Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Registration of Securities Issued in a 84 428K
Business-Combination Transaction
2: EX-4.1 Indenture of the Corporation 82 331K
11: EX-4.10 Series A Capital Securities Agreement 24 93K
12: EX-4.11 Common Securities Guarantee Agreement 10 40K
3: EX-4.2 Form of Certificate of Exhchange 9 38K
4: EX-4.3 Certificate of Trust Bfd Preferred Capital Trust 1 10K
5: EX-4.4 Declaration of Trust of Bfd Preferred Capital 4 22K
6: EX-4.5 Amended and Restated Declaratoin of Trust 98 362K
7: EX-4.6 Form of Exchange Capital Security Certificate 8 25K
8: EX-4.7 Form of Exchange Guarantee of the Corporation 25 92K
9: EX-4.8 Registration Rights Agreement 26 110K
10: EX-4.9 Liguidation Rights Agreement 4 21K
13: EX-5.1 Opinion and Consent of Muldoon, Murphy & Faucette 2 14K
14: EX-5.2 Opinion and Consent of Morris, James, Hitchens 3 19K
15: EX-8.0 Opinion of Muldoon, Murphy & Faucette LLP 1 12K
16: EX-12.0 Computation of Ratio of Earnings to Fixed Charges 2± 13K
17: EX-23.1 Consent of Kpmg LLP 1 10K
18: EX-25.1 Form T-1 Property Trustee 29 95K
19: EX-25.2 Form T-1 Guarantee Trustee 29 95K
20: EX-25.3 Form T-1 Debenture Trustee 29 93K
21: EX-99.1 Form of Letter of Transmittal 14 69K
22: EX-99.2 Form of Notice of Guaranteed Delivery 4 19K
23: EX-99.3 Form of Exchange Agreement 11 42K
24: EX-99.4 Form of Letters to Brokers and Other Nominees 3 17K
25: EX-99.5 Form of Client Letter 2 14K
S-4 — Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents
As filed with the Securities and Exchange Commission on February 8, 2001
Registration No. _____
Registration No. _____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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BOSTONFED BANCORP, INC. BFD PREFERRED CAPITAL TRUST II
(Exact Name of Registrant as Specified in its Charter) (Exact Name of Registrant as Specified in its Trust Agreement)
DELAWARE DELAWARE
(State or Other Jurisdiction (State or Other Jurisdiction
of Incorporation or Organization) of Incorporation or Organization)
6035 6719
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
52-1940834 04-6925115
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
17 NEW ENGLAND EXECUTIVE PARK 17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803 BURLINGTON, MASSACHUSETTS 01803
(781) 273-0300 (781) 273-0300
(Address, including Zip Code and Telephone Number, (Address, including Zip Code and Telephone Number,
including Area Code, of Registrant's Principle Executive Including Area Code, of Registrant's Principle Executive
Offices) Offices)
DAVID F. HOLLAND DAVID F. HOLLAND
PRESIDENT AND CHIEF EXECUTIVE OFFICER ADMINISTRATIVE TRUSTEE
17 NEW ENGLAND EXECUTIVE PARK 17 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803 BURLINGTON, MASSACHUSETTS 01803
(781) 273-0300 (781) 273-0300
(Name, Address, including Zip Code and Telephone Number, (Name, Address, including Zip Code and Telephone Number,
including Area Code, of Agent for Service) including Area Code, of Agent for Service)
COPIES TO:
LAWRENCE M.F. SPACCASI, ESQ.
VICTOR L. CANGELOSI, ESQ.
MULDOON MURPHY & FAUCETTE LLP
5101 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20016
(202) 362-0840
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If 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 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. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES BEING TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER UNIT PRICE(2) FEE(2)
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10.875% Capital Securities,
Series B, of BFD Preferred $22,000,000 100% $22,000,000 $5,500
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10.875% Junior
Subordinated Deferrable
Interest Debentures, Series
B, of BostonFed Bancorp,
Inc. $22,000,000 100% $22,000,000 N/A
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Series B Capital Securities
Guarantee of BostonFed
Bancorp, Inc.(3) N/A N/A N/A N/A
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Total $22,000,000 100% $22,000,000 $5,500
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(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the 10.875% Junior
Subordinated Deferrable Interest Debentures, Series B, of BFD Preferred
Capital Trust II (the "Junior Subordinated Debentures") distributed upon
any liquidation of BFD Preferred Capital Trust II.
(3) No separate consideration will be received for the Series B Capital
Securities Guarantee of BostonFed Bancorp, Inc.
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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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
PROSPECTUS
BFD PREFERRED CAPITAL TRUST II
OFFER TO EXCHANGE ITS
10.875% CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10.875% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
TO THE EXTENT DESCRIBED IN THIS PROSPECTUS, BY
[COMPANY LOGO AND NAME]
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME
ON , 2001 UNLESS EXTENDED.
BFD Preferred Capital Trust II is offering to exchange up to $22,000,000
aggregate liquidation amount of its 10.875% capital securities, Series B,
referred to as the exchange capital securities, for a similar amount of its
outstanding 10.875% capital securities, Series A, referred to as the original
capital securities, of which $22,000,000 aggregate liquidation amount are issued
and outstanding. The exchange capital securities are registered under the
Securities Act of 1933.
This prospectus and letter of transmittal are first being mailed to all
holders of the original capital securities on or about _____________, 2001.
See "Risk Factors" beginning on page 15 to read about the risks that you
should consider in deciding whether to tender the 10.875% capital securities,
Series A in the exchange offer.
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION OR REGULATOR HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR
ANYONE TO TELL YOU OTHERWISE.
THE DATE OF THIS PROSPECTUS IS _____________, 2001.
AVAILABLE INFORMATION
We have filed a registration statement on Form S-4 under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission to register the
exchange capital securities to be issued in the exchange offer. This prospectus
is a part of that registration statement. As allowed by Commission rules, this
prospectus does not contain all of the information that you can find in the
registration statement or the exhibits to the registration statement.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, referred to as the Exchange Act, and, in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. You may also obtain copies of such material by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. If available, you may also
access such information through the Commission's electronic data gathering,
analysis and retrieval system, commonly referred to as EDGAR, via electronic
means, including the Commission's home page on the Internet
(http://www.sec.gov). The common stock of BostonFed Bancorp is traded on the
American Stock Exchange under the symbol "BFD." Documents filed by us with the
Commission also can be inspected at the offices of the American Stock Exchange,
86 Trinity Place, New York, New York 10006.
No separate financial statements of the Trust have been included in this
prospectus and no separate financial statements will be prepared in the future.
We do not consider that such financial statements would be material to holders
of the securities offered by this prospectus because the Trust: (i) is a
newly-formed special purpose entity; (ii) has no operating history or
independent operations; and (iii) is not engaged in and does not propose to
engage in any activity other than holding as trust assets our exchange
debentures, issuing the capital and common securities and engaging in incidental
activities. We do not expect that the Trust will file reports, proxy statements
and other information under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we have filed with the Commission are
incorporated into this prospectus by reference:
- BostonFed Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1999;
- BostonFed Bancorp's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000;
- BostonFed Bancorp's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000;
- BostonFed Bancorp's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000; and
- BostonFed Bancorp's Current Report on Form 8-K filed with the
Commission on February 7, 2001.
In addition to the documents listed above, we also incorporate by reference
into this prospectus, any other documents we file with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this prospectus and before the completion of the exchange offer referred to in
this prospectus. Any statement contained in this prospectus or in a document
incorporated or deemed incorporated by reference shall be deemed to be modified
or superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
is or is deemed to be incorporated by reference in this prospectus modifies or
supersedes that statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
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You may obtain a copy of our filings with the Commission at no cost, by
writing or telephoning us at the following address:
BostonFed Bancorp, Inc.
Attention: Corporate Secretary
17 New England Executive Park
Burlington, Massachusetts 01803
(781) 273-0300
When we refer to this prospectus, we mean not only this prospectus but also
any documents which are incorporated or deemed to be incorporated in this
prospectus by reference. You should rely only on the information incorporated by
reference or provided in this prospectus or any supplement. We have not
authorized anyone else to provide you with additional or different information.
This prospectus is used to offer and sell the exchange capital securities
referred to in this prospectus, and only under circumstances and in
jurisdictions where it is lawful to do so.
As used in this prospectus, "we" and "us" and "our" refer to BostonFed
Bancorp and its consolidated subsidiaries, depending on the context.
FORWARD-LOOKING STATEMENTS
Some of the information presented or incorporated by reference into this
prospectus contains "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and may be identified by the
use of such words as "believe," "expect," "anticipate," "should," "planned,"
"estimated" and "potential." Examples of forward-looking statements include, but
are not limited to, estimates with respect to our financial condition, results
of operations and business that are subject to various factors which could cause
actual results to differ materially from these estimates. These factors include,
but are not limited to:
- general economic conditions;
- changes in interest rates, deposit flows, loan demand, real estate
values and competition;
- changes in accounting principles, policies, or guidelines;
- material unforeseen changes in the financial condition or results of
operations of our customers;
- unforeseen difficulties in realizing expected cost savings from
acquisitions;
- changes in legislation or regulation; and
- other economic, competitive, governmental, regulatory, and
technological factors affecting our operations, pricing, products and
services.
Our actual results could vary materially from the future results covered in
our forward-looking statements. The statements in the "Risk Factors" section of
this prospectus are cautionary statements identifying important factors,
including certain risks and uncertainties, that could cause our results to vary
materially from the future results covered in such forward-looking statements.
Other factors, such as the general state of the United States economy, could
also cause actual results to vary materially from the future results covered in
such forward-looking statements.
We disclaim any obligation to announce publicly future events or
developments that affect the forward-looking statements in this prospectus.
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SUMMARY
The following information is a summary of the significant terms of the
offering of our exchange capital securities. You should carefully read this
prospectus to understand fully the terms of the exchange capital securities, as
well as the tax and other considerations that are important to you in making a
decision about whether to exchange your original capital securities for the
exchange capital securities. You should pay special attention to the "Risk
Factors" section beginning on page __ of this prospectus to determine whether an
investment in the exchange capital securities is appropriate for you.
BOSTONFED BANCORP, INC.
We are a registered bank holding company whose principal business is
conducted by our wholly-owned subsidiaries, Boston Federal Savings Bank and
Broadway National Bank. Our banking subsidiaries are collectively referred to in
this prospectus as "the Banks." We are also the parent corporation for BFD
Preferred Capital Trust I, a New York common law trust, which was formed for the
exclusive purpose of issuing and selling capital securities. Our common stock
trades on the American Stock Exchange under the symbol "BFD."
Our business is conducted primarily through our ownership of Boston Federal
and Broadway National. Boston Federal's administrative and banking office is
located in Burlington, Massachusetts and its eight other banking offices are
located in Arlington, Bedford, Billerica, Boston, Lexington, Peabody, Wellesley
and Woburn, all of which are in the greater Boston metropolitan area. Boston
Federal's consumer finance subsidiary, Diversified Ventures, Inc., d/b/a Forward
Financial, maintains its headquarters in Northboro, Massachusetts and operates
in approximately twenty states. Broadway National has two banking offices
located in Chelsea and Revere, also in the greater Boston metropolitan area.
At September 30, 2000, we had total assets of approximately $1.3 billion,
total deposits of $861 million, and total consolidated stockholders' equity of
approximately $88.6 million.
Our principal executive offices are located at 17 New England Executive
Park, Burlington, Massachusetts 01803, and our telephone number at such address
is (781) 273-0300.
CORPORATE GROWTH STRATEGY
Our strategy has been and continues to be attracting retail deposits from
the general public in the greater Boston metropolitan area and, to a lesser
extent, other areas of New England, and through brokers, and investing those
deposits, together with funds generated from operations, loan sales and
borrowings, primarily in one- to four-family residential mortgage loans. To a
lesser but growing extent, we invest in commercial real estate, construction and
land, multi-family mortgage, home equity lines of credit, business and consumer
loans. We originate mortgage loans for investment and for sale in the secondary
market, generally retaining the servicing rights for loans sold.
Through Forward Financial, we also originate consumer loans primarily with
customers purchasing or refinancing manufactured homes, recreational vehicles,
marine vessels and leased equipment and subsequently sell substantially all of
these loans, servicing released, to third party client lenders. The acquisition
of Forward Financial, and a related company, Ellsmere Insurance Agency, Inc. in
December 1999, along with the continued successful increase in business,
commercial real estate, construction lending and home equity loans, have allowed
us to diversify our product line, asset mix and the geographical area we serve.
On July 26, 2000, BFD Preferred Capital Trust I, a common law trust created
under the laws of the State of New York, issued $10,000,000 of its 11.295%
capital securities, referred to as the 11.295% capital securities, which remain
outstanding. The 11.295% capital securities issued by BFD Preferred Capital
Trust I are part of a pool of trust preferred securities issued by a number of
issuers, including us, and as such do not trade in the secondary market. The
11.295% capital securities are of equal rank to the original capital securities
and will be of equal rank to the exchange capital securities.
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BFD PREFERRED CAPITAL TRUST II
BFD Preferred Capital Trust II is a statutory business trust created under
Delaware law. The Trust's business and affairs are conducted by the property
trustee, the Delaware trustee and the three individual administrative trustees,
who are our officers. The Trust exists for the exclusive purposes of:
- issuing and selling the original capital securities and the exchange
capital securities, collectively referred to as the capital
securities;
- using the proceeds from the sale of the capital securities to acquire
junior subordinated debentures issued by us; and
- engaging in only those other activities necessary, advisable or
incidental to the above.
Accordingly, the junior subordinated debentures are the sole assets of the
Trust, and payments under the junior subordinated debentures will be the sole
revenues of the Trust.
We own all of the common securities of the Trust .
THE EXCHANGE OFFER
The Exchange Offer........ Up to $22,000,000 aggregate liquidation amount of
exchange capital securities are being offered in
exchange for a similar aggregate liquidation amount
of original capital securities. Original capital
securities may be tendered for exchange in whole or
in part in a liquidation amount of $100,000 (100
original capital securities) or any integral multiple
of $1,000 (one original capital security) in excess
of $100,000. Under the exchange offer, we will
exchange as soon as practicable after the date of
this prospectus our $22,000,000 aggregate principal
amount of junior subordinated debentures, Series A,
also referred to as the original junior subordinated
debentures, for a similar aggregate principal amount
of our junior subordinated debentures, Series B, also
referred to as the exchange debentures. We refer to
the original junior subordinated debentures and the
exchange debentures collectively as the junior
subordinated debentures.
We and the Trust are making the exchange offer in
order to satisfy our respective obligations under the
registration rights agreement relating to the
original capital securities. For a description of the
procedures for tendering original capital securities,
please read "The Exchange Offer--Procedures for
Tendering Original Capital Securities."
Expiration Date........... 5:00 p.m., Eastern time, on _____________, 2001
unless the exchange offer is extended by us and the
Trust, in which case the expiration date will be the
latest date and time to which the exchange offer is
extended.
Conditions to the
Exchange Offer.......... The exchange offer is subject to certain conditions,
which may be waived by us and the Trust in our sole
discretion. The exchange offer is not conditioned
upon any minimum liquidation amount of original
capital securities being tendered.
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Terms of the
Exchange Offer.......... We and the Trust reserve the right in our sole and
absolute discretion, subject to applicable law, at
any time and from time to time, (1) to delay the
acceptance of the original capital securities, (2) to
terminate the exchange offer if certain specified
conditions have not been satisfied, (3) to extend the
expiration date of the exchange offer and retain all
original capital securities tendered as a result of
the exchange offer, subject, however, to the right of
holders of original capital securities to withdraw
their tendered original capital securities, or (4) to
waive any condition or otherwise amend the terms of
the exchange offer in any respect.
Withdrawal Rights......... You may withdraw tenders of original capital
securities at any time on or prior to the expiration
date by delivering a written notice of withdrawal to
the exchange agent in conformity with certain
procedures as set forth under "The Exchange
Offer--Withdrawal Rights."
Procedures for Tendering
Original Capital
Securities.............. Certain brokers, dealers, commercial banks, trust
companies and other nominees who hold original
capital securities through The Depository Trust
Company, or DTC, must effect tenders by book-entry
transfer through DTC's Automated Tender Offer
Program, or ATOP. Beneficial owners of original
capital securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender original capital
securities under the exchange offer. Tendering
holders of original capital securities that do not
use ATOP must complete and sign a letter of
transmittal in accordance with the instructions
contained in such letter and forward the same by
mail, facsimile transmission or hand delivery,
together with any other required documents, to the
exchange agent, either with the certificates of the
original capital securities to be tendered or in
compliance with the specified procedures for
guaranteed delivery of original capital securities.
Tendering holders of original capital securities that
use ATOP will, by so doing, acknowledge that they are
bound by the terms of the letter of transmittal.
Letters of transmittal and certificates representing
original capital securities should not be sent to us
or the Trust. You should send such documents only to
the exchange agent.
Resales of Exchange
Capital Securities...... We and the Trust are making the exchange offer in
reliance on the position of the staff of the
Commission, as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, neither we nor the Trust has
sought our own interpretive letter and there can be
no assurance that the staff of the 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 Commission, and subject to the two
immediately following sentences, we and the Trust
believe that exchange capital securities issued under
this exchange offer in exchange for original capital
securities may be offered for resale, resold and
otherwise transferred by a holder of such exchange
capital securities, other than a holder who is a
broker-dealer, without further compliance with the
registration and prospectus delivery requirements of
the
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Securities Act of 1933, as amended, or Securities
Act, provided that such 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 us or the
Trust or who intends to participate in the exchange
offer for the purpose of distributing the exchange
capital securities, or any broker-dealer who
purchased the original capital securities from the
Trust to resell pursuant to Rule 144A or any other
available exemption under the Securities Act:
- will not be able to rely on the interpretations
of the staff of the Commission set forth in the
above-mentioned interpretive letters;
- will not be permitted or entitled to tender such
original capital securities in the exchange
offer; and
- 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 in reliance on an exemption from
such requirements.
In addition, as described in this prospectus, if any
broker-dealer holds original capital securities
acquired for its own account as a result of
market-making or other trading activities and
exchanges such original capital securities for
exchange capital securities, then such broker-dealer
must deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales of
such exchange capital securities.
Each holder of the original capital securities who
wishes to exchange original capital securities for
exchange capitals securities in the exchange offer
will be required to represent that;
- it is not an affiliate of us or the Trust;
- any exchange capital securities to be received
by it are being acquired in the ordinary course
of its business;
- 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
- 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.
Each broker-dealer that receives exchange capital
securities for its own account in exchange for
original capital securities, where such original
capital securities were acquired by such
broker-dealer as a result of market-making activities
or other trading activities, must
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acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Exchange Act of
1934, as amended, or Exchange Act, in connection with
any resale of such exchange capital securities. See
"Plan of Distribution."
The letter of transmittal states that, by so
acknowledging 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. Based on the position taken by the staff of the
Commission in the interpretive letters referred to
above, we and the Trust 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
that represent an unsold allotment from the initial
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 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 and to the limitations
described in this prospectus under "The Exchange
Offer--Resales of Exchange Capital Securities," we
and the Trust 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, or if earlier, when all such
exchange capital securities have been disposed of by
such participating broker-dealer. Any participating
broker-dealer who is an affiliate of us or the Trust
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.
Exchange Agent............ The exchange agent with respect to the exchange offer
is the property trustee of the Trust, Wilmington
Trust Company. The address, telephone and facsimile
number of the exchange agent are set forth in "The
Exchange Offer--Exchange Agent" and in the letter of
transmittal.
Use of Proceeds........... Neither we nor the Trust will receive any cash
proceeds from the issuance of the exchange capital
securities.
Certain Federal Income Tax
Considerations.......... The exchange of original capital securities for
exchange capital securities will not be a taxable
exchange for federal income tax purposes, and you
should not recognize any taxable gain or loss or any
interest income as a result of such exchange.
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ERISA Considerations...... You should review the information set forth under
"ERISA Considerations" before tendering original
capital securities in the exchange offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered........ Up to $22,000,000 aggregate liquidation amount of
exchange capital securities, liquidation amount
$1,000 per exchange capital security, have been
registered under the Securities Act. The exchange
capital securities will be issued as were the
original capital securities under the Amended and
Restated Declaration of Trust of BFD Preferred
Capital Trust II, dated as of September 22, 2000,
relating to the Trust by and among us, as Sponsor,
Wilmington Trust Company, as property trustee,
Wilmington Trust Company, as Delaware trustee, and
the administrative trustees, also referred to as the
trust agreement. The exchange capital securities and
any original capital securities that remain
outstanding after consummation of the exchange offer
will vote together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding liquidation amount have
taken certain actions or exercised certain rights
under the trust agreement. The terms of the exchange
capital securities are identical in all material
respects to the terms of the original capital
securities, except that the exchange capital
securities have been registered under the Securities
Act, will not be subject to certain restrictions on
transfer applicable to the original capital
securities and will not provide for any increase in
the distribution rate.
Distributions............. You will be entitled to receive cumulative cash
distributions at the annual rate of 10.875% of the
liquidation amount of $1,000 per exchange capital
security. Distributions will accumulate from the date
the Trust issued the original capital securities and
will be paid semi-annually in arrears on April 1st
and October 1st of each year, beginning on April 1,
2001. The amount of each distribution will include
amounts accumulated up to the date the distribution
is due.
The record dates will be the 15th day of the month
immediately preceding the month in which the relevant
payment occurs. If the exchange offer is consummated
before the first record date, March 15, 2001, then
each exchange capital security will pay cumulative
distributions from and after September 22, 2000 and
no distributions will be paid on any original capital
security tendered for an exchange capital security.
However, in the event the exchange offer is
consummated after March 15, 2001, distributions will
be paid on the original capital securities
accumulated from and after September 22, 2000 through
April 1, 2001, and distributions will be paid on the
exchange capital securities from and after April 1,
2001. The amount of each distribution with respect to
the capital securities will include amounts accrued
to, but excluding the date the distribution is due.
Because of the foregoing procedures regarding
distributions, the amount of the distributions
received by holders whose original capital securities
are accepted for exchange will not be affected by the
exchange.
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Deferral Periods.......... So long as no event of default under the exchange
debentures has occurred and is continuing, we have
the right, at one or more times, to defer interest
payments on the exchange debentures for up to 10
consecutive semi-annual periods. All deferrals will
end on an interest payment date and will not extend
beyond October 1, 2030, the stated maturity date of
the exchange debentures.
If we defer interest payments on the exchange
debentures, the Trust will also defer distributions
on the exchange capital securities. During this
deferral period, the exchange debentures will
continue to accrue interest and the exchange capital
securities will continue to accumulate distributions.
During a deferral period, you will also accumulate
additional distributions at the annual rate of
10.875% on any accumulated and unpaid distributions,
to the extent permitted by law. If the Trust defers
your distributions, you will still be required to
accrue interest income and include it in your gross
income for federal income tax purposes, even if you
are a cash basis taxpayer.
Exchange Guarantee........ We are offering to exchange our guarantee, also
referred to as the exchange guarantee, of payments of
cash distributions and payments in liquidation of the
Trust or redemption of the exchange capital
securities for the existing guarantee, also referred
to as the original guarantee, in respect of the
original capital securities. We refer to the original
guarantee and the exchange guarantee collectively as
the guarantees. Under the trust agreement governing
BFD Preferred Capital Trust II, our exchange
debentures and related indenture and our exchange
guarantee, we will, on a subordinated basis, fully,
irrevocably and unconditionally guarantee:
- payment of distributions on the exchange capital
securities;
- payments on liquidation of the Trust; and
- payments on maturity or earlier redemption of
the exchange capital securities.
If we do not make a payment on the exchange
debentures, the Trust will not have sufficient funds
to make payments on the exchange capital securities.
Our exchange guarantee does not assure the payment of
distributions when the Trust does not have sufficient
funds to pay the distributions. Our obligations under
the exchange guarantee are unsecured and subordinated
to payment of our senior and subordinated debt and
will be effectively subordinated to all of the
existing and future liabilities and obligations of
our subsidiaries, including Boston Federal's and
Broadway National's deposit liabilities. See
"Description of Junior Subordinated
Debentures--Subordination."
Ranking................... The exchange capital securities will rank on parity,
and payments thereon will be made pro rata, with the
original capital securities and the common securities
of the Trust, except as described under "Description
of Capital Securities-- Subordination of Common
Securities." The exchange junior subordinated
debentures will
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10
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rank on parity with the original junior subordinated
debentures, our 11.295% junior subordinated notes,
issued to BFD Preferred Capital Trust I on July 26,
2000, maturing on July 19, 2030, referred to as the
11.295% junior subordinated notes, and all other
junior subordinated debentures, or other debentures,
if any, issued by us, which are issued and sold, if
at all, to other trusts established by us, or the
other trusts, if any, in each case similar to the
Trust, and will constitute our unsecured obligations
and will rank subordinate and junior in right of
payment to all senior indebtedness, to the extent and
in the manner set forth in the indenture, dated as of
September 22, 2000, as amended and supplemented from
time to time, between us and Wilmington Trust
Company, as debenture trustee, relating to the
exchange debentures, also referred to as the
indenture. See "Description of Junior Subordinated
Debentures." The exchange guarantee will rank on
parity with the original guarantee, our guarantee
issued pursuant to the offering of capital securities
of BFD Preferred Capital Trust I, and all other
guarantees, or the other guarantees, if any, issued
by us with respect to capital securities, if any,
issued by other trusts, and will constitute our
unsecured obligation and will rank subordinate and
junior in right of payment to all senior
indebtedness, to the extent and in the manner set
forth in the guarantee agreement. See "Description of
Guarantee." In addition, because we are a bank
holding company, the junior subordinated debentures
and the guarantee will be effectively subordinated to
all of the existing and future liabilities and
obligations of our subsidiaries, including Boston
Federal's and Broadway National's deposit
liabilities. See "Description of Junior Subordinated
Debentures-- Subordination."
Distribution of Exchange
Debentures............. At any time, we will have the right, subject to
receipt of any required regulatory approval, to
liquidate the Trust and distribute the exchange
debentures to holders of exchange capital securities
and common securities in liquidation of the Trust.
The exchange debentures will have identical terms and
conditions as the exchange capital securities. We
will, for instance, have the same rights, subject to
the receipt of any required regulatory approval, to
redeem such exchange debentures as if the exchange
debentures were held by the Trust. In the event of
the involuntary or voluntary liquidation,
dissolution, winding up or termination of the Trust
in which the exchange debentures are not distributed
to you, then you, as the holders of the exchange
capital securities, will be entitled to receive for
each exchange capital security, after satisfaction of
creditors of the Trust, a liquidation amount of
$1,000 plus accumulated and unpaid distributions
thereon (including interest thereon) to the date of
payment. The Trust will be able to make this
distribution in cash only if we redeem the exchange
debentures.
Maturity and Redemption... The exchange debentures will mature on October 1,
2030, unless prepaid before such date if certain
conditions are met. The Trust will redeem the
exchange capital securities when we pay the exchange
debentures at maturity or upon any earlier redemption
of the exchange debentures.
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Our ability to prepay some or all of the exchange
debentures on or after October 1, 2010 is subject to
certain conditions. We may have to obtain regulatory
approvals, including the approval of the Federal
Reserve, or any successor entity before we prepay any
exchange debentures prior to maturity. If we prepay
the exchange debentures, you will receive the
liquidation amount of $1,000 per exchange capital
security plus any accrued and unpaid distributions to
the date of redemption. In addition, we may prepay
the exchange debentures at our option, in whole but
not in part, at any time before October 1, 2010:
- if certain tax events occur;
- if there is a change in the way the exchange
debentures would be treated for regulatory
capital purposes; or
- if there is a change in the Investment Company
Act of 1940 that requires the Trust to register
under that law.
Transfer Restriction...... 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
exchange capital securities). Any such transfer of
exchange 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.
Absence of Market for the
Exchange Capital
Securities.............. The exchange capital securities will be a new issue
of securities for which there is no market. Although
Sandler O'Neill & Partners, L.P., the initial
purchaser, intends to make a market in the exchange
capital securities in a manner permitted under
applicable securities laws, the initial purchaser is
not obligated to do so, and any such market making
may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
exchange capital securities. Neither we nor the Trust
intend to apply for listing of the exchange capital
securities on any securities exchange or for
quotation through The Nasdaq Stock Market.
Ratings................... The exchange capital securities have not been rated
by any rating agency.
ERISA Considerations...... For a discussion of certain prohibited transactions
and fiduciary duty issues pertaining to purchases by
or on behalf of an employee benefit plan, you should
see "ERISA Considerations".
Voting Rights............. As a holder of the exchange capital securities, you
will have no voting rights, except in limited
circumstances. You should read "Description of
Exchange Capital Securities--Voting Rights; Amendment
of the Trust Agreement" for more information.
Risk Factors.............. You should read "Risk Factors" for a discussion of
considerations relevant to an investment in the
capital securities or the exchange of original
capital securities for exchange capital securities.
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial and other data is derived in part from,
and should be read in conjunction with, our consolidated financial statements,
related notes and other financial information incorporated into this prospectus
by reference. See "Where You Can Find More Information." The data presented at
September 30, 2000 and for the nine month periods ended September 30, 2000 and
1999 are derived from unaudited condensed consolidated financial statements but
in the opinion of management reflects all adjustments necessary to present
fairly the results for this interim period. These adjustments consist only of
normal recurring adjustments. The results of operations for the nine months
ended September 30, 2000 are not necessarily indicative of the results of
operations that may be expected for the fiscal year ending December 31, 2000.
[Enlarge/Download Table]
AT AT DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ---------- ---------- -------- --------- ---------
(IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA:
Total assets............................ $1,320,586 $1,253,653 $1,139,123 $974,680 $820,567 $640,752
Investment securities available for
sale (1)............................. 63,459 53,203 49,137 31,767 1,085 1,022
Investment securities held to maturity
(1).................................. 2,304 2,304 7,302 20,630 19,170 16,906
Mortgage-backed securities available
for sale (1)......................... 15,740 15,540 21,029 19,125 23,593 23,873
Mortgage-backed securities held to
maturity............................. 58,003 13,941 22,913 38,350 43,019 35,116
Mortgage loans held for sale............ 17,831 16,174 17,008 9,817 3,970 8,931
Allowance for loan losses............... 11,096 10,654 8,500 6,600 4,400 4,275
Loans, net.............................. 1,021,938 1,032,594 943,662 791,728 676,670 509,496
Deposit accounts........................ 861,263 770,049 707,144 619,821 428,818 419,104
FHLB advances and other borrowings...... 326,031 387,555 337,500 263,640 300,000 126,909
Stockholders' equity.................... 88,635 85,704 81,794 81,611 86,355 90,701
[Enlarge/Download Table]
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS)
SELECTED OPERATING DATA:
Interest income......................... $67,739 $59,798 $80,736 $74,775 $68,037 $52,678 $42,454
Interest expense........................ 40,638 34,822 47,208 42,557 37,129 28,891 23,552
------- ------- ------- ------- ------- ------- -------
Net interest income..................... 27,101 24,976 33,528 32,218 30,908 23,787 18,902
Provision for loan losses............... 750 1,250 1,626 1,642 1,696 1,294 3,614
------- ------- ------- ------- ------- ------- -------
Net interest income after provision for
loan losses.......................... 26,351 23,726 31,902 30,576 29,212 22,493 15,288
Total non-interest income............... 11,514 4,969 6,911 6,128 4,806 3,567 2,672
Total non-interest expense.............. 26,457 18,595 25,300 23,932 21,458 21,040 16,009
------- ------- ------- ------- ------- ------- -------
Income before income taxes.............. 11,408 10,100 13,513 12,772 12,560 5,020 1,951
Income tax expense...................... 4,017 3,807 4,945 5,151 5,505 2,083 815
------- ------- ------- ------- ------- ------- -------
Net income.............................. $ 7,391 $ 6,293 $ 8,568 $ 7,621 $ 7,055 $ 2,937 $ 1,136
======= ======= ======= ======= ======= ======= =======
(footnotes on next page)
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[Enlarge/Download Table]
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995(7)
-------- -------- --------- --------- -------- ------- --------
PERFORMANCE RATIOS: (2)
Return on average assets .............. 0.76% 0.71% 0.72% 0.72% 0.75% 0.40% 0.19%
Return on average stockholders'
equity .............................. 10.97 9.86 10.00 9.02 8.21 3.21 2.57
Dividend payout ratio ................. 24.36 26.15 25.84 24.67 20.31 31.25 --
Average stockholders' equity to
average assets ...................... 6.97 7.24 7.21 7.99 9.11 12.35 7.36
Stockholders' equity to total assets
at end of period .................... 6.71 6.84 6.84 7.18 8.37 10.52 14.16
Average interest rate spread (3) ...... 2.75 2.57 2.59 2.69 2.94 2.79 2.98
Net interest margin (4) ............... 3.02 2.96 2.97 3.17 3.42 3.34 3.28
Average interest-earning assets to
average interest-bearing
liabilities ......................... 107.70 109.65 109.00 111.60 111.53 113.40 107.40
ASSET QUALITY RATIOS: (2)
Non-performing loans as a percent of
loans (5)(6) ........................ 0.08% 0.08% 0.07% 0.09% 0.17% 0.22% 1.00%
Non-performing assets as a percent of
total assets (6) .................... 0.08 0.08 0.09 0.08 0.16 0.51 0.97
Allowance for loan losses as a
percent of loans (5) ................ 1.06 0.98 1.01 0.88 0.82 0.64 0.82
Allowance for loan losses as a
percent of non-performing loans(6)... 1,378.39 1,272.85 1,428.15 1,050.68 469.75 292.94 81.40
NUMBER OF FULL-SERVICE BANKING
FACILITIES .......................... 11 10 10 10 10 8 8
NUMBER OF SHARES OUTSTANDING AT END
OF PERIOD (IN THOUSANDS) ............ 4,751 5,021 4,973 5,112 5,520 6,260 6,590
PER SHARE DATA:
Basic earnings per common share ....... $ 1.56 $ 1.30 $ 1.78 $ 1.50 $ 1.28 $ 0.48 $ --
Diluted earnings per common share ..... 1.53 1.25 1.71 1.43 1.24 0.48 --
Dividends per common share ............ 0.38 0.34 0.46 0.37 0.26 0.15 --
Book value per common share at end of
period .............................. 19.12 17.41 17.88 16.84 15.72 14.75 14.78
Market value per common share at end
of period ........................... 21.31 15.00 15.88 17.63 21.88 14.75 11.75
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(1) The balance does not include FHLB-Boston stock.
(2) Performance Ratios for the interim periods are annualized. Asset Quality
Ratios are end-of-period ratios.
(3) The average interest rate spread represents the difference between the
weighted average yield on average interest-earning assets and the weighted
average cost of average interest-bearing liabilities.
(4) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(5) Loans includes loans, net, and mortgage loans held for sale, excluding the
allowance for loan losses.
(6) Non-performing assets consist of non-performing loans and real estate
owned. Non-performing loans consist of all loans 90 days or more past due
and other loans which have been identified by us as presenting uncertainty
with respect to the collectibility of interest or principal. It is our
policy to cease accruing interest on all such loans.
(7) On October 24, 1995, Boston Federal converted from mutual to stock form.
Accordingly, earnings per share and dividends per share for the years ended
December 31, 1995 and prior periods are not presented.
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RISK FACTORS
Prospective purchasers of the exchange capital securities should
carefully review the information contained elsewhere or incorporated by
reference in this prospectus and should particularly consider the following
factors, which do not necessarily appear in the order of importance. Investors
should consider all of these factors to be important. Because holders of the
exchange capital securities may receive exchange debentures in exchange therefor
upon liquidation of the Trust, prospective purchasers of the exchange capital
securities are also making an investment decision with regard to the exchange
debentures and should carefully review all the information regarding the
exchange debentures contained in this prospectus.
RISKS RELATED TO YOUR INVESTMENT IN THE EXCHANGE CAPITAL SECURITIES
WE CANNOT MAKE PAYMENTS UNDER THE EXCHANGE GUARANTEE OR THE EXCHANGE DEBENTURES
IF WE DEFAULT ON OUR MORE SENIOR OBLIGATIONS.
Our obligations under the exchange guarantee and the exchange debentures
are unsecured and rank:
- junior to all of our other borrowings, except those borrowings that by
their terms are equal or junior;
- junior to all of our subsidiaries' liabilities, including Boston
Federal's and Broadway National's deposit accounts; and
- senior to our common stock and preferred stock, if any.
This means that we cannot pay under the exchange guarantee or the exchange
debentures if we default on payments of any of our other borrowings, unless, by
their terms, those other borrowings are equal or junior to the exchange
guarantee or the exchange debentures. In addition, if the maturity of the
exchange debentures is accelerated, we cannot pay under the exchange guarantee
or the exchange debentures until all of our more senior borrowings are paid in
full. Finally, if we liquidate, go bankrupt or dissolve, we would be able to pay
under the exchange guarantee and the exchange debentures only after we have paid
all of our liabilities that are senior to the exchange guarantee. At September
30, 2000, we had no senior indebtedness outstanding on an unconsolidated basis.
If we default on our obligations to pay principal or interest on the
exchange debentures, the Trust will not have sufficient funds to make
distribution, redemption or liquidation payments on the exchange capital
securities. As a result, you will not be able to rely upon our exchange
guarantee for payment of these amounts. Instead, you may seek legal redress
against us directly to collect payments owed to you or rely on the property
trustee to enforce the rights of the Trust under the exchange debentures against
us.
The exchange capital securities, the exchange guarantee, the exchange
debentures and the indenture do not limit our ability to incur additional debt,
including, debt that is senior to the exchange debentures in priority of
payment.
The ability of the Trust to make payments due on the exchange capital
securities solely depends on us making payments on the exchange debentures as
and when required.
For more information on payments under the exchange guarantee and the
exchange debentures, you should refer to "Description of Exchange
Debentures--Subordination."
15
BANKING LAWS AND REGULATIONS COULD LIMIT OUR ACCESS TO FUNDS FROM BOSTON FEDERAL
AND BROADWAY NATIONAL, OUR PRIMARY SOURCES OF LIQUIDITY, WHICH ARE NEEDED TO
MAKE PAYMENTS UNDER THE EXCHANGE DEBENTURES.
Historically, we have relied primarily on dividends from Boston Federal and
Broadway National to pay our corporate expenses, to pay cash dividends on our
common stock and to engage in repurchase programs for our common stock. Dividend
payments from Boston Federal and Broadway National are subject to regulatory
limitations, generally based on current and retained earnings, imposed by the
various regulatory agencies with authority over each of the Banks. Payment of
dividends by Boston Federal and Broadway National is also subject to each of the
bank's profitability, financial condition and capital expenditures and other
cash flow requirements. Bank regulatory agencies have authority to prohibit
Boston Federal and Broadway National or us from engaging in an unsafe or unsound
practice in conducting our business. The payment of dividends, depending upon
the financial condition of Boston Federal and Broadway National or us, could be
deemed to constitute an unsafe or unsound practice. The Federal Reserve 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
(i) the organization's net income available to common shareholders over the past
year has been sufficient to fund fully the dividends; and (ii) the prospective
rate of earnings retention appears consistent with the organization's capital
needs, asset quality, and overall financial condition.
On July 20, 2000, we announced our intention to repurchase up to 242,646
shares, or 5%, of our common stock. As of September 30, 2000, a total of 102,047
shares had been acquired and 140,599 shares remained to be acquired as part of
this 5% stock repurchase program. In addition, based on our past dividend
practices and the current number of outstanding shares of our common stock, we
expect to pay at least approximately $2.5 million per year in cash dividends on
our common stock. At September 30, 2000, we had cash and other liquid assets of
$26.1 million on an unconsolidated basis, including the proceeds from the
original capital securities offering. We expect to have sufficient liquidity to
pay our corporate expenses, maintain regular payment of cash dividends to our
common shareholders, complete our stock repurchase program and pay interest on
the exchange debentures, until approximately December 31, 2005, after which we
expect to rely on dividends or borrowings from Boston Federal and Broadway
National to pay principal of and interest on the exchange debentures. However,
we cannot assure you that we will have sufficient liquidity at the holding
company to pay interest on the exchange debentures prior to December 31, 2005
without relying on dividends or borrowings from Boston Federal and Broadway
National if, for example, we pursue a more aggressive strategy of repurchasing
our common stock or make acquisitions using cash, in whole or in part, as
consideration. In such circumstances, as well as after December 31, 2005, if we
do not receive sufficient cash dividends or borrowings from Boston Federal and
Broadway National, then it is unlikely that we will have sufficient funds to
make payments under the exchange debentures.
We are a multi-bank holding company regulated by the Federal Reserve
System, and almost all of our operating assets are owned by Boston Federal and
Broadway National. The Office of Thrift Supervision limits all capital
distributions by Boston Federal, directly or indirectly, to us, including
dividend payments. However, if the total amount of all capital distributions
(including each proposed capital distribution) for the applicable calendar year
exceeds net income to date for that year plus the retained net income (i.e., net
income after deducting prior capital distributions) for the preceding two years,
or if the amount of the proposed capital distribution would cause Boston Federal
to fail to remain "adequately capitalized" under applicable laws and
regulations, then Boston Federal must file an application to receive the prior
approval of the Office of Thrift Supervision for the proposed capital
distribution. As of September 30, 2000, approximately $14.5 million was
available for the payment of dividends from Boston Federal to us without prior
approval from the Office of Thrift Supervision. The foregoing assumes that the
funds utilized to acquire Forward Financial are not a capital distribution under
the regulations of the Office of Thrift Supervision. If, however, the Office of
Thrift Supervision were to take the position that the funds utilized to acquire
Forward Financial were a capital distribution, then the level of capital
distributions available from Boston Federal would be significantly impacted.
Under such circumstances, Boston Federal would be required to obtain approval
from the Office of Thrift Supervision prior to the payment of any capital
distributions to us, which in turn, would adversely affect our ability to make
payments on the exchange debentures.
16
Broadway National may not pay dividends out of its permanent capital and
may not, without the approval of the Office of the Comptroller of the Currency,
pay dividends in excess of the total of Broadway National's retained net income
for the year combined with retained net income for the prior two years. As a
national bank, Broadway National may not pay a dividend that would cause it to
fall below regulatory capital standards. At September 30, 2000, Broadway
National met all applicable regulatory capital standards. As of September 30,
2000, approximately $922,000 was available for the payment of dividends from
Broadway National to us without prior approval from the Office of the
Comptroller of the Currency. During the first nine months of 2000, Broadway
National paid $874,000 in dividends to us and Boston Federal paid no dividends
to us. In the aggregate, as of September 30, 2000, approximately $15.5 million
was available for the payment of dividends from Boston Federal and Broadway
National to us without prior regulatory approval.
Under the prompt corrective action provisions of the Federal Deposit
Insurance Act, Boston Federal and Broadway National are prohibited from making
capital distributions, including the payment of dividends, if, after making any
capital distribution, Boston Federal and Broadway National would become
undercapitalized as defined under the Federal Deposit Insurance Act. Based on
Boston Federal's and Broadway National's current financial condition, we do not
currently expect that this provision will have any impact on the ability of
Boston Federal and Broadway National to pay dividends to us. Payment of
dividends by Boston Federal and Broadway National also may be restricted at any
time at the discretion of the appropriate regulator if it deems the payment to
constitute unsafe or unsound banking practice.
In addition to regulatory restrictions on the payment of dividends, Boston
Federal and Broadway National are subject to certain restrictions imposed by
federal law on any extensions of credit it makes to, and certain other
transactions with, its affiliates and on investments in stock or other
securities of its affiliates. We are considered an affiliate of Boston Federal
and Broadway National. These restrictions prevent affiliates of Boston Federal
and Broadway National, including us, from borrowing from Boston Federal and
Broadway National, unless various types of collateral secure the loans. Federal
law limits the aggregate amount of loans to and investments in any single
affiliate to 10% of each bank's capital stock and surplus and also limits the
aggregate amount of loans to and investments in all affiliates to 20% of the
each bank's capital stock and surplus. As of September 30, 2000, approximately
$7.5 million of credit was available to us under this limitation.
We cannot assure you that Boston Federal or Broadway National will be able
to pay dividends or extend credit to us at past levels, or at all, in the
future, which may prevent us from satisfying our obligations under the exchange
debentures.
Also, as a multi-bank holding company, our right to receive any
distribution of assets of any subsidiary, upon such subsidiary's liquidation or
reorganization or otherwise (and thus your right to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary,
except to the extent we are also recognized as a creditor of that subsidiary.
For example, if Boston Federal is liquidated or reorganized, depositors of
Boston Federal would have the right to receive distributions from Boston Federal
before us unless we were also considered a creditor of Boston Federal. At
September 30, 2000, our subsidiaries had total liabilities, including deposits,
of $1.2 billion.
BOSTONFED BANCORP CAN DEFER INTEREST PAYMENTS ON THE EXCHANGE DEBENTURES,
CAUSING YOUR PAYMENTS UNDER THE EXCHANGE CAPITAL SECURITIES TO STOP, WHICH WILL
HAVE TAX CONSEQUENCES TO YOU AND MAY AFFECT THE MARKET PRICE OF THE EXCHANGE
CAPITAL SECURITIES.
We have the right, at one or more times, unless an event of default exists
under the exchange debentures, to defer interest payments on the exchange
debentures for up to 10 consecutive semi-annual periods, but not beyond October
1, 2030. If we defer interest payments, the Trust will defer paying
distributions to you on your exchange capital securities during the deferral
period. Additionally, during this period, any unpaid distributions on the
exchange capital securities will accumulate additional distributions at the rate
of 10.875% per year, compounded semi-annually, to the extent permitted by law.
During this time, we will be prohibited from declaring or paying cash dividends
on our common stock and preferred stock, if any, and making payments on our debt
securities which
17
rank equal to or junior to the exchange capital securities, including the
11.295% capital securities issued by BFD Preferred Capital Trust I. For more
information, please refer to "Description of Exchange Capital
Securities--Distributions."
When any deferral period ends and we pay all interest then accrued and
unpaid on the exchange debentures, we may elect to begin a new deferral period.
There is no limitation on the number of times that we may elect to begin a
deferral period. See "Description of Exchange Capital Securities--Distributions"
and "Description of Exchange Debentures--Option to Extend Interest Payment
Date."
If we exercise our right to defer payments of interest on the exchange
debentures, you will be required to accrue income (as original issue discount)
in respect of the deferred stated interest allocable to your exchange capital
securities for federal income tax purposes, which will be allocated but not
distributed to you. As a result, you will be required to recognize income for
federal income tax purposes before you receive any cash. Furthermore, if you
dispose of your exchange capital securities prior to the record date for the
distribution payment, you will not receive, from the Trust, the cash related to
this interest income.
As a result of our right to defer interest payments, the market price of
the exchange capital securities, which represent preferred beneficial interests
in the Trust, may be more volatile than the market prices of other securities
that are not subject to such deferral options. We do not currently intend to
exercise our right to defer interest payments on the exchange debentures.
However, if we exercise this right in the future, the market price of the
exchange capital securities will probably be affected. The exchange capital
securities may trade at a price that does not fully reflect the value of accrued
but unpaid interest on the exchange debentures. If you sell your exchange
capital securities during a deferral period, you may not receive the same return
on your investment as someone else who continues to hold the exchange capital
securities.
DISTRIBUTION OF EXCHANGE DEBENTURES MAY HAVE A POSSIBLE ADVERSE EFFECT ON
TRADING PRICES.
We have the right to dissolve the Trust at any time if such dissolution and
any distribution of the exchange debentures would not result in a taxable event
to the holders of the exchange capital securities. If we dissolve the Trust, the
Trust will be liquidated by distribution of the exchange debentures to holders
of the exchange capital securities and the common securities.
Under current federal income tax laws, a distribution of exchange
debentures to you on the dissolution of the Trust would not be a taxable event
to you. Nevertheless, if the Trust is classified for federal income tax purposes
as an association taxable as a corporation at the time it is dissolved, the
distribution of exchange debentures to you would be a taxable event. In
addition, if there is a change in law, a distribution of exchange debentures to
you on the dissolution of the Trust could also be a taxable event.
Your investment in the exchange capital securities may decrease in value if
the exchange debentures are distributed to you in liquidation of the Trust. We
cannot predict the liquidity of the market price or market prices for the
exchange debentures that maybe distributed. Accordingly, the exchange debentures
that you receive upon a distribution, or the exchange capital securities you
hold pending such distribution, may trade at a discount to the price that you
paid to purchase the exchange capital securities. Because you may receive the
exchange debentures, you must also make an investment decision with regard to
the exchange debentures. You should carefully review all of the information
regarding the exchange debentures contained in this prospectus .
18
YOU WILL HAVE LIMITED VOTING RIGHTS.
As a holder of exchange capital securities, you will have limited voting
rights. You can vote only to modify certain terms of the exchange capital
securities or on the removal of the property and Delaware trustees of the Trust
upon a limited number of events. We, along with the property trustee and the
administrative trustees, may amend the trust agreement without your consent even
if these actions adversely affect your interests, to ensure that the Trust:
- will continue to be classified as a grantor trust for federal income
tax purposes; and
- will not be required to register as an "investment company" under the
Investment Company Act of 1940.
You will not have any voting rights regarding us or the administrative
trustees or with respect to any matters submitted to a vote of our common
stockholders. See "Description of Exchange Capital Securities--Removal of Issuer
Trustees" and "--Voting Rights; Amendment of the Trust Agreement" for more
information on your limited voting rights.
THE LIMITED COVENANTS RELATING TO THE EXCHANGE CAPITAL SECURITIES AND THE
EXCHANGE DEBENTURES DO NOT PROTECT YOU.
The covenants in the governing documents relating to the exchange capital
securities and the exchange debentures are limited. As a result, the governing
documents do not protect you in the event of an adverse change in our financial
condition or results of operations. In addition, the governing documents do not
limit our ability, or the ability of our subsidiaries, to incur additional debt.
You should not consider the terms of the governing documents to be a significant
factor in evaluating whether we will be able to comply with our obligations
under the exchange debentures or the exchange guarantee.
TRADING CHARACTERISTICS OF THE EXCHANGE CAPITAL SECURITIES MAY CREATE ADVERSE
TAX CONSEQUENCES FOR YOU.
The exchange capital securities may trade at a price that does not reflect
the value of the accrued but unpaid interest on the underlying exchange
debentures. If you dispose of your exchange capital securities between the
record date for payments on the exchange capital securities, you may have
adverse tax consequences. Under these circumstances, you will be required to
include accrued but unpaid interest on the exchange debentures allocable to the
exchange capital securities through the date of disposition in your income. If
interest on the exchange debentures is included in income under the original
issue discount provisions, you would add this amount to your adjusted tax basis
in your share of the underlying exchange debentures deemed disposed. If your
selling price is less than your adjusted tax basis, which will include all
accrued but unpaid original issue discount interest included in your income, you
could recognize a capital loss which cannot be applied to offset ordinary income
for federal income tax purposes, subject to exceptions. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount" and
"--Sales or Redemptions of Capital Securities" for more information on possible
adverse tax consequences to you.
YOUR FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES MAY ADVERSELY AFFECT YOUR
ABILITY TO SELL SUCH SECURITIES.
The original capital securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an available exemption from the applicable securities laws or in a
transaction not subject to such laws and in each case in compliance with certain
other conditions and restrictions.. Original capital securities which remain
outstanding after consummation of the exchange offer will continue to bear a
legend reflecting such restrictions on transfer. In addition, upon consummation
of the exchange offer, holders of original capital securities which remain
outstanding will not be entitled to any rights to have such original capital
securities registered under the Securities Act or to any similar rights under
the registration rights agreement, subject to certain limited exceptions. We and
the Trust do not intend
19
to register under the Securities Act any original capital securities which
remain outstanding after consummation of the exchange offer, subject to such
limited exceptions, if applicable. To the extent that original capital
securities are tendered and accepted in the exchange offer, your ability to sell
untendered original capital securities could be adversely affected.
The exchange capital securities and any original capital securities which
remain outstanding after consummation of the exchange offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding liquidation amount thereof have taken certain actions
or exercised certain rights under the trust agreement. See "Description of
Exchange Capital Securities--Voting Rights; Amendment of the Trust Agreement."
ABSENCE OF RATINGS AND PUBLIC MARKET; RESTRICTIONS ON RESALE.
Neither the original capital securities nor the exchange capital securities
have been rated by any rating agency. The original capital securities were
issued to, and we believe such securities are currently owned by, less than
_____ beneficial owners. We have not registered the original capital securities
under the Securities Act and they will be subject to restrictions on
transferability if they are not exchanged for the exchange capital securities.
Although the exchange capital securities may be resold or otherwise transferred
by the holders who are not affiliates of BostonFed Bancorp, Inc. 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 and will be transferable only in blocks having a liquidation amount of
not less than $100,000 (100 exchange capital securities).
There is no existing market for the original capital securities nor the
exchange capital securities and there can be no assurance as to:
- the liquidity of any markets that may develop for the original capital
securities or the exchange capital securities;
- the ability of the holders to sell the original capital securities or
the exchange capital securities; or
- the price, if any, at which holders of the original capital
securities, or, the exchange capital securities, will be able to sell
their original capital securities or the exchange capital securities,
as the case may be.
If a public trading market develops, future trading prices of the exchange
capital securities will depend on many factors, including, among others,
prevailing interest rates, our operating results and the market for similar
securities. The initial purchaser has informed the Trust and us that it intends
to make a market in the original capital securities and the exchange capital
securities. However, the initial purchaser is not obligated to do so and any
such activity may be terminated at any time without notice to the holders of the
original capital securities or the exchange capital securities, as applicable.
In addition, any market making activity will be subject to the limits of the
Securities Act and may be limited during the pendency of the exchange offer.
Accordingly, we cannot assure you that an active public or other market
will develop for the exchange capital securities, or as to the liquidity of or
the trading market for the exchange capital securities. If an active public
market does not develop, the market price and liquidity of the exchange capital
securities may be adversely affected. In addition, neither we nor the Trust
intend to apply for listing of the exchange capital securities on any securities
exchange or for quotation through The Nasdaq Stock Market, Inc. See "Plan of
Distribution."
Notwithstanding the registration of the exchange capital securities in the
exchange offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of us or the Trust may publicly offer for sale or resell the
exchange capital securities only in compliance with the provisions of Rule 144
under the Securities Act.
20
Each broker-dealer that receives exchange capital securities for its own
account in exchange for original capital securities, where such original capital
securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange capital securities.
See "Plan of Distribution."
We are not obligated to notify you of defects or irregularities in the
exchange offer procedures.
Subject to conditions set forth under "The Exchange Offer--Conditions to
the Exchange Offer," issuance of the exchange capital securities in exchange for
original capital securities under the exchange offer will be made only after a
timely receipt by the Trust of:
- a book-entry confirmation evidencing the tender of such original
capital securities through ATOP; or
- certificates representing such original capital securities, a properly
completed and duly executed letter of transmittal, with any required
signature guarantees, and all other required documents.
Therefore, holders of the original capital securities desiring to tender
such original capital securities should allow sufficient time to ensure timely
delivery. See "The Exchange Offer-Acceptance for Exchange and Issuance of
Exchange Capital Securities" and "--Procedures for Tendering Original Capital
Securities." Neither we nor the Trust is under any duty to give notification of
defects or irregularities with respect to the tenders of original capital
securities for exchange.
RISK FACTORS RELATING TO BOSTONFED BANCORP
CREDITORS OF OUR SUBSIDIARIES HAVE PRIORITY OVER YOU IN THE EVENT OF A
DISTRIBUTION OF OUR SUBSIDIARIES' ASSETS.
The creditors of our subsidiaries have priority over us and you in any
distribution of our subsidiaries' assets in a liquidation or reorganization. We
are a holding company and our assets are primarily composed of our investment in
the stock of our subsidiaries. The creditors of our subsidiaries will have
priority over us and you in any distribution of the subsidiaries' assets in a
liquidation, reorganization or otherwise, except to the extent that we are
recognized as a creditor of our subsidiaries. We will depend on funds available
to us as well as dividends and other amounts we receive from our subsidiaries to
make payments on the exchange debentures. If we do not have sufficient funds and
if our subsidiaries make no distributions to us, we may not be able to make
payments on the exchange debentures and the Trust will not be able to make
payments to you on the exchange capital securities.
CHANGES IN ECONOMIC CONDITIONS COULD LEAD TO HIGHER LOAN CHARGE-OFFS AND REDUCE
OUR INCOME AND GROWTH.
Boston Federal's and Broadway National's loan portfolios include many real
estate secured loans. Real estate loans are in demand when interest rates are
low and economic conditions are favorable. Even when economic conditions are
favorable and interest rates are low, these conditions may not continue.
An increase in unemployment, a decrease in real estate values or further
increases in interest rates could weaken the local economy. Weakness in our
market area could depress our earnings and consequently our financial condition
because:
- customers may not want or need our products and services;
- borrowers may not be able to repay their loans;
- the value of the collateral securing our loans to borrowers may
decline; and
- the quality of our loan portfolio may decline.
21
Any of the latter three scenarios could require us to "charge-off" a higher
percentage of our loans and/or increase our provisions for loan losses, which
would reduce our income.
RISING INTEREST RATES MAY REDUCE OUR NET INCOME AND FUTURE CASH FLOWS.
Our primary source of income is our net interest income, which is the
difference between the interest income earned on its interest earning assets and
the interest expense incurred on its interest bearing liabilities. At September
30, 2000, our one year interest rate sensitivity gap (the difference between our
interest rate sensitive assets maturing or repricing within one year and our
interest rate sensitive liabilities maturing or repricing within one year,
expressed as a percentage of total assets) was negative 0.13%. In a rising
interest rate environment, an institution with a negative gap would generally be
expected, absent the effects of other factors, to experience a greater increase
in its cost of liabilities relative to its yield on assets, and thus decrease an
institution's net interest income. Because interest rates are established by
competition, we have limited control over our net interest income.
Under Office of Thrift Supervision regulations, as a federal savings bank,
Boston Federal is required to monitor changes in the net present value of the
expected future cash flows of its assets and liabilities, which is referred to
as net portfolio value or NPV. In addition, we monitor our NPV ratio, which is
our NPV divided by the estimated market value of total assets. The NPV ratio can
be viewed as a corollary to our capital ratios. To monitor our overall
sensitivity to changes in interest rates, we simulate the effect of
instantaneous changes in interest rates of up to 200 basis points on our assets
and liabilities. As of September 30, 2000, an increase in interest rates of 200
basis points would have reduced our NPV by approximately 12.13%, resulting in an
NPV ratio of 8.70%. There can be no assurance that future changes in our mix of
assets and liabilities will not result in more extensive declines in our NPV and
NPV ratio.
OUR FOCUS ON COMMERCIAL AND CONSUMER LENDING MAY HURT OUR RESULTS OF OPERATIONS.
Our business strategy centers on continuing to increase our emphasis on
commercial loans (commercial real estate, multi-family, construction and
business loans) and consumer lending activities in order to expand our net
interest margin. Consistent with this strategy, we have reduced the percentage
of our assets that are lower-yielding, including one- to four-family residential
first mortgage loans, and increased the percentage of our commercial and
consumer loans, which have higher risk-adjusted returns and shorter maturities
than one- to four-family residential first mortgage loans. At September 30,
2000, commercial and consumer loans totaled $222.2 million, which represented
16.8% of total assets as compared to $197.0 million, which represented 15.7% of
total assets at December 31, 1999 and $134.8 million, which represented 11.8% of
total assets at December 31, 1998.
Our commercial and consumer lending strategy may take a period of time to
implement fully and may require the incurrence of additional expenses to
originate the desired volume of non-residential loans. Specifically, in recent
years, we have incurred above average non-interest expense levels, which are
primarily related to our transition into commercial and consumer lending and the
maintenance of our mortgage banking activities. Total non-interest expense for
the year ended December 31, 1999 was $25.3 million, compared to $23.9 million
for 1998. The primary reason for the increase was increased staff levels for the
establishment of our commercial and consumer lending departments, the inclusion
of Forward Financial's compensation and benefits from its acquisition on
December 7, 1999, and normal year-over-year salary increases. Our efficiency
ratio was 60.8% for the year ended December 31, 1999, compared to 59.7% for the
year ended December 31, 1998, and was 65.2% for the nine months ended September
30, 2000, compared to 60.5% for the nine months ended September 30, 1999.
Our mortgage banking activities depend highly on the real estate market and
the level and trend of interest rates. While some of our expenses in this
operation are variable, a significant portion are fixed in the short-term and as
a result can contribute to periodic variances in our non-interest expense.
Additionally, expenses have been incurred over recent periods related to data
processing, equipment and personnel related to our commercial banking
operations. We cannot assure you that our increased expenditures will result in
our meeting our objective to increase our level of commercial and consumer
loans. Factors that may affect our ability to increase originations of
22
these loans include the demand for these loans, interest rates, our ability to
recruit and retain commercial lenders and the state of the local and national
economy.
If we continue to increase the level of our commercial and consumer loans,
we will increase our credit risk profile relative to traditional thrift
institutions that have higher concentrations of one- to four-family loans.
Boston Federal began originating commercial business loans in 1998. Commercial
business loans, amounting to $13.6 million at September 30, 2000, are generally
secured by a variety of collateral, primarily equipment, assets and accounts
receivable, and are generally supported by personal guarantees. Unlike one- to
four-family mortgage loans, which generally are made on the basis of the
borrower's ability to make repayment from his or her employment or other income,
and which are secured by real property whose value tends to be more easily
ascertainable, commercial business loans are of higher risk and typically are
made on the basis of the borrower's ability to make repayment from the cash flow
of the borrower's business. As a result, the availability of funds for the
repayment of commercial business loans may be substantially dependent on the
success of the business itself. Further, any collateral securing such loans may
depreciate over time, may be difficult to appraise and may fluctuate in value.
Consumer loans entail greater risk than one- to four-family mortgage loans,
particularly, in the case of consumer loans which are unsecured or secured by
rapidly depreciating assets, such as equipment, machinery or automobiles, or
receivables which may be uncollectible, in whole or in part. In such cases,
repossessed collateral for a defaulted loan may not provide an adequate source
of repayment of the outstanding loan balance. Additionally, the repayment of
consumer loans generally is dependent on the borrower's continuing financial
stability and, therefore, is more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Finally, the application of various
federal and state laws, including federal and state bankruptcy and insolvency
laws, may limit the amount which can be recovered on such loans in the event of
a default.
Loans secured by commercial real estate properties are generally larger
and, similar to other commercial type loans, involve a greater degree of credit
risk than one- to four-family residential mortgage loans. Because payments on
loans secured by commercial real estate properties are often dependent on the
successful operation or management of the properties, repayment of such loans
may be more subject to the real estate market or the economy than one- to
four-family mortgage loans.
Construction and land financing is generally considered to involve a higher
degree of credit risk than long-term financing on improved, owner-occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development compared to the estimated cost (including interest)
of construction. If the estimate of value proves to be inaccurate, the loan's
collateral may have a value which is insufficient to assure full repayment.
We seek to minimize these lending risks, through our underwriting
standards. A substantial portion of our commercial business loans have been
originated recently and have not been subject to unfavorable economic
conditions. We cannot assure you that a downturn in the local economy, however,
would not have a material adverse effect on the quality of the commercial
business loan portfolio, or on the commercial real estate and construction loan
portfolios, thereby resulting in material delinquencies and losses to our
operations.
USE OF PROCEEDS
Neither we nor the Trust will receive any cash proceeds from the issuance
of the exchange capital securities and the exchange guarantee. In consideration
for issuing the exchange capital securities in exchange for original capital
securities as described in this prospectus, the Trust will receive original
capital securities in like liquidation amount. The original capital securities
surrendered in exchange for the exchange capital securities will be retired and
canceled.
All of the proceeds from the sale by the Trust of its original capital
securities and common securities were invested by the Trust in the original
junior subordinated debentures. We received approximately $21.1 million in net
proceeds from
23
the sale of the original junior subordinated debentures. We deposited all of the
net proceeds from the sale of the original junior subordinated debentures to
Boston Federal, which in turn initially used the funds to repay maturing FHLB
advances.
REGULATORY CAPITAL RATIOS
The following table sets forth our consolidated capital ratios at September
30, 2000. Consummation of the exchange offer will have no effect on our
consolidated capital ratios.
AT SEPTEMBER 30, 2000
---------------------
Tier 1 risk-based capital.................. 12.7%
Total risk-based capital................... 14.3%
Leverage ratio............................. 7.7%
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as our subsidiary
and its accounts are included in our consolidated financial statements. The
capital securities are presented as a separate line item in our consolidated
balance sheet and appropriate disclosures about the capital securities, the
guarantee and the junior subordinated debentures will be included in the notes
to consolidated financial statements. For financial reporting purposes, we will
record distributions on the capital securities as a component of non-interest
expense in the consolidated statements of income.
Future reports we file under the Exchange Act will include a footnote to
the consolidated financial statements stating that:
- the Trust is wholly-owned;
- the sole assets of the Trust are the junior subordinated debentures
(specifying the principal amount, interest rate and maturity date of
such junior subordinated debentures); and
- our obligations under the trust agreement, the junior subordinated
debentures and related indenture and the guarantee, in the aggregate,
constitute a full and unconditional guarantee by us of the obligations
of the Trust under the capital securities.
We expect that the Trust will not be required to provide separate reports
under the Exchange Act.
24
CAPITALIZATION
The following table sets forth our consolidated capitalization at September
30, 2000. Consummation of the exchange offer will have no effect on our
consolidated capitalization.
[Enlarge/Download Table]
AT
SEPTEMBER 30, 2000
------------------
(UNAUDITED,
IN THOUSANDS)
Long-term borrowings............................................... $184,000
Corporation-obligated mandatorily redeemable capital securities(1). 32,000
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no
shares issued.................................................... --
Common stock, $0.01 par value, 17,000,000 shares authorized,
6,589,617 shares issued.......................................... 66
Additional paid-in capital......................................... 67,450
Retained earnings.................................................. 56,010
Accumulated other comprehensive (loss)............................. (760)
Treasury stock at cost - 1,838,736 shares at September 30, 2000... (32,295)
Unallocated ESOP shares............................................ (1,663)
Unearned 1996 stock-based incentive plan........................... (173)
--------
Total stockholders' equity......................................... 88,635
--------
Total capitalization(2)............................................ $118,285
========
----------------------
(1) The subsidiary trusts are BFD Preferred Capital Trust I, which issued trust
preferred securities on July 26, 2000 and holds $10.3 million in 11.295%
junior subordinated notes issued by us to BFD Preferred Capital Trust I,
and BFD Preferred Capital Trust II, which issued the original capital
securities on September 22, 2000 and holds $22.7 million in original junior
subordinated debentures.
(2) Of the $32.0 million of trust preferred securities outstanding at September
30, 2000 a total of $29.7 million was includable in total capitalization
due to regulatory limitations.
REGULATION AND SUPERVISION
We are a multi-bank holding company regulated by the Federal Reserve
System, and almost all of our operating assets are owned by Boston Federal and
Broadway National. Thus, our ability to pay principal of, and interest on, the
junior subordinated debentures depends almost entirely on cash dividends we
receive from our bank subsidiaries.
The Office of Thrift Supervision limits all capital distributions by Boston
Federal, directly or indirectly, to us, including dividend payments. However, if
the total amount of all capital distributions (including each proposed capital
distribution) for the applicable calendar year exceeds net income to date for
that year plus the retained net income (i.e., net income after deducting prior
capital distributions) for the preceding two years, or if the amount of the
proposed capital distribution would cause Boston Federal to fail to remain
"adequately capitalized" under applicable laws and regulations, then Boston
Federal must file an application to receive the prior approval of the Office of
Thrift Supervision for the proposed capital distribution. As of September 30,
2000, approximately $14.5 million was available for the payment of dividends
from Boston Federal to us without prior approval from the Office of Thrift
Supervision. The foregoing assumes that the funds utilized to acquire Forward
Financial are not a capital distribution under the regulations of the Office of
Thrift Supervision. If, however, the Office of Thrift Supervision were to take
the position that the funds utilized to acquire Forward Financial were a capital
distribution, then the level of capital distributions available from Boston
Federal would be significantly impacted. Under such circumstances, Boston
Federal would be required to obtain approval from the Office of Thrift
Supervision prior to
25
the payment of any capital distributions to us, which in turn, would adversely
affect our ability to make payments on the junior subordinated debentures.
Broadway National may not pay dividends out of its permanent capital and
may not, without the approval of the Office of the Comptroller of the Currency,
pay dividends in excess of the total of Broadway National's retained net income
for the year combined with retained net income for the prior two years. As a
national bank, Broadway National may not pay a dividend that would cause it to
fall below regulatory capital standards. At September 30, 2000, Broadway
National met all applicable regulatory capital standards. As of September 30,
2000, approximately $922,000 was available for the payment of dividends from
Broadway National to us without prior approval from the Office of the
Comptroller of the Currency. During the first nine months of 2000, Broadway
National paid $874,000 in dividends to us and Boston Federal paid no dividends
to us. In the aggregate, as of September 30, 2000, approximately $15.5 million
was available for the payment of dividends from Boston Federal and Broadway
National to us without prior regulatory approval.
Under the prompt corrective action provisions of the Federal Deposit
Insurance Act, Boston Federal and Broadway National are prohibited from making
capital distributions, including the payment of dividends, if, after making any
capital distribution, Boston Federal and Broadway National would become
undercapitalized as defined under the Federal Deposit Insurance Act. Based on
Boston Federal's and Broadway National's current financial condition, we do not
currently expect that this provision will have any impact on the ability of
Boston Federal and Broadway National to pay dividends to us. Payment of
dividends by Boston Federal and Broadway National also may be restricted at any
time at the discretion of the appropriate regulator if it deems the payment to
constitute unsafe or unsound banking practice.
If we do not receive sufficient cash dividends from Boston Federal and
Broadway National, it is unlikely that we will have sufficient funds to make
payments on the exchange debentures or that the Trust will be able to make the
related payments on the exchange capital securities. See "Description of
Exchange Capital Securities" and "Description of Exchange Debentures."
Other statutes and regulations that affect us, Boston Federal and Broadway
National are summarized in "Item 1. Business -- Regulation and Supervision" of
our annual report on Form 10-K for the fiscal year ended December 31, 1999,
which is incorporated into this prospectus by reference. See "Incorporation of
Certain Documents by Reference."
BFD PREFERRED CAPITAL TRUST II
The Trust is a statutory business trust created under Delaware law upon the
filing of a certificate of trust with the Delaware Secretary of State. The Trust
exists for the exclusive purposes of:
- issuing and selling the capital securities and the common securities;
- using the proceeds from the sale of the capital securities and the
common securities to acquire the junior subordinated debentures issued
by us; and
- engaging in only those other activities necessary, advisable or
incidental thereto, including the exchange offer.
The junior subordinated debentures are the sole assets of the Trust, and,
accordingly, payments under the junior subordinated debentures are the sole
revenues of the Trust. We own all of the common securities of the Trust, which
have an aggregate liquidation amount equal to at least 3% of the total capital
of the Trust. The common securities rank pari passu, and payments will be made
thereon pro rata, with the capital securities, except that upon the occurrence
and continuance of an event of default under the trust agreement resulting from
an event of default under the junior subordinated debentures, our rights as
holder of the common securities to payments in respect of distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the capital securities. See "Description of Capital
Securities--Subordination of Common Securities."
26
The Trust has a term of 35 years, but may dissolve earlier as provided in
its Amended and Restated Declaration of Trust, referred to in this prospectus as
the trust agreement. The Trust's business and affairs are conducted by the
issuer trustees. The trustees for the Trust are Wilmington Trust Company, as the
property trustee and as the Delaware trustee, and three administrative trustees
who are our officers. Wilmington Trust Company will also act as guarantee
trustee under the exchange guarantee and as debenture trustee under the
indenture. See "Description of Exchange Guarantee" and "Description of Exchange
Debentures." The holder of the common securities of the Trust or, if an event of
default under the trust agreement has occurred and is continuing, the holders of
a majority in liquidation amount of the capital securities will be entitled to
appoint, remove or replace the property trustee and/or the Delaware trustee. In
no event will the holders of the exchange capital securities have the right to
vote to appoint, remove or replace the administrative trustees; such voting
rights will be vested exclusively in the holder of the common securities.
The trust agreement governs the duties and obligations of each issuer
trustee. As issuer of the exchange debentures, we will pay all fees, expenses,
debts and obligations (other than the payment of principal of, and interest on,
the exchange capital securities) related to the Trust and the offering of the
exchange capital securities and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of the Trust. The principal executive office of
the Trust is c/o BostonFed Bancorp, Inc., 17 New England Executive Park,
Burlington, Massachusetts 01803 and its telephone number is (781) 273-0300.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the original capital securities, we and the
Trust entered into the registration rights agreement with the initial
purchasers, under which we and the Trust agreed to file and to use our best
efforts to cause to become effective with the Commission a registration
statement with respect to the exchange of the original capital securities for
exchange 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.
We and the Trust are making the exchange offer to satisfy contractual
obligations 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 have been
registered under the Securities Act and will not provide for any increase in the
distribution rate and certain restrictions on transfer applicable to the
original capital securities. In that regard, the original capital securities
provide, among other things, that, if the Trust has not exchanged the exchange
capital securities for all original capital securities validly tendered on or
prior to the 45th day after the registration statement is declared effective,
the distribution rate borne by the original capital securities will increase by
25 basis points 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 on the original capital
securities or any further registration rights under the registration rights
agreement, except under limited circumstances. See "Risk Factors."
The exchange offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of original capital securities in any jurisdiction in
which the exchange offer or its acceptance 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 the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose original capital securities are held of record by DTC who desires
to deliver such original capital securities by book-entry transfer at DTC.
Under the exchange offer, we will exchange as soon as practicable after the
date of this prospectus the original guarantee for the exchange guarantee and
the original junior subordinated debentures, in an amount
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corresponding to the original capital securities accepted for exchange, for a
like aggregate principal amount of the exchange debentures. The exchange
guarantee and exchange debentures have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, the Trust hereby offers to
exchange up to $22,000,000 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 Trust will
issue, promptly after the expiration date, an aggregate liquidation amount of up
to $22,000,000 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, which equals 100 original capital securities, or any
integral multiple of $1,000 liquidation amount, which equals one original
capital security, in excess of $100,000.
The exchange offer is not conditioned upon any minimum liquidation amount
of original capital securities being tendered. As of the date of this
prospectus, $22,000,000 aggregate liquidation amount of the original capital
securities is outstanding.
You 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, except under limited circumstances. See "Risk Factors" and
"Description of Original Securities."
If we do not accept any tendered original capital securities for exchange
because of an invalid tender, the occurrence of certain other events set forth
in this prospectus or otherwise, certificates for any such unaccepted original
capital securities will be returned, without expense, to the tendering holder
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. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See
"--Fees and Expenses."
Neither we, our Board of Directors nor any administrative trustee of the
Trust makes any recommendation to you as to whether to tender or refrain from
tendering all or any portion of your original capital securities pursuant to the
exchange offer. In addition, no one has been authorized to make any such
recommendation. You must make your own decisions whether to tender pursuant to
the exchange offer and, if so, the aggregate amount of original capital
securities to tender based your own financial positions and requirements.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" means 5:00 p.m., Eastern time, on _____________,
2001, unless we or the Trust extends the exchange offer, in which case the term
"expiration date" shall mean the latest date and time to which the exchange
offer is extended.
We and the Trust expressly reserve the right in our sole and absolute
discretion, subject to applicable law, at any time and from time to time:
- to delay the acceptance of the original capital securities for
exchange;
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- to terminate the exchange offer, whether or not any original capital
securities have theretofore been accepted for exchange, if the Trust
determines, in its sole and absolute discretion, that any of the
events or conditions referred to under "--Conditions to the Exchange
Offer" have occurred or exist or have not been satisfied;
- to extend the expiration date of the exchange offer and retain all
original capital securities tendered under 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
- to waive any condition or otherwise amend the terms of the exchange
offer in any respect.
If we amend the exchange offer in a manner we and the Trust determine to
constitute a material change, or if we and the Trust waive a material condition
of the exchange offer, we and the Trust will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the holders of the
original capital securities, and we and the Trust 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 to the exchange agent and by making
a public announcement, and such announcement in the case of an extension will be
made no later than 9:00 a.m., Eastern time, on the next business day after the
previously scheduled expiration date. Without limiting the manner in which we
and the Trust may choose to make any public announcement and subject to
applicable law, we and the Trust 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, the
Trust 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.
In all cases, delivery of exchange capital securities in exchange for
original capital securities tendered and accepted for exchange under the
exchange offer will be made only after timely receipt by the exchange agent of
(1) the book-entry confirmation described below under "--Procedures for
Tendering Original Capital Securities Book-Entry Transfer" or (2) certificates
representing such original capital securities, the letter of transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by the letter of
transmittal.
Subject to the terms and conditions of the exchange offer, the Trust will
be deemed to have accepted for exchange, and thereby exchanged, original capital
securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the exchange agent of the Trust's acceptance of such
original capital securities for exchange under the exchange offer. The exchange
agent will act as agent for the Trust for the purpose of receiving tenders of
book-entry confirmations or certificates representing original capital
securities, letters of transmittal and related documents, and as agent for
tendering holders for the purpose of receiving book-entry confirmations or
certificates representing 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 the Trust extends the exchange offer or is unable to
accept for exchange or exchange original capital securities tendered under the
exchange offer, then, without prejudice to the Trust's rights set forth in this
prospectus, the exchange agent may, nevertheless, on behalf of the Trust and
subject to
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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."
In accordance with the letter of transmittal, a holder of original capital
securities will warrant and agree that it has full power and authority to
tender, exchange, sell, assign and transfer the original capital securities,
that the Trust 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. Such holder also will
warrant and agree that it will, upon request, execute and deliver any additional
documents the Trust or the exchange agent deems necessary or desirable to
complete the exchange, sale, assignment, and transfer of the original capital
securities tendered under the exchange offer. Tendering holders of original
capital securities that use ATOP will, by so doing, acknowledge that they are
bound by the terms of the letter of transmittal.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
VALID TENDER. Except as set forth in this prospectus, in order for original
capital securities to be validly tendered under the exchange offer, a properly
completed and duly executed letter of transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the exchange agent at its address set forth under "--Exchange
Agent," and, in addition, one of the following:
- tendered original capital securities must be received by the exchange
agent;
- such original capital securities must be tendered pursuant to the
procedures for book-entry transfer set forth in this prospectus and a
book-entry confirmation must be received by the exchange agent, in
each case on or prior to the expiration date; or
- the guaranteed delivery procedures set forth in this prospectus 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. The entire amount of
original capital securities delivered to the exchange agent will be deemed to
have been tendered unless otherwise indicated.
The method of delivery of the book-entry confirmations or 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, we recommend
using registered mail, return receipt requested, properly insured, or an
overnight delivery service. In all cases, sufficient time should be allowed to
ensure timely delivery.
BOOK-ENTRY TRANSFER. For purposes of the exchange offer, the exchange agent
will establish an account with respect to the original capital securities at DTC
as soon as practicable. Any tendering financial institution that is a
participant in DTC's book-entry transfer facility system must 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 ATOP procedures for transfers. Such holder of original
capital securities using ATOP should transmit its acceptance to DTC on or prior
to the expiration date, or comply with the guaranteed delivery procedures set
forth below. DTC will verify such acceptance, execute a book-entry transfer of
the tendered original capital securities into the exchange agent's account at
DTC and then send to the exchange agent confirmation of such book-entry
transfer, including an agent's message confirming that DTC has received an
express acknowledgment from such holder that such holder has received and agrees
to be bound by the letter of transmittal and that we and the Trust may enforce
the letter of transmittal against such holder. We refer to this procedure as a
book-entry confirmation.
30
If you are 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, we urge you to contact such entity promptly if
you wish to participate in the exchange offer.
CERTIFICATES. If the tender is not made through ATOP, certificates
representing original capital securities, as well as the letter of transmittal,
or facsimile thereof, properly completed and duly executed, with any required
signature guarantees, and any other required documents required by the letter of
transmittal, must be received by the exchange agent at its address set forth
under "--Exchange Agent" on or prior to the expiration date in order for such
tender to be effective, or the guaranteed delivery procedure set forth herein
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. The entire amount
of original capital securities delivered to the exchange agent will be deemed to
have been tendered unless otherwise indicated.
SIGNATURE GUARANTEES. Certificates for the original capital securities need
not be endorsed and signature guarantees on the letter of transmittal are
unnecessary unless:
- a certificate for the original capital securities is registered in a
name other than that of the person surrendering the certificate; or
- the holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the letter of transmittal.
In the case of the above conditions, 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): (1) a bank; (2) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (3) a
credit union; (4) a national securities exchange, registered securities
association or clearing agency; or (5) a savings association that is a
participant in a Securities Transfer Association, which institutions are
referred to in this prospectus as an eligible institution, unless surrendered on
behalf of such eligible institution. See Instruction 1 to the letter of
transmittal.
DELIVERY. 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:
- a book-entry confirmation with respect to such original capital
securities; or
- certificates representing original capital securities and a properly
completed and duly executed letter of transmittal, or facsimile
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 book-entry
confirmations with respect to original capital securities or certificates
representing original capital securities and other required documents are
received by the exchange agent.
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the exchange agent.
GUARANTEED DELIVERY. If a holder desires to tender original capital
securities under 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
31
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:
- such tenders are made by or through an eligible institution;
- properly completed and duly executed notice to the exchange agent
guaranteeing delivery to the exchange agent of either certificates
representing original capital securities or a book-entry confirmation
in compliance with the requirements set forth in this prospectus, the
notice of guaranteed delivery, substantially in the form accompanying
the letter of transmittal, is received by the exchange agent, as
provided herein, on or prior to the expiration date; and
- a book-entry confirmation or the certificates 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, with any required signature
guarantees and any other documents required by the letter of
transmittal, are, in any case, received by the exchange agent within
three Nasdaq National Market 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.
The Trust's acceptance for exchange of original capital securities tendered
in compliance with any of the procedures described above will constitute a
binding agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the exchange offer.
DETERMINATION OF VALIDITY. We and the Trust will determine all questions as
to the form of documents, validity, eligibility, including time of receipt, and
acceptance for exchange of any tendered original capital securities, in our sole
discretion, and the determination shall be final and binding on all parties. We
and the Trust reserve the absolute right, in our sole and absolute discretion,
to reject any and all tenders determined by us not to be in proper form or the
acceptance of which, or exchange for, may, in the opinion of counsel to us and
the Trust, be unlawful. We and the Trust 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 Trust's and our interpretation 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. Neither us, the Trust, any affiliates
or assigns of us 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 us and the
Trust, proper evidence satisfactory to us and the Trust, in our sole discretion,
of such person's authority to so act must be submitted.
32
RESALES 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 Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither we nor the Trust sought our own interpretive letter and there
can be no assurance that the staff of the 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
Commission, and subject to the two immediately following sentences, we and the
Trust believe that exchange capital securities issued under this exchange offer
in exchange for original capital securities may be offered for resale, resold
and otherwise transferred by a holder, 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 us or the Trust 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 the Trust to resell pursuant to Rule 144A or any other available
exemption under the Securities Act:
- will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters;
- will not be permitted or entitled to tender such original capital
securities in the exchange offer; and
- 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 or, if distributed, junior
subordinated debentures, unless such sale is made in reliance on an
exemption from such requirements.
In addition, as described below, if any broker-dealer holds original capital
securities acquired for its own account as a result of market-making or other
trading activities and exchanges such original capital securities for exchange
capital securities, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
exchange capital securities.
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:
- it is not an affiliate of us or the Trust;
- any exchange capital securities to be received by it are being
acquired in the ordinary course of its business;
- 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
- 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.
We and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the exchange offer, to furnish to us and the Trust
(or an agent of the Trust) 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 broker-dealer that receives exchange capital securities for
its own account as a result of the exchange offer must acknowledge 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
33
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
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
Commission in the interpretive letters referred to above, we and the Trust
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 initial 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, we and the Trust 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 us or the Trust, or cause
us or 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 for
that purpose in the letter of transmittal or may be delivered to the exchange
agent at the address set forth herein under "--Exchange Agent." Any
participating broker-dealer who is an affiliate of us or the Trust 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.
Each participating broker-dealer who surrenders original capital securities
under the exchange offer will be deemed to have agreed, by execution of the
letter of transmittal, that upon receipt of notice from us or the Trust 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;
- any fact 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
- 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 debentures, as applicable,
pursuant to this prospectus until we or the Trust has amended or supplemented
this prospectus to correct such misstatement or omission and has furnished
copies of the amended and supplemented prospectus to such participating
broker-dealer, or we or the Trust has given notice that the sale of the exchange
capital securities, or the exchange guarantee or the exchange debentures, as
applicable, may be resumed, as the case may be.
If we or the Trust gives such notice to suspend the sale of the exchange
capital securities, or the exchange guarantee or the exchange debentures, as
applicable, the 90-day period referred to above shall be extended 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 we or
34
the Trust has given notice that the sale of exchange capital securities, or the
exchange guarantee or the exchange debentures, as applicable, may be resumed, as
the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, 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 the address 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
such certificates if different from that of the person who tendered such
original capital securities. If certificates representing original capital
securities have been delivered or otherwise identified to the exchange agent,
then prior to the physical release of such certificates, the tendering holder
must submit the serial numbers shown on the particular certificates 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 in accordance with the procedures for book-entry transfer set
forth in "--Procedures for Tendering Original Capital Securities--Book-Entry
Transfer," 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. 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 us and the Trust, in
our sole discretion, whose determination shall be final and binding on all
parties. Neither we, the Trust, any affiliates or assigns of us or 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 promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of exchange capital securities whose original capital securities
are accepted for exchange will be entitled to receive cumulative cash
distributions arising from the payment of interest on the exchange debentures at
the annual rate of 10.875% of the liquidation amount of $1,000 per exchange
capital security, accumulating from September 22, 2000, and will be payable
semi-annually in arrears on April 1st and October 1st of each year, beginning on
April 1, 2001. The record dates will be the 15th day of the month immediately
preceding the month in which the relevant payment occurs. In the event the
exchange offer is consummated prior to the first record date, March 15, 2001,
each exchange capital security will pay cumulative distributions from and after
September 22, 2000 and no distributions will be paid on any original capital
security tendered for an exchange capital security. However, in the event the
exchange offer is consummated after March 15, 2001, distributions will be paid
on the original capital securities accumulated from and after September 22, 2000
through April 1, 2001, and distributions will be paid on the exchange capital
securities from and after April 1, 2001. The amount of each distribution with
respect to the capital securities will include amounts accrued to, but excluding
the date the distribution is due. Because of the foregoing procedures regarding
distributions, the amount of the distributions received by holders whose
original capital securities are accepted for exchange will not be affected by
the exchange.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, or any
extension of the exchange offer, we and the Trust will not be required to accept
for exchange, or to exchange, any original capital securities for any
35
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 or have not
been satisfied:
- there shall occur a change in the current interpretation by the staff
of the 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, other than broker-dealers and any such holder which is an
affiliate of us or the Trust within the meaning of Rule 405 under the
Securities Act, 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;
- any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of us or the Trust, would reasonably be
expected to impair its ability to proceed with the exchange offer;
- the Commission or any state securities authority shall have issued a
stop order suspending the effectiveness of the registration statement,
or proceedings shall have been initiated or, to the knowledge of us or
the Trust, threatened for that purpose, or any governmental approval
has not been obtained, which approval we or the Trust shall, in our
sole discretion, deem necessary for the consummation of the exchange
offer as contemplated hereby; or
- we 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 an adverse tax consequence to the Trust
or us.
EXCHANGE AGENT
Wilmington Trust Company, as property trustee of the Trust, 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 Hand, Overnight Delivery, Registered or Certified Mail:
Wilmington Trust Company, as Exchange Agent
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration--
BFD Preferred Capital Trust II
Confirm by Telephone: (302) 651-1000
Facsimile Transmission: (302) 651-8882
(Eligible Institutions Only)
Delivery to another address other than the above address or facsimile
number will not constitute a valid delivery.
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FEES AND EXPENSES
We have 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 with the exchange offering. We 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.
Neither we nor the Trust will make any payment to brokers, dealers or other
nominees soliciting acceptances of the exchange offer.
DESCRIPTION OF CAPITAL SECURITIES
Under the terms of the trust agreement, the trustees on behalf of the trust
will issue the exchange capital securities. The exchange capital securities will
represent beneficial interests in the trust and their holders will be entitled
to a preference over the common securities in certain circumstances with respect
to distributions and amounts payable on redemption of the exchange capital
securities or liquidation of the trust. See "--Subordination of Common
Securities." The trust agreement will be qualified under the Trust Indenture Act
of 1939, as amended, referred to as the Trust Indenture Act. This summary
describes the material provisions of the exchange capital securities. It is not
complete and is subject to, and qualified by, the trust agreement, including the
definitions used in the trust agreement, and the Trust Indenture Act. We have
incorporated the definitions used in the trust agreement in this prospectus. You
can receive a complete copy of the form of trust agreement by requesting a copy
from us.
GENERAL
The exchange capital securities will be limited to $22.0 million aggregate
liquidation amount at any one time outstanding. The exchange capital securities
will rank equal to, and payments will be made on a pro rata basis with, the
common securities, except as described under "Subordination of Common
Securities." The property trustee will have legal title to the exchange
debentures and will hold them in trust for the benefit of you and the other
holders of the exchange capital securities. Our exchange guarantee for the
benefit of the holders of the exchange capital securities will be a guarantee on
a subordinated basis with respect to the exchange capital securities, but will
not guarantee payment of distributions or amounts payable on redemption of the
exchange capital securities or liquidation of the Trust when the Trust does not
have funds legally available for such payments. You should read "Description of
Exchange Guarantee" for more information about our guarantee.
DISTRIBUTIONS
Distributions on the exchange capital securities will be cumulative, and
will accumulate from the date that the original capital securities were first
issued. Distributions will be payable at the annual rate of 10.875% of the
liquidation amount, payable semiannually in arrears on the distribution dates,
which are April 1 and October 1 of each year, commencing April 1, 2001, to the
holders of the exchange capital securities on the relevant record dates. The
record dates will be the 15th day of the month immediately preceding the month
in which the relevant distribution date occurs. In the event the exchange offer
is consummated before the first record date of March 15, 2001, each exchange
capital security will pay cumulative distributions from and after September 22,
2000 and no distributions will be paid on any original capital security tendered
to an exchange capital security. However, if the exchange offer is consummated
after March 15, 2001, distributions will be paid on the original capital
securities accumulated from and after September 22, 2000 through April 1, 2001
and distributions will be paid on the exchange capital securities from and after
April 1, 2001. The amount of distributions to be paid on each distribution
37
with respect to the capital securities will include amounts accrued to, but
excluding the date the distribution is due. Because of the foregoing procedures
regarding distributions, the amount of the distributions received by holders
whose original capital securities are accepted for exchange will not be affected
by the exchange. The amount of distributions payable for any distribution period
will be based on a 360-day year of twelve 30-day months.
If any distribution date would otherwise fall on a day that is not a
business day, the required payment will be made on the next business day without
any additional payments for the delay. A business day means any day other than a
Saturday or a Sunday, or a day on which banking institutions in New York, New
York, Wilmington, Delaware or Burlington, Massachusetts are authorized or
required by law or executive order to remain closed.
The Trust's revenue available for distribution to holders of the exchange
capital securities will be limited to our payments to the Trust under our
exchange debentures. For more information, please refer to "Description of
Exchange Debentures--General." If we do not make interest payments on the
exchange debentures, the property trustee will not have funds available to pay
distributions on the exchange capital securities. Our guarantee only covers the
payment of distributions if, and to the extent that, the Trust has funds legally
available to pay the distributions. You should read "--Description of Exchange
Guarantee" for more information about the extent of our guarantee.
OPTION TO DEFER INTEREST PAYMENTS
As long as no event of default under the exchange debenture exists, we have
the right under the indenture to elect to defer the payment of interest on the
exchange debentures, at any time or from time to time, for no more than 10
consecutive semiannual periods, provided that no deferral period will end on a
date other than an interest payment date, or extend beyond October 1, 2030, the
stated maturity date of the exchange debentures. If we defer payments, the Trust
will defer semiannual distributions on the exchange capital securities during
the deferral period. During any deferral period, distributions will continue to
accumulate on the exchange capital securities and on any accumulated and unpaid
distributions, compounded semiannually from the relevant distribution date at
the applicable distribution rate, which will be equal to the applicable interest
rate on the exchange debentures. The term distributions includes any accumulated
additional distributions.
Before the end of any deferral period, we may extend the deferral period,
as long as the extension does not cause the deferral period to exceed 10
consecutive semiannual periods or to end on a date other than an interest
payment date or extend beyond October 1, 2030. At the end of any deferral period
and upon the payment of all amounts then due on any interest payment date, we
may elect to begin a new deferral period, subject to the above requirements. No
interest shall be due and payable during a deferral period until the deferral
period ends. We must give the property trustee, the administrative trustees and
the debenture trustee notice of our election to defer interest payments or to
extend a deferral period at least five business days before the earlier of:
- the date the distributions on the exchange capital securities would
have been payable, except for the election to begin a deferral period;
and
- the date the property trustee is required to give notice to any
securities exchange or automated quotation system or to holders of the
exchange capital securities of the record date or the date such
distributions are payable, but in any event at least five business
days before such record date.
There is no limitation on the number of times that we may elect to begin a
deferral period. Please refer to "Description of Exchange Debentures--Option to
Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
During any deferral period, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock;
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- make any payment of principal of, or interest on, or repay, repurchase
or redeem any debt securities (including any other debentures) that
rank equal or junior to the exchange debentures; or
- make any guarantee payments with respect to any guarantee of the debt
securities of any of our subsidiaries (including other guarantees) if
such guarantee ranks equal or junior to the exchange debentures.
Notwithstanding the foregoing, during a deferral period the following is
permitted:
- a payment of dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, our common
stock;
- a 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;
- a payment under the guarantee;
- a reclassification of our capital stock or the exchange or
conversion of one class or series of our capital stock for another
class or series of our capital stock;
- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and
- the purchase of common stock related to the issuance of common stock
or rights under any of our benefit plans for our directors, officers
or employees or any of our dividend reinvestment plans.
We do not currently intend to exercise our right to defer payments of
interest on the exchange debentures. Our obligations under the guarantee to make
payment of distributions is limited to the extent that the Trust has funds
legally available to pay distributions. You should read "Description of Exchange
Guarantee" for more information about the extent of our guarantee.
REDEMPTION
Upon repayment at maturity on October 1, 2030 or prepayment, in whole or in
part prior to October 1, 2030, of the exchange debentures (other than following
the distribution of the exchange debentures to you as a holder of the exchange
capital securities and us, as the holder of the common securities), the property
trustee will apply the proceeds from the repayment or prepayment of the exchange
debentures (as long as the property trustee has received written notice no later
than 45 days before the repayment) to redeem at the applicable redemption price
exchange capital securities and common securities having an aggregate
liquidation amount equal to the principal amount of the exchange debentures paid
to the Trust. The Trust will give notice of any redemption of exchange capital
securities between 30 to 60 days prior to the redemption date.
If we prepay less than all of the exchange debentures on the stated
maturity date or a redemption date, then the property trustee will allocate the
proceeds of the prepayment on a pro rata basis among the exchange capital
securities and the common securities. If a court of competent jurisdiction
enters an order to dissolve the Trust, the exchange debentures will be subject
to optional prepayment in whole, but not in part, on or after October 1, 2010.
We will have the right to prepay the exchange debentures:
- in whole or in part, on or after October 1, 2010; and
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- in whole but not in part, prior to October 1, 2010, if there are
changes in the bank regulatory, investment company or tax laws that
would adversely affect the status of the Trust, the exchange capital
securities or the exchange debentures.
We may have to obtain regulatory approval, including the approval of the
Federal Reserve, before we redeem any exchange debentures. Please refer to
"Description of Exchange Debentures--Optional Prepayment" and "--Special Event
Prepayment" for information on prepayment of the exchange debentures.
The redemption prices applicable to the exchange capital securities will
correspond to the maturity and prepayment prices applicable to the exchange
debentures.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF EXCHANGE DEBENTURES
We will have the right at any time to dissolve the Trust and, after
satisfying the liabilities owed to the Trust's creditors, as required by
applicable law, we will have the right to distribute the exchange debentures to
the holders of the exchange capital securities and to us as holder of the common
securities. Our right to dissolve the Trust is subject to our receiving:
- an opinion of counsel to the effect that if we distribute the exchange
debentures, the holders of the exchange capital securities will not
experience a taxable event; and
- all required regulatory approvals.
The Trust will automatically dissolve if:
- certain bankruptcy events occur, or we dissolve or liquidate;
- we distribute exchange debentures having a principal amount equal to
the liquidation amount of the exchange capital securities and the
common securities to holders of such securities and we, as sponsor,
have given written directions to the property trustee to dissolve the
Trust (which direction is at our option and, except as described
above, wholly within our discretion, as sponsor);
- the Trust redeems all of the exchange capital securities and common
securities in accordance with their terms;
- the exchange debentures are redeemed or repaid or there are no
exchange debentures outstanding;
- the Trust's term expires; or
- a court of competent jurisdiction enters an order for the dissolution
of the Trust.
If the Trust is dissolved for any of the above reasons, except for a
redemption of all capital securities and the common securities, the
administrative trustees will liquidate the Trust as quickly as they determine to
be possible by distributing to holders of the exchange capital securities and
the common securities, after satisfying the liabilities owed to the Trust's
creditors, as provided by applicable law, exchange debentures having a principal
amount equal to the liquidation amount of the exchange capital securities and
the common securities, unless the property trustee determines that this
distribution is not practicable. If the property trustee determines that this
distribution is not practicable, the holders of the exchange capital securities
will be entitled to receive an amount equal to the aggregate of the liquidation
amount, plus accumulated and unpaid distributions on the exchange capital
securities to the date of payment (such amount being the "liquidation
distribution") out of the assets of the Trust legally available for distribution
to holders, after satisfying the liabilities owed to the Trust's creditors as
provided by applicable law. If the liquidation distribution can be paid only in
part because the Trust has insufficient assets legally available to pay the full
amount of the liquidation distribution, then the amounts payable shall be paid
pro
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rata on the exchange capital securities and the common securities, except that
if an event of default under the exchange debentures exists, the exchange
capital securities will have a priority over the common securities. For more
information, please refer to "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of exchange
debentures to holders of the exchange capital securities:
- the exchange capital securities will no longer be deemed to be
outstanding;
- DTC or its nominee will receive in respect of each registered global
certificate representing exchange capital securities a registered
global certificate representing the exchange debentures to be
delivered upon this distribution; and
- any certificates representing exchange capital securities not held by
DTC or its nominee will be deemed to represent exchange debentures
having a principal amount equal to the liquidation amount of those
exchange capital securities, and bearing accrued and unpaid interest
in an amount equal to the accumulated and unpaid distributions on
those exchange capital securities until such certificates are
presented to the administrative trustees or their agent for
cancellation, in which case we will issue to those holders, and the
debenture trustee will authenticate, a certificate representing the
exchange debentures.
We cannot assure you of the market prices for the exchange capital
securities or the exchange debentures that may be distributed to you in exchange
for the exchange capital securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the exchange capital securities that you
purchase, or the exchange debentures that you may receive upon a dissolution and
liquidation of the Trust, may trade at a discount to the price that you paid to
purchase the exchange capital securities.
If we elect not to prepay the exchange debentures prior to maturity and
either elect not to or we are unable to liquidate the Trust and distribute the
exchange debentures to holders of the exchange capital securities, the exchange
capital securities will remain outstanding until the repayment of the exchange
debentures on October 1, 2030.
REDEMPTION PROCEDURES
If we pay the exchange debentures at maturity or earlier prepayment, the
Trust will redeem exchange capital securities at the applicable redemption price
with the proceeds that it receives from our payment or prepayment of the
exchange debentures. Any redemption of exchange capital securities will be made
and the applicable redemption price will be payable on the redemption date only
to the extent that the Trust has funds legally available to pay the applicable
redemption price. For more information, you should refer to "--Subordination of
Common Securities."
If the Trust gives a notice of redemption for the exchange capital
securities, then, by 12:00 noon, New York City time, on the redemption date, to
the extent funds legally are available, with respect to:
- the exchange capital securities held by DTC or its nominees, the
property trustee will deposit, or cause the paying agent to deposit,
irrevocably with DTC funds sufficient to pay the applicable redemption
price. For more information, you should refer to "--Form,
Denomination, Book--Entry Procedures and Transfers;" and
- the exchange capital securities held in certificated form, the
property trustee will irrevocably deposit with the paying agent funds
sufficient to pay the applicable redemption price and will give the
paying agent irrevocable instructions and authority to pay the
applicable redemption price to the holders upon surrender of their
certificates evidencing the exchange capital securities. For more
information, you should refer to "--Payment and Paying Agency."
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The paying agent will initially be the property trustee and any co-paying
agent chosen by the property trustee and acceptable to the administrative
trustees and us.
Notwithstanding the foregoing, distributions payable on or before the
redemption date will be payable to the holders of the exchange capital
securities on the relevant record dates for the related distribution dates. If
the Trust gives a notice of redemption and funds are deposited as required, then
upon the date of the deposit, all rights of the holders of the exchange capital
securities called for redemption will cease, except the right of the holders of
the exchange capital securities to receive the applicable redemption price,
without interest, and the exchange capital securities called to be redeemed will
cease to be outstanding.
If any redemption date for the exchange capital securities is not a
business day, then the applicable redemption price, without interest or any
other payment in respect of the delay, will be paid on the next business day,
except that, if the next business day falls in the next calendar year, the
payment shall be made on the last business day of the current calendar year.
If payment of the applicable redemption price is improperly withheld or
refused and not paid either by the Trust or by us pursuant to the guarantee:
- distributions on the exchange capital securities will continue to
accumulate from the redemption date originally established by the
Trust to the date such applicable redemption price is actually paid;
and
- the actual payment date will be the redemption date for purposes of
calculating the applicable redemption price.
Notice of any redemption will be mailed between 30 and 60 days before the
redemption date to each holder of exchange capital securities at its registered
address. Unless we default in payment of the applicable redemption price on, or
in the repayment of, the exchange debentures, on and after the redemption date,
distributions will cease to accrue on the exchange capital securities called for
redemption.
Subject to applicable law, including, without limitation, federal
securities laws, we or our subsidiaries may at any time, and from time to time,
purchase outstanding exchange capital securities in the open market or by
private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, the redemption price of, and the liquidation
distribution for, the exchange capital securities and the common securities, as
applicable, will generally be made on a pro rata basis. However, if an event of
default under the exchange debentures exists on any distribution, redemption or
liquidation date, no payment of any distribution on, or applicable redemption
price of, or liquidation distribution for, any of the common securities, and no
other payment on account of the redemption, liquidation or other acquisition of
the common securities, will be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the outstanding exchange capital
securities for all distribution periods terminating on or before the
distribution, redemption or liquidation date, or payment of the applicable
redemption price or liquidation distribution is made in full. All funds
available to the property trustee will first be applied to the payment in full
in cash of all distributions on, or redemption price of, or liquidation
distribution for, the exchange capital securities then due and payable.
In the case of any event of default under the trust agreement, we, as
holder of all of the common securities, will be deemed to have waived any right
to act with respect to the event of default until the effect of the event of
default has been cured or waived. Until any event of default has been cured or
waived, the property trustee will act solely on behalf of the holders of the
exchange capital securities and not on our behalf, and only the holders of the
exchange capital securities will have the right to direct the property trustee
to act on their behalf.
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EVENTS OF DEFAULT; NOTICE
An event of default under the exchange debentures constitutes an event of
default under the trust agreement. See "Description of Exchange Debentures-- e
Events of Default Under the Exchange Debentures."
The trust agreement provides that within ten (10) business days after the
property trustee has actual knowledge that any event of default has occurred,
the property trustee will give notice of the event of default to the holders of
the exchange capital securities, the administrative trustees and, to us, as
sponsor, unless the event of default has been cured or waived. We, as sponsor,
and the administrative trustees are required to file annually with the property
trustee a certificate as to whether we and the administrative trustees have
complied with the applicable conditions and covenants of the trust agreement.
If an event of default under the exchange debenture exists, the exchange
capital securities will have a preference over the common securities as
described under "--Liquidation of the Trust and Distribution of Exchange
Debentures" and "--Subordination of Common Securities." An event of default does
not entitle the holders of capital securities to require the redemption of the
exchange capital securities.
REMOVAL OF TRUSTEES
Unless an event of default under the exchange debenture exists, we may
remove the property trustee and the Delaware trustee at any time. If an event of
default under the exchange debenture exists, the property trustee and the
Delaware trustee may be removed only by the holders of a majority in liquidation
amount of the outstanding exchange capital securities. In no event will the
holders of the exchange capital securities have the right to vote to appoint,
remove or replace the administrative trustees, because these voting rights are
vested exclusively in us as the holder of all of the common securities. No
resignation or removal of the property trustee or the Delaware trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the trust agreement.
MERGER OR CONSOLIDATION OF TRUSTEES
If the property trustee, the Delaware trustee or any administrative trustee
that is not a natural person is merged, converted or consolidated into another
entity, or the property trustee or the Delaware trustee is a party to a merger,
conversion or consolidation which results in a new entity, or an entity succeeds
to all or substantially all of the corporate trust business of the property
trustee or the Delaware trustee, the new entity shall be the successor of the
respective trustee under the trust agreement, provided that the entity is
otherwise qualified and eligible.
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 all or substantially all of its
properties and assets to any corporation or other entity, except as described
below or as otherwise described under "--Liquidation of the Trust and
Distribution of Exchange Debentures." The Trust may, at our request, as sponsor,
and with the consent of the administrative trustees but without the consent of
the holders of the exchange capital securities, merge with or into, consolidate,
amalgamate or be replaced by or convey, transfer or lease all or substantially
all of its properties and assets to a trust organized as such under the laws of
any state; provided, that:
- the successor either:
* expressly assumes all of the obligations of the Trust with
respect to the exchange capital securities; or
* substitutes securities for the exchange capital securities that
have substantially the same terms as the exchange capital
securities so long as the substitute securities rank equal to
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the exchange capital securities in priority with respect to
distributions and payments upon liquidation, redemption and
otherwise;
- we appoint a trustee of the successor possessing the same powers and
duties as the property trustee with respect to the exchange
debentures;
- the substitute securities are listed, or any substitute securities
will be listed upon notification of issuance, on any national
securities exchange or other organization on which the exchange
capital securities are then listed or quoted, if any;
- if the exchange capital securities, substitute securities or exchange
debentures are rated by any nationally recognized statistical rating
organization prior to such transaction, the transaction does not cause
any of those securities to be downgraded by any such organization;
- the transaction does not adversely affect the rights, preferences and
privileges of the holders of the exchange capital securities
(including any successor securities) in any material respect;
- the successor has a purpose substantially identical to that of the
Trust; and
- prior to the transaction, we received an opinion from independent
counsel to the Trust experienced in such matters to the effect that:
* the transaction does not adversely affect the rights, preferences
and privileges of the holders of the exchange capital securities
(including any successor securities) in any material respect
(other than any dilution of such holders' interests in the new
entity);
* following the transaction, neither the Trust nor the successor
will be required to register as an investment company under the
Investment Company Act;
* the Trust continues to be, and any successor will be, classified
as a grantor trust for federal income tax purposes; and
* we, or any permitted successor or assignee, own all of the common
securities of the successor and guarantee the obligations of the
successor under the substitute securities at least to the extent
provided by our guarantee and the common securities guarantee.
Notwithstanding the foregoing, the Trust may not, except with the consent
of holders of 100% in liquidation amount of the exchange capital securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease all or substantially all of its properties and assets to, any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if the transaction would cause the Trust or the successor
not to be classified as a grantor trust for federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided under "--Mergers, Consolidations, Amalgamations or
Replacements of the Trust" and "Description of Exchange Guarantee--Amendments
and Assignment" and as otherwise required by law and the trust agreement, the
holders of the exchange capital securities will have no voting rights.
We, together with the property trustee and the administrative trustees, may
amend the trust agreement from time to time, without the consent of the holders
of the exchange capital securities, 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
44
questions arising under the trust agreement, which are not
inconsistent with the other provisions of the trust agreement;
- modify, eliminate or add to any provisions of the trust agreement as
is necessary to ensure that at all times that any exchange capital
securities are outstanding, the Trust will be classified as a grantor
trust for federal income tax purposes, or to ensure that the Trust
will not be required to register as an investment company under the
Investment Company Act; or
- modify, eliminate or add any provisions of the trust agreement as is
necessary to enable us or the Trust to conduct an exchange offer in
the manner contemplated by the registration rights agreement;
provided, however, that the amendment would not adversely affect in any material
respect the interests of the holders of the exchange capital securities. Any
amendments of the trust agreement pursuant to the foregoing shall become
effective when notice of the amendment is given to the holders of the exchange
capital securities.
We, together with the trustees, may amend the trust agreement:
- with the consent of holders of a majority in liquidation amount of the
outstanding exchange capital securities; and
- upon receipt by the trustees of an opinion of counsel experienced in
such matters to the effect that the amendment or the exercise of any
power granted to the trustees in accordance with the amendment will
not affect the Trust's status as being a grantor trust for 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 exchange capital
securities and common securities, no amendment may change the amount or timing
of any distribution on the exchange capital securities and common securities or
otherwise adversely affect the amount of any distribution required to be made in
respect of the exchange capital securities and common securities as of a
specified date, change any of the prepayment provisions, or restrict the right
of a holder of exchange capital securities and common securities to sue for the
enforcement of any payment on or after the specified date.
So long as the property trustee holds any exchange debentures, the trustees
may not:
- 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 exchange
debentures;
- waive certain past defaults under the indenture;
- exercise any right to rescind or annul a declaration accelerating the
maturity of the principal of the exchange debentures; or
- consent to any amendment, modification or termination of the indenture
or the exchange debentures, where such consent shall be required,
without, in each case, obtaining the prior consent of the holders of a majority
in liquidation amount of all outstanding exchange capital securities; provided,
however, that where a consent under the indenture would require the consent of
each holder of exchange debentures affected by the amendment, modification or
termination, the property trustee will not give its consent without the prior
approval of each holder of the exchange capital securities.
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The trustees shall not revoke any action previously authorized or approved
by a vote of the holders of the exchange capital securities, except by
subsequent vote of such holders. The property trustee shall notify each holder
of exchange capital securities of any notice of default with respect to the
exchange debentures. In addition to obtaining the approvals of the holders of
the exchange 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
federal income tax purposes after taking the action into account.
Any required approval of holders of exchange capital securities may be
given at a meeting of the holders convened for the purpose of approving the
matter or pursuant to written consent. The property trustee will cause a notice
to be given of any meeting at which holders of exchange capital securities are
entitled to vote or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of exchange capital
securities in accordance with the trust agreement.
No vote or consent of the holders of exchange capital securities will be
required for the Trust to redeem and cancel the exchange capital securities in
accordance with the trust agreement.
Notwithstanding that holders of the exchange capital securities are
entitled to vote or consent under any of the circumstances described above, any
of the exchange capital securities that are owned by us, the Trust, the trustees
or any affiliates thereof shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The exchange capital securities initially will be represented by one or
more exchange capital securities in registered, global form (collectively, the
global exchange capital securities). The global exchange capital securities will
be deposited upon issuance with the property trustee as custodian for DTC, in
Wilmington, Delaware, 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 in this prospectus.
In the event that exchange capital securities are issued in certificated
form, the exchange capital securities will be in blocks having a liquidation
amount of not less than $100,000 (100 exchange capital securities) and may be
transferred or exchanged only in such blocks and in the manner described in this
prospectus.
Except as set forth in this prospectus, the global exchange 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 exchange capital securities. Beneficial
interests in the global exchange capital securities may not be exchanged for
exchange capital securities in certificated form, except in the limited
circumstances described in this prospectus. See "--Exchange of Book-Entry
Capital Securities for Certificated Capital Securities."
DEPOSITARY PROCEDURES
DTC has advised the Trust and us that it 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, "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, to eliminate 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 banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly (collectively, indirect participants). Persons who are
not participants may beneficially own securities held by or on behalf of DTC
only through participants or indirect participants. The ownership interest and
transfer of ownership
46
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of participants and indirect participants.
DTC also has advised the Trust and us that, pursuant to procedures
established by it, (i) upon deposit of the global exchange capital securities,
DTC will credit the accounts of participants designated by the initial purchaser
with the designated liquidation amount of the global exchange capital securities
and (ii) ownership of beneficial interests in the global exchange capital
securities will be shown on, and the transfer of ownership of the global
exchange capital securities, will be effected only through, records maintained
by DTC (with respect to participants) or by participants and indirect
participants (with respect to other owners of beneficial interests in the global
exchange capital securities).
You may hold your interests in the global capital security directly through
DTC if you are a participant, 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 those 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 its interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interests, may be affected by the lack of a physical certificate
evidencing its interests. For certain other restrictions on the transferability
of the exchange capital securities, see "--Exchange of Book-Entry Capital
Securities for Certificated Capital Securities."
Except as described below, owners of beneficial interests in the global
capital securities will not have exchange capital securities registered in their
name, will not receive physical delivery of exchange capital securities in
certificated form and will not be considered the registered owners or holders
thereof under the trust agreement for any purpose.
Payments on 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 holder under the trust agreement. Under the terms of the trust agreement,
the property trustee will treat the persons in whose names the exchange capital
securities, including the global exchange capital securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Neither the property trustee nor any agent
thereof has or will have any responsibility or liability for:
- 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 exchange 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 exchange
capital securities; or
- o any other matter relating to the actions and practices of DTC or any
of its participants or indirect participants.
DTC has advised the Trust and us that its current practice, upon receipt of
any payment on the exchange 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 the exchange
capital securities as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on the payment date. Payments by
participants and indirect participants to the beneficial owners of exchange
capital securities will be governed by standing instructions and customary
practices and will be the responsibility of participants or indirect
participants and will not be the responsibility of DTC, the property trustee,
the Trust or us. None of us, the Trust or the property trustee will be liable
for any delay by DTC or any of its participants or indirect participants in
identifying the beneficial owners of the exchange capital securities, and we,
the Trust and the property trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee for all purposes.
47
Any secondary market trading activity in interests in the global exchange
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 the Trust and us that it will take any action permitted to
be taken by a holder of exchange capital securities (including, without
limitation, presenting the exchange capital securities for exchange as described
below) only at the direction of one or more participants who have an interest in
DTC's global exchange capital securities in respect of the portion of the
liquidation amount of the exchange capital securities as to which the
participant or participants has or have given direction. However, if an event of
default exists under the trust agreement, DTC reserves the right to exchange the
global exchange capital securities for legended exchange capital securities in
certificated form and to distribute the certificated capital securities to its
participants.
We believe that the information in this section concerning DTC and its
book-entry system has been obtained from reliable sources, but we do not take
responsibility for the accuracy of this information.
Although DTC has agreed to the procedures described in this section to
facilitate transfers of interests in the global exchange capital securities
among participants in DTC, DTC is not obligated to perform or to continue to
perform these procedures, and these procedures may be discontinued at any time.
None of us, the Trust, or the property trustee will have any responsibility or
liability for any aspect of the performance by DTC or its participants or
indirect participants of any of their respective obligations under the rules and
procedures governing their operations or for maintaining, supervising or
reviewing any records relating to the global exchange capital securities that
are maintained by DTC or any of its participants or indirect participants.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A global capital security is exchangeable for exchange capital securities
in registered certificated form if:
- DTC notifies the Trust that it is unwilling or unable to continue as
depositary for the global capital security and the Trust fails to
appoint a successor depositary within 90 days of receipt of DTC's
notice, or DTC has ceased to be a clearing agency registered under the
Exchange Act and the Trust fails to appoint a successor depositary
within 90 days of becoming aware of this condition;
- the Trust, in its sole discretion, elects to cause the exchange
capital securities to be issued in certificated form; or
- an event of default, or any event which after notice or lapse of time
or both would be an event of default, exists under the trust
agreement.
In addition, beneficial interests in a global capital security will be
exchanged by or on behalf of DTC for certificated exchange 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 exchange capital securities delivered in exchange for any
global capital security will be registered in the names, and issued in any
approved denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
PAYMENT AND PAYING AGENCY
The Trust will make payments on any global capital security to DTC, which
will credit the relevant accounts at DTC on the applicable distribution dates.
The Trust will make payments on the exchange capital securities that are not
held by DTC by mailing a check to the address of the holder entitled to the
payment as the holder's address appears on the register. The paying agent will
initially be the property trustee and any copaying agent chosen by the property
trustee and acceptable to the administrative trustees and us. The paying agent
will be permitted to resign as paying agent upon 30 days' notice to the property
trustee, the administrative trustees and us. In the event that the property
trustee is no longer the paying agent, the administrative trustees will appoint
a
48
successor (which must be a bank or trust company acceptable to the
administrative trustees and us) to act as paying agent.
RESTRICTIONS ON TRANSFER
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
exchange capital securities) and multiples of $1,000 in excess of $100,000. Any
attempted sale, transfer or other disposition of exchange capital securities in
a block having a liquidation amount of less than $100,000 will be deemed to be
void and of no legal effect whatsoever. Any such purported transferee will be
deemed not to be the holder of such exchange capital securities for any purpose,
including but not limited to the receipt of distributions on such exchange
capital securities, and such purported transferee will be deemed to have no
interest whatsoever in such exchange capital securities.
REGISTRAR AND TRANSFER AGENT
The property trustee will act as registrar and transfer agent for the
exchange capital securities.
The Trust will register transfers of the exchange capital securities
without charge, except for any tax or other governmental charges that may be
imposed in connection with any transfer or exchange. The Trust will not be
required to have the transfer of the exchange capital securities registered
after they have been called for redemption.
MISCELLANEOUS
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the Trust so that:
- the Trust will not be deemed to be an investment company required to
be registered under the Investment Company Act;
- the Trust will be classified as a grantor trust for federal income tax
purposes; and
- the exchange debentures will be treated as our indebtedness for
federal income tax purposes.
We, together with the administrative trustees, are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the trust agreement, that we and the administrative trustees determine
in our discretion is necessary or desirable, as long as it does not materially
adversely affect the interests of the holders of the exchange capital
securities.
The trust agreement provides that holders of the capital securities have no
preemptive or similar rights to subscribe for any additional capital securities
and the issuance of capital securities is not subject to preemptive or similar
rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
GOVERNING LAW
The trust agreement and exchange capital securities will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of law principles.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
Except if an event of default exists under the trust agreement, the
property trustee will undertake to perform only the duties specifically set
forth in the trust agreement. While such an event of default exists, the
49
property trustee 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 not obligated to exercise any of the
powers vested in it by the trust agreement at the request of any holder of
exchange capital securities, unless it is offered reasonable indemnity against
the costs, expenses and liabilities that it might incur. If no event of default
exists and the property trustee is required to decide between alternative
courses of action or to 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 exchange capital securities or the
common securities are entitled under the trust agreement to vote, then the
property trustee shall take such action as directed by us and, if not directed,
shall take such action as it deems advisable and in the best interests of the
holders of the exchange capital securities and will have no liability, except
for its own bad faith, negligence or willful misconduct.
DESCRIPTION OF EXCHANGE DEBENTURES
This summary describes the material provisions of the exchange debentures.
It is not complete and is subject to, and qualified in its entirety by, the
indenture. The indenture will be qualified by the Trust Indenture Act. We have
incorporated the definitions used in the indenture in this prospectus . You can
obtain a copy of the indenture by requesting it from us. Wilmington Trust
Company will act as debenture trustee under the indenture.
GENERAL
The Trust invested the proceeds from the sale of the capital securities and
the common securities in the original junior subordinated debentures issued by
BostonFed Bancorp. The original junior subordinated debentures bear interest at
the annual rate of 10.875% of the principal amount of the original junior
subordinated debentures, payable semiannually in arrears on interest payment
dates of April 1 and October 1 of each year to the person in whose name each
original junior subordinated debenture is registered at the close of business on
the relevant record date. The exchange debentures will have terms identical in
all material respects to the original junior subordinated debentures, except
that the exchange debentures will not have certain terms with respect to
transfer restrictions under the Securities Act and will not provide for
liquidated damages. The first interest payment date for the exchange debentures
will be April 1, 2001. The period beginning on and including the date the
exchange debentures are first issued and ending on but excluding April 1, 2001
and each period beginning on and including an interest payment date and ending
on but excluding the next interest payment date is an interest period.
We anticipate that, until the liquidation, if any, of the Trust, each
exchange debenture will be held by the property trustee in trust for the benefit
of the holders of the exchange capital securities. The amount of interest
payable for any interest period will be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any interest payment date would
otherwise fall on a day that is not a business day, the required payment will be
made on the next business day (without any interest or other payment due to the
delay).
Accrued interest that is not paid on the applicable interest payment date
will bear additional interest (to the extent permitted by law) at the rate of
10.875% per year, compounded semiannually, from the last interest payment date
for which interest was paid. The term "interest" as used in this prospectus
includes semiannual interest payments and interest on semiannual interest
payments not paid on the applicable interest payment date.
Notwithstanding anything to the contrary above, if the stated maturity date
or date of earlier redemption falls on a day that is not a business day, the
payment of principal and interest will be paid on the next business day, with
the same force and effect as if made on such date, and no interest on such
payments will accrue from and after such date.
The exchange debentures will be issued as a series of junior subordinated
deferrable interest debentures under the indenture.
The exchange debentures will mature on October 1, 2030, unless redeemed
prior thereto in accordance with the terms discussed below.
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The exchange debentures will rank equal to all of our other junior
subordinated debentures (including any other debentures) which have been or may
be issued to other trusts established by us, in each case similar to the Trust,
and will be unsecured and rank subordinate and junior to all of our senior
indebtedness to the extent and in the manner set forth in the indenture. See
"--Subordination."
We are a bank holding company regulated by the Federal Reserve and our
subsidiaries own almost all of our operating assets. We are a legal entity
separate and distinct from our subsidiaries. Holders of exchange debentures
should look only to us for payments on the exchange debentures. We rely
primarily on dividends from the Banks to meet our obligations for payment of
principal and interest on our outstanding debt obligations and corporate
expenses. Dividend payments from the Banks are subject to regulatory
limitations, generally based on current and retained earnings, imposed by the
various regulatory agencies with authority over the respective Banks. Payment of
dividends by the Banks is also subject to the respective Bank's profitability,
financial condition and capital expenditures and other cash flow requirements.
The Federal Reserve 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: (i) the organization's net income available to common
shareholders over the past year has been sufficient to fund fully the dividends;
and (ii) the prospective rate of earnings retention appears consistent with the
organization's capital needs, asset quality, and overall financial condition. No
assurance can be given that the Banks will be able to pay dividends at past
levels, or at all, in the future. See "Risk Factors--Banking laws and
regulations could limit our access to funds from Boston Federal and Broadway
National, our primary sources of liquidity, which are needed to make payments
under the exchange debentures."
In addition to restrictions on the payment of dividends, the Banks are
subject to certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, us and certain other affiliates,
and on investments in stock or other securities thereof. Such restrictions
prevent us and such other affiliates from borrowing from the Banks unless the
loans are secured by various types of collateral. Furthermore, such secured
loans, other transactions and investments by the Banks are generally limited in
amount as to us and as to each of such other affiliates to 10% of each Bank's
capital and surplus and as to us and all of such other affiliates to an
aggregate of 20% of each Bank's capital and surplus. As of September 30, 2000,
approximately $7.5 million of credit was available to us under this limitation.
Because we are a holding company, our right 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 the Banks), except to the extent that we may be recognized as a creditor of
that subsidiary. At September 30, 2000, our subsidiaries had total liabilities,
including deposits, of $1.2 billion. Accordingly, the junior subordinated
debentures will be effectively subordinated to all existing and future
liabilities of our subsidiaries (including the Banks' deposit liabilities) and
all liabilities of any of our future subsidiaries. At September 30, 2000, we had
no senior indebtedness on an unconsolidated basis. The indenture does not limit
us or any of our subsidiaries from incurring or issuing other secured or
unsecured debt, including senior indebtedness. See "--Subordination."
FORM, REGISTRATION AND TRANSFER
If the exchange debentures are distributed to the holders of the exchange
capital securities, the exchange 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 exchange debentures are expected to be
substantially similar to those in effect for the exchange capital securities.
For a description of DTC and the terms of the depositary arrangements relating
to payments, transfers, voting rights, redemptions and other notices and other
matters, you should read "Description of Exchange Capital Securities--Form,
Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
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Payment of principal of and interest on the exchange 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 we may designate from time to
time, except that, at our option, payment of any interest may be made, except in
the case of exchange debentures in global form:
- by check mailed to the address of the person or entity entitled to the
interest payment as such address shall appear in the register for the
exchange debentures; or
- by transfer to an account maintained by the person or entity entitled
to the interest payment as specified in the register, provided that
proper transfer instructions have been received by the relevant record
date.
Payment of any interest on any exchange debenture will be made to the
person or entity in whose name the exchange debenture is registered at the close
of business on the record date for the interest payment date, except in the case
of defaulted interest.
We may at any time designate additional paying agents or rescind the
designation of any paying agent; however we will always be required to maintain
a paying agent in each place of payment for the exchange debentures.
Any moneys deposited with the debenture trustee or any paying agent, or
then held by us, in trust for the payment of the principal of or interest on any
exchange debenture and remaining unclaimed for two years after such principal or
interest has become due and payable shall, at our request, be repaid to us and
the holder of the exchange debenture shall thereafter look, as a general
unsecured creditor, only to us for payment.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no event of default under the exchange debenture exists, we will
have the right under the indenture to defer the payment of interest on the
exchange debentures, at any time and from time to time, for no more than 10
consecutive semiannual periods, provided that no deferral period shall end on a
date other than an interest payment date or extend beyond October 1, 2030. At
the end of a deferral period, we must pay all interest then accrued and unpaid
(together with interest thereon at the rate of 10.875% per year, compounded
semi-annually from the last interest payment date to which interest was paid, to
the extent permitted by applicable law). During a deferral period, interest will
continue to accrue, and holders of the exchange capital securities or, if the
exchange debentures have been distributed to holders of the exchange capital
securities, holders of exchange debentures, will be required to include that
deferred interest in gross income for federal income tax purposes on an accrual
method of accounting prescribed by the Code and Treasury regulation provisions
on original issue discount prior to the receipt of cash attributable to that
income. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any deferral period, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock;
- make any payment of principal of, or interest on, or repay, repurchase
or redeem any of our debt securities (including any other debentures)
that rank equal to or junior to the exchange debentures; or
- make any guarantee payments with respect to any guarantee by us of the
debt securities of any of our subsidiaries (including our guarantee of
the exchange capital securities of the Trust and any other guarantees)
if such guarantee ranks equal or junior to the exchange debentures.
Notwithstanding the foregoing, during a deferral period the following is
permitted:
52
- dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, our capital stock;
- 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 rights
pursuant thereto;
- payments under the exchange guarantee;
- a reclassification of our capital stock or the exchange or conversion
of one class or series of our capital stock for another class or
series of our capital stock;
- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and
- purchases of our common stock related to the issuance of common stock
or rights under any of our benefit plans for our directors, officers
or employees or any of our dividend reinvestment plans.
Before the end of any deferral period, we may extend the deferral period,
as long as no event of default exists and the extension does not cause the
deferral period to exceed 10 consecutive semiannual periods, to end on a date
other than an interest payment date or to extend beyond October 1, 2030. At the
end of any deferral period and upon the payment of all then accrued and unpaid
interest (together with interest thereon at the rate of 10.875% per year,
compounded semiannually, to the extent permitted by applicable law), we may
elect to begin a new deferral period, subject to the requirements set forth in
this prospectus . No interest will be due and payable during a deferral period
until the deferral period ends.
We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election at least five business days before the
earlier of:
- the date the distributions on the exchange capital securities would
have been payable, except for the election to begin or extend such
deferral period;
- the date the property trustee is required to give notice to any
securities exchange or automated quotation system on which the
exchange capital securities are listed or quoted or to holders of
exchange capital securities of the record date for such distributions;
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 will notify holders of the exchange capital
securities of our election to begin or extend a new deferral period.
There is no limit on the number of times that we may elect to begin a
deferral period.
We do not currently intend to exercise our right to defer payments of
interest on the exchange debentures.
OPTIONAL PREPAYMENT
The exchange debentures will be prepayable, in whole or in part, at our
option on or after October 1, 2010, subject to our receipt of any required
regulatory approval, at an optional prepayment price equal to $1,000 per
exchange capital security, plus, in each case, accrued and unpaid interest on
the exchange debentures, if any, to the date of prepayment.
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SPECIAL EVENT PREPAYMENT
If there are changes in the bank regulatory, investment company or tax laws
that adversely affect the status of the Trust, the exchange capital securities
or the exchange debentures, we may, at our option and at any time, subject to
our receipt of any required regulatory approval, prepay the exchange debentures,
in whole but not in part, at any time within 90 days of the change in the law,
at the special event prepayment price. The special event prepayment price will
be an amount equal to 100% of the principal amount of the exchange debentures
plus accrued and unpaid interest and liquidated damages, if any, to the date of
prepayment.
A change in the bank regulatory law means our receipt of an opinion of
independent bank regulatory counsel experienced in such matters to the effect
that, as a result of:
- any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of an applicable regulatory agency or
authority; or
- 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 the exchange capital securities are first issued,
the exchange capital securities do not constitute, or within 90 days of the
opinion will not constitute, Tier 1 capital (or its then equivalent if we were
subject to such capital requirement).
A change in the investment company law means the receipt by us and the
Trust of an opinion of independent securities counsel experienced in such
matters to the effect that, as a result of:
- any amendment to, or change (including any announced prospective
change) in, any laws or regulations of the United States or any rules,
guidelines or policies of any applicable regulatory agency or
authority; or
- 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 the exchange capital securities are first issued,
the Trust is, or within 90 days of the date of the opinion will be, considered
an investment company that is required to be registered under the Investment
Company Act.
A change in tax law means the receipt by us 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, any laws or regulations of the United States or any
political subdivision or taxing authority thereof or therein; or
- 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 the exchange capital securities are first issued,
there is more than an insubstantial risk that:
- the Trust is, or will be within 90 days of the date of such opinion,
subject to federal income tax with respect to any income received or
accrued on the exchange debentures;
54
- interest payable by us on the exchange debentures is not, or within 90
days of the date of such opinion will not be, deductible by us, in
whole or in part, for federal income tax purposes; or
- 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.
We will mail any notice of prepayment between 30 and 60 days before the
prepayment date to each holder of exchange debentures to be prepaid at its
registered address. Unless we default in payment of the prepayment price, on the
prepayment date interest shall cease to accrue on the exchange debentures called
for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a change in the tax law, we will pay as
additional amounts on the exchange debentures any amounts as may be necessary in
order that the amount of distributions then due and payable by the Trust on the
outstanding exchange capital securities shall not be reduced as a result of any
additional sums, including taxes, duties or other governmental charges to which
the Trust has become subject as a result of a change in the tax law.
CERTAIN COVENANTS OF BOSTONFED BANCORP
We covenant that we will not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our
capital stock; or
- make any payment of principal of, or interest or premium, if any, on,
or repay, repurchase or redeem any of our debt securities (including
any other debentures) that rank equal or junior to the exchange
debentures; or
- make any guarantee payments with respect to any of our guarantees of
the debt securities of any of our subsidiaries (including any other
guarantees) if such guarantee ranks equal or junior to the exchange
debentures.
if at such time:
- we have actual knowledge that there is any event that is, or with the
giving of notice or the lapse of time, or both, would be, an exchange
debenture event of default and that we have not taken reasonable steps
to cure;
- we are in default with respect to our payment obligations under the
exchange guarantee; or
- we have given notice of our election to exercise our right to defer
interest payments on the exchange debentures as provided in the
indenture and the deferral period, or any extension of the deferral
period, is continuing.
Notwithstanding the foregoing, the following is permitted:
- dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, our common stock;
- 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;
- payments under the exchange guarantee;
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- a reclassification of our capital stock or the exchange or conversion
of one class or series of our capital stock for another class or
series of our capital stock;
- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and
- purchases of our common stock related to the issuance of common stock
or rights under any of our benefit plans for our directors, officers
or employees or any of our dividend reinvestment plans.
So long as the capital securities remain outstanding, we also will
covenant:
- to directly or indirectly maintain 100% direct or indirect ownership
of the common securities; provided, however, that any of our permitted
successors under the indenture may succeed to our ownership of the
common securities;
- to use commercially reasonable efforts to cause the Trust to remain a
business trust, except in connection with the distribution of exchange
debentures to the holders of capital securities and common securities
in liquidation of the Trust, the redemption of all of the capital
securities and common securities, or certain mergers, consolidations
or amalgamations, each as permitted by the trust agreement;
- to use commercially reasonable efforts to cause the Trust to otherwise
continue to be classified as a grantor trust for federal income tax
purposes;
- to use commercially reasonable efforts to cause each holder of capital
securities to be treated as owning an undivided beneficial interest in
the junior subordinated debentures; and
- 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, we, together with the debenture trustee, may, without
the consent of the holders of exchange debentures, amend the indenture for
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies or enabling us and the Trust to conduct an exchange offer as
contemplated by the registration rights agreement, provided that any amendment
to the indenture does not materially adversely affect the interest of the
holders of exchange debentures. We, together with the debenture trustee, may
amend the indenture, regardless of the effect on the interest of the holders of
the exchange debenture, for specific purposes including, among other things, to
qualify, and qualifying, or maintaining the qualification of, the indenture
under the Trust Indenture Act.
The indenture permits us and the debenture trustee, with the consent of the
holders of a majority in aggregate principal amount of exchange debentures, to
modify the indenture in a manner affecting the rights of the holders of the
exchange debentures; provided that no modification may, without the consent of
the holders of each outstanding subordinated debenture affected:
- change the stated maturity date, or reduce the principal amount, of
the exchange debentures;
- reduce the amount payable on prepayment or reduce the rate or extend
the time of payment of interest except pursuant to our right under the
indenture to defer the payment of interest, see "--Option to Extend
Interest Payment Date";
- change any of the prepayment provisions;
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- make the principal of, or interest on, the exchange debentures payable
in any coin or currency other than that provided in the exchange
debentures;
- impair or affect the right of any holder of exchange debentures to
institute suit for the payment thereof; or
- reduce the percentage of the principal amount of the exchange
debentures, the holders of which are required to consent to any such
modification.
EVENTS OF DEFAULT UNDER THE EXCHANGE DEBENTURE
An event of default under the exchange debenture means:
- our failure for 30 days to pay any interest, including compounded
interest and additional sums, if any, or liquidated damages, if any,
on the exchange debentures or any other debentures when due (subject
to the deferral of any interest due date in the case of a deferral
period with respect to the exchange debentures or other debentures, as
the case may be);
- our failure to pay any principal on the exchange debentures or any
other debentures when due, whether at maturity, upon prepayment, by
accelerating the maturity or otherwise;
- our failure to observe or perform any other covenant contained in the
indenture for 90 days after written notice to us from the debenture
trustee or to us and the debenture trustee from the holders of at
least 25% in aggregate outstanding principal amount of exchange
debentures; or
- certain events related to our bankruptcy, insolvency or
reorganization.
The holders of a majority in aggregate outstanding principal amount of the
exchange 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 exchange debentures may declare
the principal due and payable immediately upon an event of default. The holders
of a majority in aggregate outstanding principal amount of the exchange
debentures may annul this declaration and waive the default if the default
(other than the nonpayment of the principal of the exchange 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.
Prior to any declaration accelerating the maturity of the exchange
debentures the holders of a majority in aggregate outstanding principal amount
of the exchange debentures affected may, on behalf of the holders of all the
exchange debentures, waive any past default, except a default in the payment of
principal or interest (including compounded interest and additional sums, if
any) or liquidated damages, if any (unless such default 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) 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
exchange debenture.
The indenture requires that we file with the debenture trustee a
certificate annually as to the absence of defaults specified under the
indenture.
The indenture provides that the debenture trustee may withhold notice of a
debenture event of default from the holders of the exchange debentures if the
debenture trustee considers it in the interest of the holders to do so.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF EXCHANGE CAPITAL SECURITIES
If an event of default under the exchange debenture exists that is
attributable to our failure to pay the principal of or interest (including
compounded interest and additional sums, if any) or liquidated damages, if any,
on the exchange debentures on the due date, a holder of exchange capital
securities may institute a direct action against us. We may not amend the
indenture to remove this right to bring a direct action without the prior
written consent of the holders of all of the exchange capital securities.
Notwithstanding any payments that we make to a holder of exchange capital
securities in connection with a direct action, we shall remain obligated to pay
the principal of and interest on the exchange debentures, and we shall be
subrogated to the rights of the holder of the exchange capital securities with
respect to payments on the exchange capital securities to the extent that we
make any payments to a holder in any direct action.
The holders of the exchange capital securities will not be able to exercise
directly any remedies, other than those described in the above paragraph,
available to the holders of the exchange debentures, unless an event of default
exists under the trust agreement. See "Description of Exchange Capital
Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture provides that we will not consolidate with or merge into any
other person or convey, transfer or lease all or substantially all of our
properties to any person, and no person shall consolidate with or merge into us
or convey, transfer or lease all or substantially all of its properties to us,
unless:
- in case we consolidate with or merge into another person or convey or
transfer all or substantially all of our properties to any person, the
successor is organized under the laws of the United States or any
state or the District of Columbia, and the successor expressly assumes
our obligations under the indenture with respect to the exchange
debentures;
- immediately after giving effect to the transaction, no event of
default under the exchange debenture, and no event which, after notice
or lapse of time or both, would become an event of default under the
exchange debenture, exists; and
- certain other conditions as prescribed in the indenture are met.
The general provisions of the indenture do not afford holders of the
exchange debentures protection in the event of a highly leveraged or other
transaction that we may become involved in that may adversely affect holders of
the exchange debentures.
SATISFACTION AND DISCHARGE
The indenture provides that when, among other things,
- all exchange debentures not previously delivered to the debenture
trustee for cancellation have become due and payable or will become
due and payable at maturity or called for prepayment within one year;
and
- we deposit or cause 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 exchange debentures not
previously delivered to the debenture trustee for cancellation, for
the principal and interest (including compounded interest and
additional sums, if any) to the date of the deposit or to October 1,
2030, as the case may be,
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then the indenture will cease to be of further effect (except as to our
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel), and we will be deemed to
have satisfied and discharged the indenture.
SUBORDINATION
We have promised that any of our exchange debentures issued under the
indenture will rank junior to all of our senior indebtedness to the extent
provided in the indenture. Upon any payment or distribution of our assets to
creditors upon our liquidation, dissolution, winding up, reorganization,
assignment for the benefit of our creditors, marshaling of our assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in connection
with any insolvency or bankruptcy proceeding involving us, the allocable amounts
in respect of the senior indebtedness must be paid in full before the holders of
the exchange debentures will be entitled to receive or retain any payment in
respect thereof.
If the maturity of exchange debentures is accelerated, the holders of all
senior indebtedness outstanding at such time will first be entitled to receive
payment in full of the allocable amounts in respect of such senior indebtedness
before the holders of exchange debentures will be entitled to receive or retain
any payment in respect of the principal of or interest, if any, on the exchange
debentures.
No payments on account of principal or interest, if any, in respect of the
exchange debentures may be made if there is a default in any payment with
respect to senior indebtedness, or an event of default exists with respect to
any senior indebtedness that accelerates the maturity of the senior
indebtedness, or if any judicial proceeding shall be pending with respect to the
default.
Allocable amounts, when used with respect to any senior indebtedness, means
all amounts due or to become due on such senior indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such senior indebtedness (whether as a result of the receipt of
payments by the holders of such senior indebtedness from us or any other obligor
thereon or from any holders of, or trustee in respect of, other indebtedness
that is subordinate and junior in right of payment to such senior indebtedness
pursuant to any provision of such indebtedness for the payment over of amounts
received on account of such indebtedness to the holders of such senior
indebtedness or otherwise) but for the fact that such senior indebtedness is
subordinate or junior in right of payment to (or subject to a requirement that
amounts received on such senior indebtedness be paid over to obligees on) trade
accounts payable or accrued liabilities arising in the ordinary course of
business.
Indebtedness for money borrowed means any of our obligations, or any
obligation guaranteed by us, to repay borrowed money, whether or not evidenced
by bonds, debentures, notes or other written instruments, except that
indebtedness for money borrowed does not include trade accounts payable or
accrued liabilities arising in the ordinary course of business.
Indebtedness ranking on a parity with the exchange debentures means:
- indebtedness for money borrowed, whether outstanding on the date the
indenture is executed or created, assumed or incurred after the date
that the indenture is executed, to the extent the indebtedness for
money borrowed by its terms ranks equal to and not prior or senior to
the exchange debentures in the right of payment upon the happening of
our dissolution, winding-up, liquidation or reorganization, including
without limitation the 11.295% junior subordinated notes;
- 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 us, that is
our financing vehicle (a "financing entity"), in connection with the
issuance by the financing entity of equity securities or other
securities guaranteed by us pursuant to an instrument that ranks equal
with or junior to the exchange guarantee, including without limitation
the guarantee issued in respect of the capital securities of BFD
Preferred Capital Trust I; and
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- the securing of any indebtedness otherwise constituting indebtedness
ranking on a parity with the exchange debentures shall not be deemed
to prevent such indebtedness from constituting indebtedness ranking on
a parity with the exchange debentures.
Indebtedness ranking junior to the exchange debentures means any
indebtedness for money borrowed, whether outstanding on the date the indenture
is executed or created, assumed or incurred after the date the indenture is
executed, to the extent the indebtedness for money borrowed by its terms ranks
junior to and not equal with or prior to the exchange debentures (and any other
indebtedness ranking on a parity with the exchange debentures) in right of
payment upon the happening of our dissolution or winding-up or liquidation or
reorganization. The securing of any indebtedness otherwise constituting
indebtedness ranking junior to the exchange debentures shall not be deemed to
prevent such indebtedness for money borrowed from constituting indebtedness
ranking junior to the exchange debentures.
Senior indebtedness means all indebtedness for money borrowed, whether
outstanding on the date the indenture is executed or created, assumed or
incurred after the date the indenture is executed, except indebtedness ranking
on a parity with the exchange debentures or indebtedness ranking junior to the
exchange debentures, and any deferrals, renewals or extensions of the senior
indebtedness.
We are a bank holding company and our subsidiaries own almost all of our
operating assets. We rely primarily on dividends from the Banks to meet our
obligations for payment of principal and interest on our outstanding debt
obligations and corporate expenses. We are a legal entity separate and distinct
from our subsidiaries. Holders of exchange debentures should look only to us for
payments on the exchange debentures. There are regulatory limitations on the
payment of dividends directly or indirectly to us from the Banks. See
"--General." In addition, the Banks are subject to certain restrictions imposed
by federal law on any extensions of credit to, and certain other transactions
with us and certain other affiliates, and on investments in stock or other
securities thereof. Such restrictions prevent us and such other affiliates from
borrowing from the Banks unless the loans are secured by various types of
collateral. Further, such secured loans, other transactions and investments by
the Banks are generally limited in amount as to us and as to each of such other
affiliates to 10% of each Bank's capital and surplus and as to us and all of
such other affiliates to an aggregate of 20% of each Bank's capital and surplus.
Accordingly, the exchange debentures will be effectively subordinated to all
existing and future liabilities of our subsidiaries.
Because we are a bank holding company, our right 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 the Banks), except to the extent we may be recognized as a creditor of that
subsidiary. At September 30, 2000, our subsidiaries had total liabilities,
including deposits, of $1.2 billion. Accordingly, the exchange debentures will
be effectively subordinated to all existing and future liabilities of our
subsidiaries (including the Banks' deposit liabilities) and all liabilities of
any of our future subsidiaries. The indenture does not limit us or our
subsidiaries from incurring or issuing other secured or unsecured debt,
including senior indebtedness.
RESTRICTIONS ON TRANSFER
The exchange debentures will be issued and may be transferred only in
blocks having an aggregate principal amount of not less than $100,000 and
multiples of $1,000 in excess of $100,000. Any attempted transfer of exchange
debentures in a block having an aggregate principal amount of less than $100,000
will 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 exchange debentures for
any purpose, including but not limited to the receipt of payments on such
exchange debentures, and such purported transferee shall be deemed to have no
interest whatsoever in such exchange debentures.
GOVERNING LAW
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The indenture and the exchange debentures will be governed by and construed
in accordance with the laws of the State of New York, without regard to conflict
of law principles.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Following the exchange offer and the qualification of the indenture under
the Trust Indenture Act, the debenture trustee will 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 not obligated to exercise any of the powers vested in it by the indenture at
the request of any holder of exchange debentures, unless offered reasonable
indemnity by the 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 EXCHANGE GUARANTEE
We will execute and deliver the exchange guarantee at the same time the
exchange capital securities are issued. The terms of the exchange guarantee are
identical in all material respects to the terms of the original guarantee. The
guarantee will be qualified as an indenture under the Trust Indenture Act. This
summary of the material provisions of the exchange guarantee is not complete and
is subject to, and qualified in its entirety by, the exchange guarantee and the
Trust Indenture Act. The guarantee trustee will hold the exchange guarantee for
the benefit of the holders of the exchange capital securities. You can obtain a
copy of the exchange guarantee by requesting it from us. Wilmington Trust
Company will act as guarantee trustee under the exchange guarantee.
GENERAL
We will irrevocably agree to pay in full on a subordinated basis, to the
extent set forth in this prospectus , the following payments with respect to the
exchange capital securities to the extent not paid by the Trust:
- any accumulated and unpaid distributions required to be paid on the
exchange capital securities, to the extent that the Trust has funds
legally available at that time;
- the applicable redemption price with respect to the exchange capital
securities called for redemption, to the extent that the Trust has
funds legally available at that time; and
- upon a voluntary or involuntary dissolution, winding-up or liquidation
of the Trust (other than in connection with the distribution of the
exchange debentures to holders of the exchange capital securities or
the redemption of all exchange capital securities), the liquidation
distribution, to the extent the Trust has funds legally available at
that time.
The exchange guarantee will rank subordinate and junior to all senior
indebtedness to the extent provided in the guarantee. See "--Status of the
Exchange Guarantee." Our obligation to make a guarantee payment may be satisfied
by our direct payment of the required amounts to the holders of the exchange
capital securities or by causing the Trust to pay these amounts to the holders
of the exchange capital securities.
The exchange guarantee will be an irrevocable guarantee on a subordinated
basis of the Trust's obligations under the exchange capital securities, but will
apply only to the extent that the Trust has funds sufficient to make these
payments. If we do not make payments on the exchange debentures held by the
Trust, then it will not be able to make the related payments to you on the
exchange capital securities and will not have funds legally available. Please
refer to the "Relationship Among the Exchange Capital Securities, the Exchange
Debentures and the Exchange Guarantee" section of this prospectus .
The exchange guarantee does not limit us from incurring or issuing other
secured or unsecured debt, including senior indebtedness, whether under the
indenture, any other indenture that we may enter into in the future or
otherwise. The holders of at least a majority in aggregate liquidation amount of
the exchange capital securities
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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 our guarantee or
to direct the exercise of any trust power conferred upon the guarantee trustee
under our guarantee. If the guarantee trustee fails to enforce the guarantee,
any holder of the exchange capital securities may institute a legal proceeding
directly against us to enforce their rights under the exchange guarantee without
first instituting a legal proceeding against the Trust, the guarantee trustee or
any other person or entity.
If we default on our obligation to pay amounts payable under the exchange
debentures, the Trust will lack funds for the payment of distributions or
amounts payable on redemption of the exchange capital securities or otherwise,
and the holders of the exchange capital securities will not be able to rely upon
the exchange guarantee for payment of such amounts. Instead, if an event of
default under the exchange debentures exists that is attributable to our failure
to pay principal of or interest on the exchange debentures on a payment date,
then any holder of exchange capital securities may institute a direct action
against us pursuant to the terms of the indenture for enforcement of payment to
that holder of the principal of or interest on such exchange debentures having a
principal amount equal to the aggregate liquidation amount of the exchange
capital securities of that holder. In connection with a direct action, we will
have a right of setoff under the indenture to the extent that we made any
payment to the holder of exchange capital securities in the direct action.
Except as described in this prospectus , holders of exchange capital securities
will not be able to exercise directly any other remedy available to the holders
of the exchange debentures or assert directly any other rights in respect of the
exchange debentures. The trust agreement provides that each holder of exchange
capital securities by accepting the exchange capital securities agrees to the
provisions of the exchange guarantee and the indenture.
We will, through our exchange guarantee, the trust agreement, the exchange
debentures and the indenture, taken together, fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the exchange
capital securities. No single document standing alone, or operating in
conjunction with fewer than all of the other documents, constitutes that
guarantee. Only the combined operation of these documents provides a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
capital securities. You should refer to "Relationship Among the Exchange Capital
Securities, the Exchange Debentures and the Exchange Guarantee" for more
information about our exchange guarantee.
STATUS OF THE EXCHANGE GUARANTEE
Our exchange guarantee will constitute an unsecured obligation and will
rank subordinate and junior to all senior indebtedness in the same manner as the
exchange debentures. See "Description of Exchange Debentures--Subordination." In
addition, because we are a holding company, our right to participate in any
distribution of the assets of our subsidiaries, upon their liquidation or
reorganization or otherwise is subject to the prior claims of their creditors
(including its depositors), except to the extent we may be recognized as their
creditor. Accordingly, our obligations under the exchange guarantee effectively
will be subordinated to all existing and future liabilities of our present and
future subsidiaries (including depositors of the Banks). As a result, claimants
should look only to our assets for payments under the exchange guarantee. See
"Description of Exchange Debentures--General."
Our exchange guarantee will rank equal to all of our other guarantees with
respect to preferred beneficial interests issued by other trusts. Our guarantee
of the Trust's exchange capital securities does not limit the amount of secured
or unsecured debt, including senior indebtedness, that we or any of our
subsidiaries may incur. We expect from time to time that we will incur
additional indebtedness and that our subsidiaries will also incur additional
liabilities.
Our guarantee will constitute a guarantee of payment only to the extent
that the Trust has funds legally available and not of collection, enabling the
guaranteed party to institute a legal proceeding directly against us to enforce
their rights under the exchange guarantee without first instituting a legal
proceeding against any other person or entity. Our guarantee will not be
discharged, except by payment of the exchange guarantee payments in full to the
extent that the Trust has not paid, or upon distribution of the exchange
debentures to, the holders of the exchange capital securities.
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EVENTS OF DEFAULT
There will be an event of default under the exchange guarantee if we fail
to perform any of our payment or other obligations under the exchange guarantee;
except that with respect to a default in payment of any guarantee payment, we
shall have received notice of default and shall not have cured the default
within 60 days after receipt of the notice. We, as guarantor, will be required
to file annually with the guarantee trustee a certificate regarding our
compliance with the applicable conditions and covenants under our guarantee.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the exchange capital securities (in which case no
approval will be required), the exchange guarantee may not be amended without
the prior approval of the holders of a majority of the liquidation amount of
such outstanding capital securities. You should read "Description of Exchange
Capital Securities--Voting Rights; Amendment of the Trust Agreement" for more
information about the manner of obtaining the holders' approval. All guarantees
and agreements contained in the exchange guarantee agreement shall bind our
successors, assigns, receivers, trustees and representatives and shall inure to
the benefit of the holders of the exchange capital securities then outstanding.
TERMINATION OF THE GUARANTEE
Our guarantee will terminate and be of no further force and effect upon:
- full payment of the applicable redemption price of all outstanding
exchange capital securities;
- full payment of the liquidation amount payable upon liquidation of the
Trust; or
- distribution of exchange debentures to the holders of the exchange
capital securities.
Our guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of the exchange capital securities must
restore payment of any sums paid under the capital securities or the exchange
guarantee.
GOVERNING LAW
The exchange guarantee will be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of law principles.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, except if we default under the exchange guarantee,
will undertake to perform only such duties as are specifically set forth in the
exchange guarantee and, in case a default with respect to the exchange 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 not be obligated to exercise any
of the powers vested in it by the exchange guarantee at the request of any
holder of the exchange capital securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that it might incur.
DESCRIPTION OF ORIGINAL SECURITIES
We refer to the original capital securities, the original guarantee and the
original junior subordinated debentures collectively as the original securities
and refer to the exchange capital securities, the exchange guarantee and the
exchange debentures collectively as the exchange securities.
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The terms of the original securities are identical in all materials
respects to the exchange securities, except that:
- original securities have not been registered under the Securities Act,
are subject to certain restrictions on transfer and are entitled to
certain rights under the applicable registration rights agreement,
which rights will terminate upon consummation of the exchange offer,
except under limited circumstances;
- the exchange capital securities will not provide for any increase in
the distribution rate; and the exchange debentures will not provide
for any liquidated damages.
The original securities provide that, if the Trust has not exchanged
exchange capital securities for all original capital securities validly tendered
by the 45th day after the date on which the registration statement is declared
effective, the distribution rate borne by the original capital securities will
increase by 25 basis points per annum for the period from the occurrence of such
event until such time as the exchange offer has been consummated. 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--Your failure to exchange original
capital securities may adversely affect your ability to sell such securities"
and "Description of Exchange Capital Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES,
THE EXCHANGE DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
We will irrevocably guarantee payments of distributions and other amounts
due on the exchange capital securities to the extent the Trust has funds legally
available to pay such amounts as and to the extent set forth under "Description
of Guarantee." Taken together, our obligations under the exchange debentures,
the indenture, the trust agreement and the exchange guarantee will provide a
full, irrevocable and unconditional guarantee of the Trust's payments of
distributions and other amounts due on the exchange capital securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes this guarantee. Only the combined operation
of these documents effectively provides a full, irrevocable and unconditional
guarantee of the Trust's obligations under the exchange capital securities.
If and to the extent that we do not make the required payments on the
exchange debentures, the Trust will not have sufficient funds to make its
related payments, including distributions on the capital securities. Our
guarantee will not cover any payments when the Trust does not have sufficient
funds legally available to make those payments. Your remedy, as a holder of
exchange capital securities, is to institute a direct action against us. Our
obligations under the exchange guarantee will be subordinate and junior to all
senior indebtedness.
SUFFICIENCY OF PAYMENTS
As long as we pay the interest and other payments when due on the exchange
debentures, the Trust will have sufficient funds to cover distributions and
other payments due on the exchange capital securities, primarily because:
- the aggregate principal amount or prepayment price of the exchange
debentures will equal the aggregate liquidation amount or redemption
price, as applicable, of the exchange capital securities;
- the interest rate and interest payment dates and other payment dates
on the exchange debentures will match the distribution rate and
distribution dates and other payment dates for the exchange capital
securities;
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- as sponsor, we will pay for all and any costs, expenses and
liabilities of the Trust, except for the Trust's obligations to
holders of exchange capital securities; and
- the trust agreement also provides that the Trust is not authorized to
engage in any activity that is not consistent with its limited
purposes.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
You, as holder of exchange capital securities, may institute a legal
proceeding directly against us to enforce your rights under our guarantee
without first instituting a legal proceeding against the guarantee trustee, the
Trust or any other person or entity.
A default or event of default under any senior indebtedness would not
constitute a default or event of default under the trust agreement. However, if
there are payment defaults under, or accelerations of, senior indebtedness, the
subordination provisions of the indenture provide that we cannot make payments
in respect of the exchange debentures until we have paid the senior indebtedness
in full or we have cured any payment default or a payment default has been
waived. Our failure to make required payments on exchange debentures would
constitute an event of default under the trust agreement.
LIMITED PURPOSE OF THE TRUST
The exchange capital securities will represent beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
capital securities and the common securities, using the proceeds from the sale
of the capital securities and the common securities to acquire our junior
subordinated debentures and engaging in only those other activities necessary,
advisable or incidental thereto. A principal difference between the rights of a
holder of an exchange capital security and a holder of a exchange debenture is
that a holder of a exchange debenture will be entitled to receive from us the
principal of and interest on exchange debentures held, while a holder of
exchange capital securities is entitled to receive distributions from the Trust
(or, in certain circumstances, from us under our exchange guarantee) if and to
the extent the Trust has funds legally available to pay the distributions.
RIGHTS UPON DISSOLUTION
Unless the exchange debentures are distributed to holders of the exchange
capital securities, if the Trust is voluntarily or involuntarily dissolved,
wound-up or liquidated, after satisfying the liabilities owed to the Trust's
creditors as required by applicable law, the holders of the exchange capital
securities will be entitled to receive, out of assets held by the Trust, the
liquidation distribution in cash. See "Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Exchange Debentures."
If we are voluntarily or involuntarily liquidated or bankrupted, the
property trustee, as holder of the exchange debentures, would be one of our
subordinated creditors, subordinated in right of payment to all senior
indebtedness, but entitled to receive payment in full of principal and interest,
before any of our stockholders receive payments or distributions. Since we will
be the guarantor under the exchange guarantee and will agree to pay all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to the
holders of its exchange capital securities), the positions of a holder of
exchange capital securities and a holder of exchange debentures relative to
other creditors and to our stockholders in the event of our liquidation or
bankruptcy are expected to be substantially the same.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Muldoon Murphy & Faucette LLP, special federal income tax
counsel to us and the Trust, the following describes the material federal income
tax consequences of the purchase, ownership and disposition of an exchange
capital security.
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This summary addresses only the tax consequences to a person that acquires
an exchange capital security in the exchange offer on its original issuance at
its original price and that holds the security as a capital asset. This summary
does not address all tax consequences that may be applicable to a beneficial
owner of an exchange capital security and does not address the tax consequences
to holders subject to special tax regimes (like banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors or persons that will hold an
exchange capital security as a position in a "straddle," as part of a "synthetic
security" or "hedge" or as part of a "conversion transaction" or other
integrated investment). This summary 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 apply to an exchange capital
security. This discussion is addressed to a U.S. Holder, which is defined as a
beneficial owner of an exchange capital security that, for federal income tax
purposes, is (or is treated as):
- a citizen or individual resident of the United States;
- a corporation or partnership (or entity treated for federal income tax
purposes as a corporation or partnership) created or organized in or
under the laws of the United States or any state (including the
District of Columbia) or other political subdivision thereof;
- an estate the income of which is includable in gross income for
federal income tax purposes without regard to its source; or
- a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more U.S. persons have the ability to control all substantial
decisions of the trust.
Except as described below under "--Non-U.S. Holders," this summary does not
address the special consequences to a non U.S. Holder who acquires an exchange
capital security. For purposes of this discussion, a "Non-U.S. Holder" generally
is any corporation, individual, partnership, estate or trust that is not a U.S.
Holder for federal income tax purposes.
This summary does not address the tax consequences to any stockholder,
partner or beneficiary of a holder of an exchange capital security. This summary
is based on the Code, Treasury regulations thereunder and the administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis. An opinion of counsel is not
binding on the IRS or the courts. No rulings have been or are expected to be
sought from the IRS with respect to any of the matters described in this
prospectus . We can give no assurance that the opinions expressed will not be
challenged by the IRS or, if challenged, that the challenge will not be
successful.
Prospective investors are advised to consult with their own tax advisors
with respect to the tax consequences to them of the purchase, ownership and
disposition of the exchange capital securities, including the tax consequences
under state, local, foreign, and other tax laws and possible effects of changes
in such tax laws.
CLASSIFICATION OF THE EXCHANGE DEBENTURES
We intend to take the position that the exchange debentures will be
classified for federal income tax purposes as our indebtedness. Muldoon Murphy &
Faucette LLP has rendered its opinion that the exchange debentures will be
treated as our debt for federal income tax purposes. We, together with the Trust
and the holders of the exchange capital securities (by acceptance of a
beneficial interest in an exchange capital security) will agree to treat the
exchange debentures as our indebtedness for all federal income tax purposes. We
cannot be sure that this position will not be challenged by the IRS or, if
challenged, that the challenge will not be successful. The discussion contained
in the "Material Federal Income Tax Consequences" section of this prospectus
assumes that the exchange debentures will be classified as our indebtedness for
federal income tax purposes.
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CLASSIFICATION OF THE TRUST
In connection with the issuance of the original capital securities, Muldoon
Murphy & Faucette LLP rendered its opinion 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 that opinion, the Trust is classified for federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for federal income tax purposes, the Trust is subject to federal
income tax, and each holder of an exchange capital security will be required to
include in its gross income any interest (or accrued original issue discount),
with respect to its allocable share of the exchange debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the indenture, we have the right to defer the payment of interest on
the exchange debentures at any time or from time to time for one or more
deferral periods not exceeding 10 consecutive semi-annual periods each, provided
that no deferral period shall end on a date other than an interest payment date
or extend beyond October 1, 2030. By reason of that right, the Treasury
regulations will subject the exchange debentures to the rules in the Code and
Treasury regulations on debt instruments issued with original issue discount,
unless the indenture or exchange debentures contain terms or conditions that
make the likelihood of exercise of the deferral option remote. Under the
Treasury regulations, a "remote" contingency that stated interest will not be
timely paid will be ignored in determining whether a debt instrument is issued
with original issue discount. Although the answer is not clear, we believe that
the likelihood that we would exercise our option to defer payments of interest
is remote since exercising that option would, among other things, prevent us
from declaring dividends on any class of our equity securities. Accordingly, we
intend to take the position that the exchange debentures will not be considered
to be issued with original issue discount and, accordingly, stated interest on
the exchange debentures generally will be taxable to a holder as ordinary income
at the time it is paid or accrued in accordance with such holder's method of
accounting.
Under the Treasury regulations, if we were to exercise our option to defer
payments of interest, the exchange debentures would at that time be treated as
issued with original issue discount, and all stated interest on the exchange
debentures would thereafter be treated as original issue discount as long as the
exchange debentures remain outstanding. If this occurred, all of a holder's
interest income with respect to the exchange debentures would thereafter be
accounted for on an economic accrual basis regardless of such holder's method of
tax accounting, and actual distributions of stated interest would not be
reported as taxable income. Consequently, a holder of an exchange capital
security would be required to include in gross income original issue discount
even though we would not make actual cash payments during a deferral period. The
amount of such includable original issue discount could be significant. Also,
under the Treasury regulations, if the option to defer the payment of interest
were determined not to be remote, the exchange debentures would be treated as
having been originally issued with original issue discount. In such event, a
holder would be required to include in gross income an amount of original issue
discount each taxable year that approximates the amount of interest that accrues
on the exchange debentures at the stated interest rate, regardless of such
holder's method of tax accounting, and actual cash payments of interest on the
exchange debenture would not be separately includable in gross income. It is
possible that the IRS could take a position contrary to the interpretation
described in this prospectus .
Because income on the exchange capital securities will constitute interest
or original issue discount, corporate holders of the exchange capital securities
will not be entitled to a dividends-received deduction with respect to any
income recognized with respect to the exchange capital securities.
RECEIPT OF EXCHANGE JUNIOR SUBORDINATED DEBENTURE OR CASH UPON LIQUIDATION OF
THE TRUST
We will have the right at any time to liquidate the Trust and cause the
exchange debentures to be distributed to the holders of the trust securities.
Under current law, the liquidation of the Trust and the distribution of the
exchange debentures to trust security holders, for federal income tax purposes,
would be treated as a nontaxable event to each holder, and the aggregate tax
basis in the exchange debentures received by such holder would be equal to the
holder's aggregate tax basis in its exchange capital securities surrendered. A
holder's holding
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period in the exchange debentures received in liquidation of the Trust would be
the same as the holding period that the holder had in the exchange capital
securities surrendered.
The exchange debentures may be prepaid in cash, and the proceeds of that
prepayment would be distributed to holders in redemption of their capital
securities. Under current law, that redemption would constitute, for federal
income tax purposes, a taxable disposition of the redeemed exchange capital
securities, the tax consequences of which are described below under "--Sales or
Redemptions of Exchange Capital Securities."
SALES OR REDEMPTIONS OF EXCHANGE CAPITAL SECURITIES
On a sale or redemption of an exchange capital security for cash, a holder
will recognize gain or loss equal to the difference between its adjusted tax
basis in the exchange capital security and the amount realized on the sale or
redemption of that exchange capital security. If the rules regarding original
issue discount do not apply, a holder's adjusted basis in an exchange capital
security generally will be its initial purchase price, and if the holder uses an
accrual method of accounting, the holder's basis will be increased by any
accrued but unpaid interest. If the rules regarding original issue discount
apply, a holder's adjusted basis in an exchange capital security generally will
be its initial purchase price increased by any original issue discount
previously included in the holder's gross income to the date of disposition and
decreased by any payments received with respect to original issue discount on
the exchange capital security. Gain or loss recognized on a sale or redemption
of an exchange capital security will be capital gain or loss. Capital gain
recognized by an individual in respect of an exchange capital security held for
more than one year as of the date of sale or redemption is subject to a maximum
federal income tax rate of 20%.
The exchange capital securities may trade at a price that discounts any
accrued but unpaid interest on the exchange debentures. Therefore, the amount
realized by a holder who disposes of an exchange capital security between
distribution payment dates and whose adjusted basis in the exchange capital
security has been increased by the amount of any accrued but unpaid original
issue discount (or interest) may be less than the holder's adjusted basis in the
exchange capital security. A holder's basis in an exchange capital security
could be increased either under the rules regarding original issue discount or,
if those rules do not apply, in the case of a holder that uses an accrual method
of accounting, under the accrual accounting rules (as discussed above). In that
case, the holder will recognize a capital loss. Subject to a limited exception
in the case of individual taxpayers, capital losses cannot be applied to offset
ordinary income for federal income tax purposes.
EXCHANGE OF CAPITAL SECURITIES
The exchange of the original capital securities for exchange capital
securities pursuant to the exchange offer should not be treated as an exchange
for federal income tax purposes and, therefore, should not be a taxable event to
holders for federal income tax 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 capital securities. If the exchange were treated as an exchange
for 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 original capital securities as the holder had in the
capital securities immediately before the exchange.
NON-U.S. HOLDERS
Under current federal income tax laws, subject to the discussion below of
backup withholding, payments by the Trust or any of its paying agents to a
Non-U.S. Holder will not be subject to federal withholding tax, provided that
(a) the Non-U.S. Holder does not own, actually or constructively, 10% or more of
the total combined voting power of all classes of our stock entitled to vote,
(b) the Non-U.S. Holder is not a controlled foreign corporation that is related
to us through stock ownership, (c) the Non-U.S. Holder is not a bank whose
receipt of interest on the exchange debentures is described in Section
881(c)(3)(A) of the Code, and (d) either (A) the Non-U.S. Holder delivers a
statement, such as a properly executed IRS Form W-8BEN (or appropriate successor
Form), to the Trust or its agent, signed by the Holder under penalties of
perjury, certifying that it is not a U.S. Holder and
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providing 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 exchange capital
security in that capacity certifies to the Trust or its agent, under penalties
of perjury, that the statement described in (A) above has been received from the
Non-U.S. Holder by it or by a financial institution between it and the Non-U.S.
Holder and furnishes the Trust or its agent with a copy thereof. As described
below, new Treasury regulations provide alternative methods for satisfying the
certification requirements described in clause (d), effective for certain
payments made after December 31, 2000.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the exchange capital securities (or the exchange debentures) is
effectively connected with the conduct of the trade or business, the Non-U.S.
Holder, although exempt from the withholding tax discussed above, will be
subject to federal income tax on that interest on a net income basis in
generally the same manner as if it were a U.S. Holder. In addition, if such
Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% of its effectively connected earnings and profits that are
repatriated or treated as repatriated. For this purpose, the interest income
would be included in the foreign corporation's earnings and profits. In the case
of a Non-U.S. Holder entitled to the benefits of a tax treaty with the United
States, the foregoing discussion generally applies only if the Non-U.S. Holder
is engaged in business in the United States through a U.S. permanent
establishment and the income on the exchange debentures is attributable to that
permanent establishment within the meaning of the treaty, and the rate of the
branch profits tax may be limited to a rate prescribed by the treaty for the
withholding of tax on dividends. New final Treasury regulations generally
prescribe new methods of certifying that a Non-U.S. Holder is exempt from the
withholding of federal income tax by reason of being engaged in trade or
business in the United States.
Any gain recognized upon a sale or other disposition of exchange capital
securities (or exchange debentures) generally will not be subject to federal
income tax unless (1) the gain is, or is treated as, effectively connected with
a U.S. trade or business of the Non-U.S. Holder or (2) in the case of a Non-U.S.
Holder who is an individual, that individual is present in the United States for
183 days or more in the taxable year of the sale or other disposition, and other
conditions are met.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest, including original issue discount, accrued on
exchange capital securities held of record by U.S. persons (other than
corporations and other exempt holders) will be reported to the IRS. "Backup"
withholding at a rate of 31% will apply to payments of interest to non-exempt
U.S. persons unless the holder furnishes its taxpayer identification number in
the manner prescribed in applicable Treasury regulations, certifies that the
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions.
Payment of the proceeds from the disposition of exchange capital securities
to or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amount withheld from a holder under the backup withholding rules will
be allowed as a refund or credit against such holder's federal income tax
liability, provided the required information is furnished to the IRS.
It is anticipated that income on exchange capital securities will be
reported to holders on Form 1099 (or any successor form) and mailed to holders
of capital securities by January 31 following each calendar year.
CHANGES TO INFORMATION REPORTING AND BACKUP WITHHOLDING RULES
Final Treasury Regulations, the "final withholding regulations," make a
number of changes to the procedures for income tax withholding and certification
of eligibility for the portfolio interest exemption or for a reduced rate of
income tax withholding based on an applicable income tax treaty. In general, the
final withholding regulations do not significantly alter substantive withholding
requirements, but unify certification procedures and clarify reliance standards.
The final withholding regulations are scheduled to be effective for payments
made on or
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after January 1, 2001, subject to certain transition rules. The final
withholding regulations are complex. Non-U.S. Holders are strongly urged to
consult their tax advisors regarding the potential application of the final
withholding regulations to payments on the preferred securities in light of
their particular circumstances.
THE 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. YOU SHOULD CONSULT YOUR TAX ADVISER WITH RESPECT TO THE TAX
CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF AN EXCHANGE
CAPITAL SECURITY, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
GENERAL
In evaluating the exchange of capital securities, a fiduciary of a
qualified profit-sharing, pension or stock bonus plan, including a plan for
self-employed individuals and their employees or any other employee benefit plan
subject to the ERISA, a collective investment fund or separate account in which
such plans invest and any other investor using assets that are treated as assets
of an employee benefit plan subject to ERISA (each, a "Plan" and collectively,
"Plans") should consider:
- whether the ownership of exchange capital securities is in accordance
with the documents and instruments governing such Plan;
- whether the ownership of exchange capital securities is solely in the
interest of Plan participants and beneficiaries and otherwise
consistent with the fiduciary's responsibilities and in compliance
with the requirements of Part 4 of Title I of ERISA, including, in
particular, the diversification, prudence and liquidity requirements
of Section 404 of ERISA and the prohibited transaction provisions of
Section 406 of ERISA and Section 4975 of the Code;
- whether the assets of the Trust are treated as assets of the Plan; and
- the need to value the assets of the Plan annually.
In addition, the fiduciary of an individual retirement arrangement under
408 of the Code (an "IRA") considering the exchange of capital securities should
consider whether the ownership of the exchange capital securities would result
in a non-exempt prohibited transaction under Section 4975 of the Code.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the prohibited transaction rules. Such plans may, however, be
subject to federal, state or local laws or regulations which may affect their
investment in the capital securities. Any fiduciary of such a governmental or
church plan considering an investment in the exchange capital securities should
determine the need for, and the availability, if necessary, of any exemptive
relief under such laws or regulations.
The fiduciary investment considerations summarized below provide a general
discussion that does not include all of the fiduciary investment considerations
relevant to Plans and, where indicated, IRAs. This summary is based on the
current provisions of ERISA and the Code and regulations and rulings thereunder,
and may be changed (perhaps adversely and with retroactive effect) by future
legislative, administrative or judicial action.
Plans and IRAs that are prospective purchasers of exchange capital
securities should consult with and rely upon their own advisors in evaluating
these matters in light of their own particular circumstances.
PLAN ASSET REGULATION
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Under Department of Labor regulations governing what constitutes the assets
of a Plan or IRA ("Plan Assets") for purposes of ERISA and the related
prohibited transaction provisions of the Code (the "Plan Asset Regulation," 29
C.F.R. Sec. 2510.3-101), when a Plan or IRA acquires an equity interest in
another entity, and such interest does not represent a "publicly offered
security" nor a security issued by an investment company registered under the
1940 Act, the Plan's assets include both the equity interest and an undivided
interest in each of the underlying assets of the entity, unless it is
established either that the entity is an operating company or that equity
participation in the entity by "benefit plan investors," as defined in the Plan
Assets Regulation, is not "significant." For purposes of the Plan Asset
Regulation, the Trust will be neither an investment company nor an operating
company.
Under the Plan Asset Regulation, equity participation by benefit plan
investors will not be considered "significant" on any date only if immediately
after the most recent acquisition of the exchange capital securities, the
aggregate interest in the exchange capital securities held by benefit plan
investors will be less than 25% of the aggregate outstanding principal amount of
the exchange capital securities. Although it is possible that the equity
participation by benefit plan investors on any date will not be "significant"
for purposes of the Plan Asset Regulation, such a result cannot be assured.
Consequently, if Plans, IRAs or investors using assets of Plans acquire the
exchange capital securities, the Trust's assets could be deemed to be "plan
assets" of such Plans and/or IRAs for purposes of the fiduciary responsibility
provisions of ERISA and the prohibited transactions rules of ERISA and the Code.
Under ERISA and the Code, any person who exercises any authority or control
respecting the management or disposition of the assets of a Plan or IRA is
considered to be a fiduciary of such Plan or IRA. The property trustee of the
Trust could therefore become a fiduciary of the Plans and IRAs that invest in
the exchange capital securities and be subject to the general fiduciary
requirements of ERISA in exercising its authority with respect to the management
of the assets of the Trust. However, the property trustee will have only limited
discretionary authority with respect to the Trust assets and the remaining
functions and responsibilities performed by the property trustee will be for the
most part custodial and ministerial in nature.
PROHIBITED TRANSACTIONS
We (the obligor with respect to the exchange debentures held by the Trust),
our affiliates and the Trust or the property trustee may be a party in interest
or a disqualified person with respect to a Plan or IRA investing in the exchange
capital securities. Therefore, such investment by a Plan or IRA may give rise to
a prohibited transaction. Consequently, before investing in the exchange capital
securities or acquiring exchange debentures any person who is, or who is
acquiring such securities for, or on behalf of, a Plan or IRA should determine
that either a statutory or an administrative exemption from the prohibited
transaction rules discussed below or otherwise available is applicable to such
investment in the exchange capital securities, or that such investment in, or
acquisition of, such securities will not result in a non-exempt prohibited
transaction.
The statutory or administrative exemptions from the prohibited transaction
rules under ERISA and the Code which may be available to a Plan or IRA, which is
investing in the exchange capital securities include the following (collectively
referred to as the "ERISA Investor Exemptions"):
- Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
- PTCE 91-38, regarding investments by bank collective investment funds;
- PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
- PTCE 96-23, regarding transactions effected by in-house asset
managers; and
- PTCE 95-60, regarding investments by insurance company general
accounts.
No person who is, or who in acquiring exchange capital securities is using
the assets of, a Plan or IRA may acquire exchange capital securities unless one
of the ERISA Investor Exemptions or another applicable exemption is
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available to the Plan or IRA, or such acquisition or holding of the exchange
capital securities will not result in a non-exempt Prohibited Transaction. The
acquisition of the exchange capital securities by any person who is, or who in
acquiring such exchange capital securities is using the assets of, a Plan or IRA
shall be deemed to constitute a representation by such person to the trustees of
the Trust, us and the initial purchaser either that:
- it is not a Plan, IRA, trustee or other person acting on behalf of a
Plan or IRA or other person or entity using the assets of any Plan or
IRA to finance such purchase; or
- such acquisition 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 the case of exchange capital securities delivered in certificated form,
the purchaser will be required to make such representation, in writing, to the
trustees of the Trust, us and the initial purchaser.
THE DISCUSSION OF ERISA IN THIS PROSPECTUS IS GENERAL IN NATURE AND IS NOT
INTENDED TO BE ALL INCLUSIVE. ANY FIDUCIARY OF A PLAN, IRA, GOVERNMENTAL PLAN OR
CHURCH PLAN CONSIDERING AN INVESTMENT IN THE EXCHANGE CAPITAL SECURITIES SHOULD
CONSULT WITH ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT
AND CONSIDER WHETHER THE PLAN OR IRA CAN MAKE THE REPRESENTATIONS NOTED ABOVE.
FURTHER, THE SALE OF INVESTMENTS TO PLANS AND IRAS IS IN NO RESPECT A
REPRESENTATION BY THE TRUST, US, THE PROPERTY TRUSTEE, THE INITIAL PURCHASER OR
ANY OTHER PERSON ASSOCIATED WITH THE SALE OF THE EXCHANGE CAPITAL SECURITIES
THAT SUCH SECURITIES MEET ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO
INVESTMENTS BY PLANS AND IRAS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH
SECURITIES ARE OTHERWISE APPROPRIATE FOR PLANS AND IRAS GENERALLY OR ANY
PARTICULAR PLAN.
ANY PURCHASER PROPOSING TO ACQUIRE EXCHANGE CAPITAL SECURITIES WITH ASSETS
OF ANY PLAN OR IRA SHOULD CONSULT WITH ITS COUNSEL.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange capital securities for its own
account pursuant to 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 a broker-dealer in connection with resales of exchange capital
securities received in exchange for original capital securities where such
original capital securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. We and the Trust have
agreed that, starting on the expiration date and ending on the close of business
on the 90th day following the expiration date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, for a period of 90 days after the expiration
date, all dealers effecting transactions in the exchange capital securities may
be required to deliver a prospectus.
We and the Trust will not receive any proceeds from any sale of exchange
capital securities by broker-dealers. Exchange capital securities received by
broker-dealers for their own account pursuant to 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
pursuant to 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 of any such
resale of exchange capital securities and any commissions or concessions
72
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.
For a period of 90 days after the expiration date, we and the Trust will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We and the Trust have agreed to pay all expenses
incident to the exchange offer, including the expenses of one counsel for the
holders of the capital securities, other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the exchange capital
securities, including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange capital securities, the exchange guarantee and
the exchange debentures will be passed upon for us by Muldoon Murphy & Faucette
LLP, our special counsel. Certain matters of Delaware law relating to the
validity of the exchange capital securities will be passed upon on behalf of us
and the Trust by Morris, James, Hitchens & Williams LLP, special Delaware
counsel to the Trust and us. Certain matters, relating to United States federal
income tax considerations will be passed upon for us by Muldoon Murphy &
Faucette LLP, our special tax counsel.
EXPERTS
Our consolidated financial statements as of December 31, 1999 and 1998, and
for each of the years in the three-year period ended December 31, 1999, have
been incorporated by reference in this prospectus and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
73
================================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THAT TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
ANY ADDITIONAL OR DIFFERENT INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE AFFAIRS OF BOSTONFED BANCORP, INC. OR THE
TRUST MAY CHANGE AFTER THE DATE OF THIS PROSPECTUS. DELIVERY OF THIS PROSPECTUS
AND THE SALES OF SECURITIES MADE HEREUNDER DOES NOT MEAN OTHERWISE.
TABLE OF CONTENTS
PAGE
Available Information..................................
Incorporation of Certain Documents by
Reference...........................................
Forward-Looking Statements.............................
Summary................................................
Selected Consolidated Financial
and Other Data......................................
Risk Factors...........................................
Use of Proceeds........................................
Regulatory Capital Ratios..............................
Accounting Treatment...................................
Capitalization.........................................
Regulation and Supervision.............................
BFD Preferred Capital Trust II.........................
The Exchange Offer.....................................
Description of Capital Securities......................
Description of Exchange Debentures.....................
Description of Exchange Guarantee......................
Description of Original Securities.....................
Relationship Among the Exchange Capital Securities,
the Exchange Debentures and
the Exchange Guarantee..............................
Material Federal Income Tax Consequences...............
ERISA Considerations...................................
Plan of Distribution...................................
Experts................................................
Independent Accountants................................
================================================================================
$22,000,000
BFD PREFERRED CAPITAL TRUST II
OFFER TO EXCHANGE ITS 10.875% CAPITAL SECURITIES, SERIES
B WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 FOR ANY AND ALL OF ITS OUTSTANDING
10.875% CAPITAL SECURITIES, SERIES A
FULLY AND UNCONDITIONALLY
GUARANTEED, TO THE EXTENT DESCRIBED
IN THIS PROSPECTUS, BY
[BOSTONFED BANCORP, INC. LOGO]
PROSPECTUS
___________, 2001
================================================================================
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the General Corporation Law of the State of Delaware
(being Chapter 1 of Title 8 of the Delaware Code), Articles 10 and 11 of the
registrant's Certificate of Incorporation provide as follows:
TENTH:
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent, or in any other capacity while serving as a Director,
Officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article
TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director or Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, services to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expenses of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification
II-1
set forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article TENTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
ELEVENTH:
A Director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
In addition, the Company, as Sponsor and Guarantor, and BFD Preferred
Capital Trust II indemnify various persons, including the Administrative
Trustees, the Property Trustee, the Debenture Trustee, the Guarantee Trustee and
the Delaware Trustee, pursuant to the Indenture, the Amended and Restated
Declaration of Trust and the Exchange Guarantee which are filed as Exhibits to
this Form S-4 as Exhibits 4.1, 4.5 and 4.7, respectively, and which are
incorporated herein by reference.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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 Certificate of Trust of BFD Preferred Capital Trust II
4.4 Declaration of Trust of BFD Preferred Capital Trust II
4.5 Amended and Restated Declaration of Trust of BFD Preferred Capital
Trust II
4.6 Form of Exchange Capital Security Certificate for BFD Preferred
Capital Trust II
4.7 Form of Exchange Guarantee of the Corporation relating to the
Exchange Capital Securities
4.8 Registration Rights Agreement
4.9 Liquidated Damages Agreement
4.10 Series A Capital Securities Guarantee Agreement
4.11 Common Securities Guarantee Agreement
5.1 Opinion and consent of Muldoon Murphy & Faucette LLP as to validity
of the Exchange Junior Subordinated Debentures and the Exchange
Guarantee to be issued by the Corporation
5.2 Opinion and consent of Morris, James, Hitchens & Williams LLP as to
the validity of the Exchange Capital Securities to be issued by BFD
Preferred Capital Trust II
8.0 Opinion of Muldoon Murphy & Faucette LLP as to certain federal
income tax matters
12.0 Computation of ratio of earnings to fixed charges
23.1 Consent of KPMG LLP
23.2 Consent of Muldoon Murphy & Faucette LLP (included in Exhibit 5.1)
23.3 Consent of Morris, James, Hitchens & Williams LLP (included in
Exhibit 5.2)
24.0 Power of Attorney of certain officers and directors of the
Corporation and Trust II (located on the signature pages hereto)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Property Trustee under the Amended and Restated Declaration of
Trust
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Guarantee Trustee under the Exchange Guarantee
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Debenture Trustee under the Indenture
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees
99.5 Form of Client Letter
II-3
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of BostonFed Bancorp, Inc.'s annual report pursuant to section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Each of the undersigned Registrants hereby also undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth 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 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.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
Provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by a Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Each of the undersigned Registrants hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest BostonFed Bancorp, Inc. annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Act of 1934, where interim financial information to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the provisions, or otherwise, each Registrant
II-4
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by each undersigned Registrant of
expenses incurred or paid by a director, officer of controlling person of each
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, each Registrant will, unless in the opinion of its
counsel the matter has been settled by the controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Each of the undersigned Registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the Prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
Each of the undersigned Registrants hereby undertakes 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-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, BostonFed
Bancorp, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Burlington,
State of Massachusetts, on the 8th day of February, 2001.
BOSTONFED BANCORP, INC.
By: /s/ David F. Holland
------------------------------
David F. Holland
President and Chief Executive Officer
We, the undersigned directors and officers of BostonFed Bancorp, Inc., do
hereby severally constitute and appoint David F. Holland our true and lawful
attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute any and all instruments for us and in
our names in the capacities indicated below which said person may deem necessary
or advisable to enable BostonFed Bancorp, Inc. to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the offering contemplated
by this Registration Statement on Form S-4, including specifically, but not
limited to, power and authority to sign for us or any of us in our names in the
capacities indicated below and any and all amendments, including post-effective
amendments thereto; and we hereby ratify and confirm all that said person shall
do or cause to by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ David F. Holland Date: February 8, 2001
--------------------------------------------
David F. Holland
President, Chief Executive Officer and
Chairman (Principal executive officer)
/s/ David P. Conley Date: February 8, 2001
--------------------------------------------
David P. Conley
Director, Executive Vice President,
Assistant Secretary and Assistant Treasurer
/s/ John A. Simas Date: February 8, 2001
--------------------------------------------
John A. Simas
Executive Vice President, Chief Financial Officer
and Corporate Secretary (Principal financial and
accounting officer)
/s/ Edward P. Callahan Date: February 8, 2001
--------------------------------------------
Edward P. Callahan
Director
/s/ Gene J. DeFeudis Date: February 8, 2001
--------------------------------------------
Gene J. DeFeudis
Director
/s/ Richard J. Dennis, Sr. Date: February 8, 2001
--------------------------------------------
Richard J. Dennis, Sr.
Director
Date:
--------------------------------------------
Richard J. Fahey
Director
/s/ Patricia M. Flynn Date: February 8, 2001
--------------------------------------------
Patricia M. Flynn
Director
/s/ Charles R. Kent Date: February 8, 2001
--------------------------------------------
Charles R. Kent
Director
/s/ W. Robert Mill Date: February 8, 2001
--------------------------------------------
W. Robert Mill
Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, BFD Preferred
Capital Trust II certifies that it has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Burlington, State of Massachusetts, on the 8th day of February, 2001.
BFD PREFERRED CAPITAL TRUST II
By: /s/ David F. Holland
----------------------------------
David F. Holland
Administrative Trustee
We, the undersigned administrative trustees of BFD Preferred Capital Trust
II, do hereby severally constitute and appoint David F. Holland our true and
lawful attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute any and all instruments for us and in
our names in the capacities indicated below which said person may deem necessary
or advisable to enable BFD Preferred Capital Trust II to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the offering
contemplated by this Registration Statement on Form S-4, including specifically,
but not limited to, power and authority to sign for us or any of us in our names
in the capacities indicated below and any and all amendments, including
post-effective amendments thereto; and we hereby ratify and confirm all that
said person shall do or cause to by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ David F. Holland Date: February 8, 2001
--------------------------------------------
David F. Holland
Administrative Trustee
/s/ David P. Conley Date: February 8, 2001
--------------------------------------------
David P. Conley
Administrative Trustee
/s/ John A. Simas Date: February 8, 2001
--------------------------------------------
John A. Simas
Administrative Trustee
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 Certificate of Trust of BFD Preferred Capital Trust II
4.4 Declaration of Trust of BFD Preferred Capital Trust II
4.5 Amended and Restated Declaration of Trust of BFD Preferred Capital
Trust II
4.6 Form of Exchange Capital Security Certificate for BFD Preferred
Capital Trust II
4.7 Form of Exchange Guarantee of the Corporation relating to the
Exchange Capital Securities
4.8 Registration Rights Agreement
4.9 Liquidated Damages Agreement
4.10 Series A Capital Securities Guarantee Agreement
4.11 Common Securities Guarantee Agreement
5.1 Opinion and consent of Muldoon Murphy & Faucette LLP as to validity
of the Exchange Junior Subordinated Debentures and the Exchange
Guarantee to be issued by the Corporation
5.2 Opinion and consent of Morris, James, Hitchens & Williams LLP as to
the validity of the Exchange Capital Securities to be issued by BFD
Preferred Capital Trust II
8.0 Opinion of Muldoon Murphy & Faucette LLP as to certain federal
income tax matters
12.0 Computation of ratio of earnings to fixed charges
23.1 Consent of KPMG LLP
23.2 Consent of Muldoon Murphy & Faucette LLP (included in Exhibit 5.1)
23.3 Consent of Morris, James, Hitchens & Williams LLP (included in
Exhibit 5.2)
24.0 Power of Attorney of certain officers and directors of the
Corporation and Trust II (located on the signature pages hereto)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Property Trustee under the Amended and Restated Declaration of
Trust
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Guarantee Trustee under the Exchange Guarantee
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as Debenture Trustee under the Indenture
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees
99.5 Form of Client Letter
Dates Referenced Herein and Documents Incorporated by Reference
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