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FILED PURSUANT TO 424(B)(3)
REGISTRATION NO. 333-55250
333-55250-01
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
[BOSTONFED BANCORP, INC. LOGO]
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN
TIME, ON APRIL 23, 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 March 16, 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 MARCH 16, 2001.
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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 15 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 April 23, 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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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.
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
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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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
- ---------------------
(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."
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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.
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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
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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.
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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
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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
seven 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.
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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.
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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
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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 the sale of the original junior subordinated debentures. We
deposited all of the net proceeds from
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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
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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.
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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.
AT
SEPTEMBER 30, 2000
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(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)
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Total stockholders' equity................................ 88,635
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Total capitalization(2)................................... $118,285
========
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(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
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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."
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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 April 23,
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 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."
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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.
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
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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 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
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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.
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
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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 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
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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 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
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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 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;
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- 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.
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.
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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 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.
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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;
- 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;
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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
- 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
- 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
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- 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 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.
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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."
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
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- 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.
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--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
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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 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);
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- 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 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.
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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.
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.
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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 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
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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
- 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.
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;
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- 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 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.
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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
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
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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.
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
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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
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 monies 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
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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:
- 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
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- 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.
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.
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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;
- 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 deminimis 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
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- 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;
- 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
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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;
- 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
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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.
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.
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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,
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.
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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
- 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
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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
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.
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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 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
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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.
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.
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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.
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
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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;
- 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."
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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.
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.
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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.
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
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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 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
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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 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.
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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 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
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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
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"):
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- 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
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.
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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 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.
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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.
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TABLE OF CONTENTS
PAGE
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Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Forward-Looking Statements............. 3
Summary................................ 4
Selected Consolidated Financial and
Other Data........................... 13
Risk Factors........................... 15
Use of Proceeds........................ 23
Regulatory Capital Ratios.............. 24
Accounting Treatment................... 24
Capitalization......................... 25
Regulation and Supervision............. 25
BFD Preferred Capital Trust II......... 26
The Exchange Offer..................... 27
Description of Capital Securities...... 37
Description of Exchange Debentures..... 49
Description of Exchange Guarantee...... 60
Description of Original Securities..... 63
Relationship Among the Exchange Capital
Securities, the Exchange Debentures
and the Exchange Guarantee........... 63
Material Federal Income Tax
Consequences......................... 65
ERISA Considerations................... 69
Plan of Distribution................... 71
Legal Matters.......................... 72
Experts................................ 72
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$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
---------------------
MARCH 16, 2001
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