the expiration date, must tender their Original Capital
Securities according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Original Capital Securities" in the
Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF Original Capital Securities TENDERED
(See Instruction 4)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
If blank, please print name and address of registered holder. Original Capital Securities tendered.
(Attach additional list if necessary)
Aggregate Liquidation Liquidation Amount of Original
Amount of Original Capital Securities Tendered
Certificate Number(s)* Capital Securities (if less than all are tendered)**
- ------------------------------- -------------------------------- -----------------------------------------
- ------------------------------- -------------------------------- -----------------------------------------
- ------------------------------- -------------------------------- -----------------------------------------
</TABLE>
TOTAL AMOUNT TENDERED:
* Need not be completed by book-entry holders.
** Original Capital Securities may be tendered in whole or in part in
denominations of $100,000 and integral multiples of $1,000 in excess thereof,
provided that if any Original Capital Securities are tendered for exchange in
part, the untendered principal amount thereof must be $100,000 or any integral
multiple of $1,000 in excess thereof. All Original Capital Securities held shall
be deemed tendered unless a lesser number is specified in this column.
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED ORIGINAL CAPITAL SECURITIES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution___________________________________________________
DTC Account Number______________________________________________________________
Transaction Code Number_________________________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s)____________________________________________________
Window Ticket Number (if any)___________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Institution which Guaranteed Delivery___________________________________
If Guaranteed Delivered is to be made By Book-Entry Transfer:
Name of Tendering Institution___________________________________________________
DTC Account Number______________________________________________________________
Transaction Code Number_________________________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NONEXCHANGED OR
NONTENDERED ORIGINAL CAPITAL SECURITIES ARE TO BE RETURNED BY CREDITING THE
DTC ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name____________________________________________________________________________
Address_________________________________________________________________________
_________________________________________________________________________
Area Code and Telephone Number__________________________________________________
Contact Person__________________________________________________________________
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to USA Capital Trust I, a trust created
under the laws of Delaware (the "Trust") and USABancShares, Inc., a Pennsylvania
corporation (the "Corporation"), the above-described aggregate Liquidation
Amount of the Trust's 9.50% Series A Capital Securities (the "Original Capital
Securities") in exchange for a like aggregate Liquidation Amount of the Trust's
9.50% Series B Capital Securities (the "Exchange Capital Securities") which have
been registered under the Securities Act of 1933 (the "Securities Act"), upon
the terms and subject to the conditions set forth in the Prospectus, dated May
__, 1999 (as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Capital Securities tendered herewith in accordance with
the terms and conditions of the Exchange Offer (including, if the Exchange Offer
is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Trust all right, title and interest in and to such Original Capital
Securities as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent also is acting as agent of the
Corporation and the Trust in connection with the Exchange Offer) with respect to
the tendered Original Capital Securities, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the Prospectus,
to (i) deliver Certificates for Original Capital Securities to the Corporation
or the Trust together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Trust, upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Capital Securities to be
issued in exchange for such Original Capital Securities, (ii) present
Certificates for such Original Capital Securities for transfer, and to transfer
the Original Capital Securities on the books of the Trust, and (iii) receive for
the account of the Trust all benefits and otherwise exercise all rights of
beneficial ownership of such Original Capital Securities, all in accordance with
the terms and conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Original Capital Securities tendered hereby and that, when the same are accepted
for exchange, the Trust will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and that the Original Capital Securities tendered hereby are not subject to any
adverse claims or proxies. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Corporation, the Trust or the
Exchange Agent to be necessary or desirable to complete the exchange, assignment
and transfer of the Original Capital Securities tendered hereby, and the
undersigned will comply with its obligations under the Registration Rights
Agreement. The undersigned has read and agrees to all of the terms of the
Exchange Offer.
The name(s) and address(es) of the registered holder(s) of the Original
Capital Securities tendered hereby should be printed above, if they are not
already set forth above, as they appear on the Certificates representing such
Original Capital Securities. The Certificate number(s) of the Original Capital
Securities that the undersigned wishes to tender should be indicated in the
appropriate boxes above.
If any tendered Original Capital Securities are not exchanged pursuant
to the Exchange Offer for any reason, or if Certificates are submitted for more
Original Capital Securities than are tendered or accepted for exchange,
Certificates for such nonexchanged or nontendered Original Capital Securities
will be returned (or, in the case of Original Capital Securities tendered by
book-entry transfer, such Original Capital Securities will be credited to an
account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Original Capital Securities
pursuant to any one of the procedures described in "The Exchange
Offer--Procedures for Tendering Original Capital Securities" in the Prospectus
and in the Instructions herein will, upon the Corporation's and the Trust's
acceptance for exchange of such tendered Original Capital Securities, constitute
a binding agreement between the undersigned, the Corporation and the Trust upon
the terms and subject to the conditions of the Exchange Offer. The undersigned
<PAGE>
recognizes that, under certain circumstances set forth in the Prospectus, the
Corporation and the Trust may not be required to accept for exchange any of the
Original Capital Securities tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Capital
Securities be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of Original Capital Securities, that such Exchange Capital
Securities be credited to the account indicated above maintained at DTC. If
applicable, substitute Certificates representing Original Capital Securities not
exchanged or not accepted for exchange will be issued to the undersigned or, in
the case of a book-entry transfer of Original Capital Securities, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please deliver
Exchange Capital Securities to the undersigned at the address shown below the
undersigned's signature.
By tendering Original Capital Securities and executing this Letter of
Transmittal, the undersigned hereby represents and agrees that (i) the
undersigned is not an "affiliate" of the Corporation or the Trust within the
meaning of Rule 405 under the Securities Act, (ii) any Exchange Capital
Securities to be received by the undersigned are being acquired in the ordinary
course of its business, (iii) the undersigned has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of Exchange Capital Securities to be received in
the Exchange Offer and (iv) if the undersigned is not a broker-dealer, the
undersigned is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities.
By tendering Original Capital Securities pursuant to the Exchange Offer and
executing this Letter of Transmittal, a holder of Original Capital Securities
which is a broker-dealer represents and agrees, consistent with certain
interpretive letters issued by the staff of the Division of Corporation Finance
of the Securities and Exchange Commission to third parties, that (a) such
Original Capital Securities held by the broker-dealer are held only as a nominee
or (b) such Original Capital Securities were acquired by such broker-dealer for
its own account as a result of market-making activities or other trading
activities and it will deliver the Prospectus (as amended or supplemented from
time to time) meeting the requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities (provided that, by so
acknowledging and by delivering a Prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act).
The Corporation and the Trust have agreed that, subject to the
provisions of the Registration Rights Agreement, the Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer (as defined below) in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities, where such
Original Capital Securities were acquired by such Participating Broker-Dealer
for its own account as a result of market-making activities or other trading
activities, for a period ending 90 days after the expiration date (subject to
extension under certain limited circumstances described in the Prospectus) or,
if earlier, when all such Exchange Capital Securities have been disposed of by
such Participating Broker-Dealer. In that regard, each broker-dealer who
acquired Original Capital Securities for its own account and as a result of
market-making or other trading activities (a "Participating Broker-Dealer"), by
tendering such Original Capital Securities and executing this Letter of
Transmittal, agrees that, upon receipt of notice from the Corporation or the
Trust of the occurrence of any event or the discovery of any fact which makes
any statement contained or incorporated by reference therein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Capital Securities
pursuant to the Prospectus until the Corporation and the Trust have amended or
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the Participating
Broker-Dealer or the Corporation or the Trust has given notice that the sale of
the Exchange Capital Securities may be resumed, as the case may be. If the
Corporation or the Trust gives such Notice to suspend the sale of the Exchange
Capital Securities, it shall extend the 90-day period referred to above during
which Participating Broker-Dealers are entitled to use the Prospectus in
connection with the resale of Exchange Capital Securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the supplemented or amended Prospectus necessary to permit resales of
the Exchange Capital Securities or to and including the date on which the
Corporation or the Trust has given notice that the sale of Exchange Capital
Securities may be resumed, as the case may be.
<PAGE>
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with re-sales of Exchange Capital Securities received
in exchange for Original Capital Securities pursuant to the Exchange Offer must
notify the Corporation and the Trust, or cause the Corporation and the Trust to
be notified, on or prior to the expiration date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided above or may be
delivered to the Exchange Agent at the address set forth in the Prospectus under
"The Exchange Offer--Exchange Agent."
Holders whose Original Capital Securities are accepted for exchange
will not receive distributions on such Original Capital Securities and the
undersigned waives the right to receive any distribution on such Original
Capital Securities following such acceptance. Holders of Original Capital
Securities as of the August 31, 1999 record date for the initial distribution on
September 15, 1999, including such holders who tender their Original Capital
Securities pursuant to the Exchange Offer, will be entitled to receive such
distribution.
All authority herein conferred or agreed to be conferred in this Letter
of Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
<PAGE>
HOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(Please Complete Substitute Form W-9 Below)
(Note: Signature(s) must be guaranteed if required by Instruction 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificates(s) for the Original Capital Securities hereby tendered or on a
security position listing, or by any person(s) authorized to become the
registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certificates and other information as may
be required by the Corporation, the Trust or the Exchange Agent to comply with
the restrictions on transfer applicable to the Original Capital Securities). If
signature is by an attorney-in-fact, executor, administrator, trustee, guardian,
officer of a corporation or another acting in a fiduciary capacity or
representative capacity, please set forth the signer's full title. See
Instruction 5.
________________________________________________________________________________
________________________________________________________________________________
(Signature(s) of Holder(s))
Date ___________________, 1999
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Area Code(s) and Telephone Number_______________________________________________
________________________________________________________________________________
(Tax Identification or Social Security Number(s))
GUARANTEE OF SIGNATURE(S) (See
Instructions 2 and 5)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
(Please Print)
Date ___________________, 1999
Capacity or Title_______________________________________________________________
Name of Firm____________________________________________________________________
Address_________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number__________________________________________________
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if Exchange Capital Securities and/or any Original Capital
Securities that are not tendered are to be issued in the name of someone other
than the registered holder of the Original Capital Securities whose name(s)
appear(s) above.
Issue:
/ / Exchange Capital Securities to:
/ / Original Capital Securities not tendered to:
Name____________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Taxpayer Identification or Social Security No.)
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if Exchange Capital Securities and/or any Original Capital
Securities that are not tendered are to be sent to someone other than the
registered holder of the Original Capital Securities whose name(s) appear(s)
above, or to the registered holder(s) at an address other than that shown
above.
Mail:
/ / Exchange Capital Securities to:
/ / Original Capital Securities not tendered to:
Name____________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Taxpayer Identification or Social Security No.)
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be completed either if (a)
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth under "The Exchange Offer--Procedures for Tendering Original
Capital Securities" in the Prospectus and an Agent's Message is not delivered or
(b) Certificates are to be forwarded herewith. Timely confirmation of a
book-entry transfer of such Original Capital Securities into the Exchange
Agent's account at DTC, or Certificates as well as this Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its addresses set forth
herein on or prior to the expiration date. Tenders by book-entry transfer also
may be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "book-entry confirmation" means a confirmation of
book-entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC. The term "Agent's Message" means a message transmitted by DTC to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by the Letter of Transmittal (including the
representations contained herein) and that the Trust and the Corporation may
enforce the Letter of Transmittal against such participant. Original Capital
Securities may be tendered in whole or in part in the Liquidation Amount of
$100,000 (100 Capital Securities) and integral multiples of $1,000 in excess
thereof, provided that, if any Original Capital Securities are tended for
exchange in part, the untendered Liquidation Amount thereof must be $100,000
(100 Capital Securities) or any integral multiple of $1,000 in excess thereof.
Holders who wish to tender their Original Capital Securities and (i)
who cannot complete the procedures for delivery by book-entry transfer on or
prior to the expiration date,(ii) who cannot deliver their Original Capital
Securities, this Letter of Transmittal and all other required documents to the
Exchange Agent on or prior to the expiration date or (iii) whose Original
Capital Securities are not immediately available, may tender their Original
Capital Securities by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
under "The Exchange Offer--Procedures for Tendering Original Capital Securities"
in the Prospectus. Pursuant to such procedures: (a) such tender must be made by
or through an Eligible Institution (as defined below); (b) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by the Corporation, must be received by the Exchange Agent on or prior
to the expiration date; and (c) the Certificates (or a book-entry confirmation
(as defined above and in the Prospectus)) representing all tendered Original
Capital Securities, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in "The Exchange
Offer--Procedures for Tendering Original Capital Securities" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Original Capital Securities to be properly tendered pursuant to the guaranteed
delivery procedure, the Exchange Agent must receive a Notice of Guaranteed
Delivery on or prior to the expiration date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
<PAGE>
Neither the Corporation nor the Trust will accept any alternative,
conditional or contingent tenders. Each tendering holder, by execution of a
Letter of Transmittal (or facsimile thereof), waives any right to receive any
notice of the acceptance of such tender.
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
holder (which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of the
Original Capital Securities) of Original Capital Securities tendered herewith,
unless such holder(s) has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" above, or
(ii) such Original Capital Securities are tendered for the
account of a firm that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned
"Description of Original Capital Securities" is inadequate, the Certificate
number(s) and/or the Liquidation Amount of Original Capital Securities and any
other required information should be listed on a separate signed schedule which
is attached to this Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. Tenders of Original Capital
Securities will be accepted only in the principal amount of $100,000 (100
Capital Securities) and integral multiples of $1,000 in excess thereof, provided
that if any Original Capital Securities are tendered for exchange in part, the
untendered principal amount thereof must be $100,000 (100 Capital securities) or
any integral multiple of $1,000 in excess thereof. If less than all the Original
Capital Securities evidenced by any Certificate submitted are to be tendered,
fill in the Liquidation Amount of Original Capital Securities which are to be
tendered in the box entitled "Liquidation Amount of Original Capital Securities
Tendered (if less than all are tendered)." In such case, a new Certificate(s)
for the remainder of the Original Capital Securities that were evidenced by your
old Certificate(s) will be sent to the holder of the Original Capital
Securities, promptly after the expiration date, unless the appropriate boxes on
this Letter of Transmittal are completed. All Original Capital Securities
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Capital
Securities may be withdrawn at any time on or prior to the expiration date. In
order for a withdrawal to be effective on or prior to that time, a written or
facsimile transmission of such notice of withdrawal must be received by the
Exchange Agent at one of its addresses set forth above or in the Prospectus on
or prior to the expiration date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be withdrawn,
the aggregate Liquidation Amount of Original Capital Securities to be withdrawn,
and (if Certificates for Original Capital Securities have been tendered) the
name of the registered holder of the Original Capital Securities as set forth on
the Certificate for the Original Capital Securities, if different from that of
the person who tendered such Original Capital Securities. If Certificates for
the Original Capital Securities have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of such Certificates for
the Original Capital Securities, the tendering holder must submit the serial
numbers shown on the particular Certificates for the Original Capital Securities
to be withdrawn and the signature on the notice of withdrawal must be guaranteed
by an Eligible Institution, except in the case of Original Capital Securities
tendered for the account of an Eligible Institution. If Original Capital
Securities have been tendered pursuant to the procedures for book-entry transfer
set forth under "The Exchange Offer--Procedures for Tendering Original Capital
Securities" in the Prospectus, the notice of withdrawal must specify the name
and number of the account at DTC to be credited with the withdrawal of Original
Capital Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written or facsimile transmission on or prior
<PAGE>
to the expiration date. Withdrawals of tenders of Original Capital Securities
may not be rescinded. Original Capital Securities properly withdrawn will not be
deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the expiration date by
following any of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Corporation and
the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. None of the Corporation, the Trust, any affiliates or
assigns of the Corporation and the Trust, the Exchange Agent nor any other
person shall be under any duty to give any notification of any irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification. Any Original Capital Securities which have been tendered but which
are withdrawn will be returned to the holder thereof without cost to such holder
promptly after withdrawal.
5. Signatures on Letter of Transmittal, Assignments and Endorsements.
If this Letter of Transmittal is signed by the registered holder(s) of the
Original Capital Securities tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Original Capital Securities tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Original Capital Securities are registered in different
name(s) on several Certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal (or facsimiles thereof) as there
are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Corporation and the Trust, in their sole
discretion, of such persons' authority to so act.
When this Letter of Transmittal is signed by the registered holder(s)
of the Original Capital Securities listed and transmitted hereby, no
endorsement(s) of Certificate(s) or separate bond power(s) are required unless
Exchange Capital Securities are to be issued in the name of a person other than
the registered holder(s). Signature(s) on such Certificate(s) or bond power(s)
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Original Capital Securities listed, the Certificates
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name or names of the registered owner(s) appear(s) on the Certificates, and
also must be accompanied by such opinions of counsel, certifications and other
information as the Corporation, the Trust or the Exchange Agent may require in
accordance with the restrictions on transfer applicable to the Original Capital
Securities. Signatures on such Certificates or bond powers must be guaranteed by
an Eligible Institution.
6. Special Issuance and Delivery Instructions. If Exchange Capital
Securities are to be issued in the name of a person other than the signer of
this Letter of Transmittal, or if Exchange Capital Securities are to be sent to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Certificates for Original Capital Securities not exchanged
will be returned by mail or, if tendered by book-entry transfer, by crediting
the account indicated above maintained at DTC. See Instruction 4.
7. Irregularities. The Corporation and the Trust will determine, in
their sole discretion, all questions as to the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
tender of Original Capital Securities, which determination shall be final and
binding on all parties. The Corporation and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by either of them not to be in proper form or the acceptance of
which, or exchange for, may, in the view of counsel to the Corporation and the
Trust, be unlawful. The Corporation and the Trust also reserve the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
<PAGE>
Offer set forth in the Prospectus under "The Exchange Offer--Certain Conditions
to the Exchange Offer" or any conditions or irregularity in any tender of
Original Capital Securities of any particular holder whether or not similar
conditions or irregularities are waived in the case of other holders. The
Corporation's and the Trust's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Original Capital Securities will
be deemed to have been validly made until all irregularities with respect to
such tender have been cured or waived. None of the Corporation, the Trust, any
affiliates or assigns of the Corporation, the Trust, the Exchange Agent, or any
other person shall be under any duty to give notification of any irregularities
in tenders or incur any liability for failure to give such notification.
8. Questions, Requests for Assistance and Additional Copies. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal
income tax law, a holder whose tendered Original Capital Securities are accepted
for exchange is required to provide the Exchange Agent with such holder's
correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If
the Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Original
Capital Securities exchanged pursuant to the Exchange Offer may be subject to
31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Original Capital Securities or of the last transferee appearing on the
transfers attached to, or endorsed on, the Original Capital Securities. If the
Original Capital Securities are registered in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
<PAGE>
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. Lost, Destroyed or Stolen Certificates. If any Certificate(s)
representing Original Capital Securities have been lost, destroyed or stolen,
the holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been followed.
11. Security Transfer Taxes. Holders who tender their Original Capital
Securities for exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, Exchange Capital Securities are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Original Capital Securities tendered, or if a transfer
tax is imposed for any reason other than the exchange of Original Capital
Securities in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Important: This Letter of Transmittal (or facsimile thereof) and all
other required documents must be received by the Exchange Agent on or prior to
the expiration date.
<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
(See Instruction 9)
PAYER'S NAME: WILMINGTON TRUST COMPANY
SUBSTITUTE Part 1 - PLEASE PROVIDE TIN _____________________________
Form W-9 YOUR TIN IN THE BOX Social Security Number or
AT RIGHT AND CERTIFY Employer Identification Number
SIGNING AND DATING BELOW
Department of the Treasury Part 2
Internal Revenue Service Awaiting TIN / /
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number
shown on this form is my correct taxpayer identification number (or I am waiting
for a number to be issued to me), (2) I am not subject to backup withholding
either because (i) I am exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
(iii) the IRS has notified me that I am no longer subject to backup withholding,
and (3) any other information provided on this form is true and correct.
Payer's Request for Taxpayer
Identification Number (TIN)
and Certification Signature___________________________________
Date________________________________________
You must cross out item (iii) in Part (2)above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return and you have not been
notified by the IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT
TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the Exchange Capital Securities shall
be retained until I provide a taxpayer identification number to the Exchange
Agent and that, if I do not provide my taxpayer identification number within 60
days, such retained amounts shall be remitted to the Internal Revenue Service as
backup withholding and 31% of all reportable payments made to me thereafter will
be withheld and remitted to the Internal Revenue Service until I provide a
taxpayer identification number.
Signature_________________________________ Date______________________________
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9.50% Series A Capital Securities
(Liquidation Amount $1,000 per Capital Security)
OF
USA CAPITAL TRUST I
Unconditionally Guaranteed By USABancShares, Inc.
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
the procedures for delivery by book-entry transfer cannot be completed on or
prior to the expiration date (as identified in the Prospectus referred to
below), (ii) certificates for the Trust's (as defined below) 9.50% Series A
Capital Securities (the "Original Capital Securities") are not immediately
available or (iii) Original Capital Securities, the Letter of Transmittal and
all other required documents cannot be delivered to Wilmington Trust Company
(the "Exchange Agent") on or prior to the Expiration Date. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission, to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering Original Capital Securities" in the Prospectus.
The Exchange Agent for the Exchange Offer is: Wilmington Trust Company
By Registered or Certified Mail By Hand or Overnight Delivery
- ------------------------------- -----------------------------
Wilmington Trust Company Wilmington Trust Company
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, DE 19890-0001 Wilmington, DE 19890-0001
Attn: Kristen Long, Corporate Attn: Kristen Long, Corporate
and Trust Operations and Trust Operations
Confirm by telephone or for information call:
(302) 651-1562
Facsimile Transmission (Eligible Institutions Only):
(302) 651-1079
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission of this Notice of Guaranteed Delivery via a
facsimile to a number other than as set forth above will not constitute a valid
delivery.
<PAGE>
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to USA Capital Trust I, a trust created
under the laws of Delaware (the "Trust"), upon the terms and subject to the
conditions set forth in the Prospectus dated May __, 1999 (as the same may be
amended or supplemented from time to time, the "Prospectus"), and the related
Letter of Transmittal (which together constitute the "Exchange Offer"), receipt
of which is hereby acknowledged, the aggregate liquidation amount of Original
Capital Securities set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering Original Capital Securities."
Aggregate Liquidation Amount Tendered: Name(s) of Registered Holder(s):
______________________________________ __________________________________
Certificate No(s). (if available): Address(es):
______________________________________ __________________________________
__________________________________
Area Code and Telephone Number(s):
__________________________________
If Original Capital Securities will be tendered by book-entry transfer, provide
the following information:
DTC Account Number:
______________________________________ __________________________________
Signature(s):
Date:
______________________________________
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Original
Capital Securities tendered hereby in proper form for transfer, or confirmation
of the book-entry transfer of such Original Capital Securities to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within three
business days after the date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Original Capital Securities tendered hereby to the Exchange
Agent within the time period set forth above and that failure to do so could
result in a financial loss to the undersigned.
Name of Firm:
______________________________________ __________________________________
(Authorized Signature)
Address:
______________________________________ Title: ___________________________
______________________________________
(Zip Code)
Name:_____________________________
(Please type or print)
Area Code and Telephone Number:
______________________________________ Date:_____________________________
NOTE: DO NOT SEND ORIGINAL CAPITAL SECURITIES WITH THIS NOTICE OF GUARANTEED
DELIVERY. ACTUAL SURRENDER OF ORIGINAL CAPITAL SECURITIES MUST BE MADE PURSUANT
TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
