<PAGE> 1
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such state.
SUBJECT TO COMPLETION, DATED JUNE 28, 1995
4,400,000 PREFERRED SECURITIES
BFGOODRICH CAPITAL
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES A ("QUIPS"*)
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
THE B.F.GOODRICH COMPANY
------------------
The % Cumulative Quarterly Income Preferred Securities, Series A (the
"Preferred Securities"), representing the trust certificates offered hereby, are
being issued by BFGoodrich Capital, a statutory business trust formed under the
laws of the State of Delaware (the "Issuer" or the "Trust"). The B.F.Goodrich
Company, a New York corporation ("BFG"), is the owner of the trust interests
represented by common securities (the "Common Securities") issued by the Issuer.
The Issuer exists for the sole purpose of issuing its trust interests and
investing the proceeds thereof in % Junior Subordinated Debentures, Series A,
Due 2025 (the "Junior Subordinated Debentures") issued by BFG. The preferred
interests represented by the Preferred Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the trust interests represented by the
Common Securities issued by the Issuer. See "Description of the Preferred
Securities -- Subordination of Common Securities".
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions accruing from the date of original issuance and payable
quarterly in arrears on the last day of March, June, September and December of
each year, commencing , 1995, at the rate of % per annum. BFG has
the right to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period thereon at any time for up to 20
consecutive quarters (each an "Extension Period"). If interest payments are so
deferred, distributions on the Preferred Securities will also be deferred.
During an Extension Period, distributions will continue to accrue, and holders
of Preferred Securities will be required to accrue interest income for United
States Federal income tax purposes. See "Description of the Junior Subordinated
Debentures -- Option to Extend Interest Payment Period" and "United States
Taxation -- Potential Extension of Interest Payment Period and Original Issue
Discount".
The payment of distributions, out of moneys held by the Issuer, and payments
on liquidation of the Issuer or the redemption of Preferred Securities, as set
forth below, are guaranteed to the extent set forth herein by BFG (the
"Guarantee"). See "Description of the Guarantee". If BFG fails to make interest
payments on the Junior Subordinated Debentures held by the Issuer, the Issuer
will have insufficient funds to pay distributions on the Preferred Securities.
The Guarantee does not cover payment of distributions when the Issuer does not
have sufficient funds to pay such distributions. In such event, the remedy of a
holder of Preferred Securities is to enforce the rights of the Issuer under the
Junior Subordinated Debentures held by the Issuer. BFG's obligations under the
Guarantee are subordinate and junior in right of payment to all other
liabilities of BFG except any liabilities that may be made pari passu expressly
by their terms.
The Preferred Securities are subject to mandatory redemption upon repayment
of the Junior Subordinated Debentures at maturity or their earlier redemption.
See "Description of Preferred Securities -- Redemption". BFG will have the
option at any time on or after , 2000 to redeem, in whole or in part,
the Junior Subordinated Debentures. BFG also will have the right at any time,
upon occurrence of a Tax Event (as defined herein), to redeem, in whole but not
in part, the Junior Subordinated Debentures. In either such case, the principal
amount of Junior Subordinated Debentures so redeemed may not exceed
approximately 103% of the amount of proceeds derived by BFG or its subsidiaries
from the issuance and sale of Common Stock of BFG within two years preceding the
date fixed for redemption. See "Description of Junior Subordinated Debentures --
Optional Redemption".
The Junior Subordinated Debentures are subordinated and junior in right of
payment to all Senior Indebtedness (as defined herein) of BFG. As of April 30,
1995, BFG had approximately $609.5 million of principal amount of indebtedness
for borrowed money and capital lease obligations constituting Senior
Indebtedness. The terms of the Junior Subordinated Debentures do not limit BFG's
ability to incur additional Senior Indebtedness. See "Description of the Junior
Subordinated Debentures -- Subordination".
In the event of the liquidation of the Issuer, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security a liquidation
amount of $25 plus accrued and unpaid distributions thereon to the date of
payment, subject to certain limitations. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution".
The Preferred Securities have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance.
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be shown on, and transfers
thereof will be effected only through, records maintained by participants in
DTC. Except as described herein, Preferred Securities in certificated form will
not be issued in exchange for the global certificates. See "Description of
Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust
Company".
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE COMMISSION(1) ISSUER(2),(3)
----------------- --------------------- ------------------
<S> <C> <C> <C>
Per Preferred Security.......................... $25.00 (2) $25.00
Total(4)........................................ $110,000,000 (2) $110,000,000
<FN>
- - ---------------
(1) The Issuer and BFG have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures, the
Underwriting Agreement provides that BFG will pay to the Underwriters, as
compensation ("Underwriters' Compensation") for their arranging the
investment therein of such proceeds, $.7875 per Preferred Security (or
$3,465,000 in the aggregate). See "Underwriting".
(3) Expenses of the offering, which are payable by BFG, are estimated to be
$450,000.
(4) The Trust and BFG have granted the Underwriters an option for 30 days to
purchase up to an additional 660,000 Preferred Securities at the initial
public offering price per Preferred Security, solely to cover
over-allotments. BFG will pay Underwriters' Compensation in the amounts per
Preferred Security set forth in Note 2 with respect to such additional
Preferred Securities. If such option is exercised in full, the total Initial
Public Offering Price, Underwriting Commission and Proceeds to the Issuer
will be $126,500,000, $3,984,750 and $126,500,000, respectively. See
"Underwriting".
</TABLE>
------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, and subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in
book-entry form through the facilities of DTC on or about , 1995.
- - ---------------
*QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
------------------
The date of this Prospectus is , 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
---------------
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
---------------
AVAILABLE INFORMATION
BFG is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by BFG 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 located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, New York, New York 10048. Copies of such materials can be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, such material
may also be inspected and copied at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005, on which certain of BFG's
securities are listed.
BFG and the Issuer have filed with the Commission a registration statement
on Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Act"). This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement.
No separate financial statements of the Issuer are included herein. BFG
considers that such financial statements would not be material to holders of the
Preferred Securities because (i) all of the Common Securities of the Issuer are
owned by BFG, a reporting company under the Exchange Act; (ii) the Issuer has no
independent operations, but exists for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of the Issuer and
investing the proceeds thereof in the Junior Subordinated Debentures; and (iii)
the obligations of the Issuer under the securities issued thereby, to the extent
funds are available therefor, are fully and unconditionally guaranteed to the
extent set forth herein by BFG.
---------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by BFG with the Commission (File No. 1-892)
pursuant to the Exchange Act are incorporated herein by reference:
1. BFG's Annual Report on Form 10-K for the year ended December 31,
1994; and
2. BFG's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
All other documents filed by BFG pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of the
filing of such documents. Any statement contained herein or in a document all or
a portion of which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or
2
<PAGE> 3
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
BFG will provide without charge to each person, including a beneficial
owner, to whom a copy of this Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any and all of the documents which
are incorporated herein by reference, other than exhibits to such information
(unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to The B.F.Goodrich
Company, 3925 Embassy Parkway, Akron, Ohio 44333-1799, Attention: Secretary,
telephone: (216) 374-3985.
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters:
SUBORDINATION OF GUARANTEE AND JUNIOR SUBORDINATED DEBENTURES. BFG's
obligations under the Guarantee are subordinate and junior in right of payment
to all other liabilities of BFG, except any liabilities that may be made pari
passu expressly by their terms. The obligations of BFG under the Junior
Subordinated Debentures are subordinate and junior in right of payment to Senior
Indebtedness (as defined herein) of BFG. As of April 30, 1995, BFG had
approximately $609.5 million of principal amount of indebtedness for borrowed
money and capital lease obligations constituting Senior Indebtedness on a
consolidated basis. In addition, as of April 30, 1995, there were approximately
$70 million of contingent obligations constituting Senior Indebtedness where
there exists a financially viable and unrelated primary obligor and where the
risk of loss to BFG is, in the opinion of BFG, remote. There are no terms of the
Preferred Securities, the Junior Subordinated Debentures or the Guarantee that
limit BFG's ability to incur additional indebtedness, including indebtedness
that would rank senior to the Junior Subordinated Debentures and the Guarantee.
See "Description of the Guarantee -- Status of the Guarantee" and "Description
of the Junior Subordinated Debentures -- Subordination".
The ability of the Issuer to pay amounts due on the Preferred Securities is
solely dependent upon BFG making payments on the Junior Subordinated Debentures
as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES. BFG has the
right under the Indenture to extend the interest payment period from time to
time on the Junior Subordinated Debentures for a period not exceeding 20
consecutive quarters. Upon the termination of any such extended interest payment
period and the payment of all amounts then due, BFG may select a new extended
interest payment period, subject to the requirements described herein. During
any such extended interest payment period, quarterly distributions on the
Preferred Securities would be deferred (but would continue to accrue with
interest thereon) by the Issuer. In the event that BFG exercises this right,
during such period BFG may not declare or pay dividends or distributions (other
than dividends or distributions in common stock of BFG) on, or redeem, purchase,
acquire, or make a liquidation payment with respect to any of its capital stock,
or make any guarantee payment with respect to the foregoing (other than payments
under the Guarantee). Prior to the termination of any such extended interest
payment period, BFG may further extend the interest payment period, provided
that such extended interest payment period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarters and that such
extended interest payment period may not extend beyond the maturity date of the
Junior Subordinated Debentures. If BFG should determine to exercise its
extension right in the future, the market price of the Preferred Securities is
likely to be affected. The Issuer and BFG believe that such an extension of an
interest payment period on the Junior Subordinated Debentures is unlikely to
occur. See "Description of the Preferred Securities -- Distributions" and
"Description of the Junior Subordinated Debentures -- Option to Extend Interest
Payment Period".
Should an extended interest payment period occur, Preferred Security
holders will continue to accrue interest income for United States Federal income
tax purposes. As a result, such a holder will be required
3
<PAGE> 4
to include such interest in gross income for United States Federal income tax
purposes in advance of the receipt of cash, and such holder will not receive the
cash from the Issuer related to such income if such holder disposes of its
Preferred Securities prior to the record date for payment of distributions. See
"United States Taxation -- Potential Extension of Interest Payment Period and
Original Issue Discount".
RIGHTS UNDER THE GUARANTEE. The Guarantee will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The Bank of New York will act as indenture trustee under the Guarantee for the
purposes of compliance with the Trust Indenture Act (the "Guarantee Trustee").
The Guarantee Trustee will also be the trustee for the Junior Subordinated
Debentures and will hold the Guarantee for the benefit of the holders of the
Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment (but not the collection) of (i) any accrued and unpaid distributions
required to be paid on the Preferred Securities, to the extent the Issuer has
funds legally available therefor, (ii) the Redemption Price (as defined herein),
including all accrued and unpaid distributions, with respect to Preferred
Securities called for redemption by the Issuer, to the extent the Issuer has
funds legally available therefor and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with a redemption of all of the Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions on
the Preferred Securities to the date of payment, to the extent the Issuer has
funds legally available therefor and (b) the amount of assets of the Issuer
remaining available for distribution to holders of the Preferred Securities in
liquidation of the Issuer. The holders of a majority in liquidation amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. If the Guarantee Trustee fails to enforce the
Guarantee, any holder of Preferred Securities may, after a period of 30 days has
elapsed from such holder's written request to the Guarantee Trustee to enforce
the Guarantee, institute a legal proceeding directly against BFG to enforce the
Guarantee Trustee's rights under the Guarantee without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other person or
entity. If BFG were to default on its obligations under the Junior Subordinated
Debentures, the Issuer would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Guarantee for payment of such amounts. Instead, holders of
the Preferred Securities would be required to rely on the enforcement by the
Property Trustee of its rights, as registered holder of the Junior Subordinated
Debentures, against BFG pursuant to the terms of the Junior Subordinated
Debentures. See "Description of the Guarantee -- Status of the Guarantee" and
"Description of the Junior Subordinated Debentures -- Subordination" herein. The
Trust Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture.
TAX EVENT REDEMPTION. Upon the occurrence of a Tax Event, BFG has the right
to redeem the Junior Subordinated Debentures, in whole but not in part, in which
event the Issuer will redeem the Preferred Securities. The stated liquidation
preference of the Preferred Securities redeemed upon such redemption of Junior
Subordinated Debentures may not exceed the amount derived, directly or
indirectly, by BFG or its subsidiaries from the issuance and sale of BFG's
common stock within two years preceding the date fixed for such redemption. See
"Description of the Preferred Securities -- Redemption" and "United States
Taxation."
LIMITED VOTING RIGHTS. Holders of Preferred Securities will have limited
voting rights and, except upon the occurrence of certain events described
herein, will not be entitled to vote to appoint, remove or replace, or to
increase or decrease the number of, the BFG Trustees, which voting rights are
vested exclusively in the holder of the Common Securities.
TRADING CHARACTERISTICS OF PREFERRED SECURITIES. The Preferred Securities
have been approved for listing as an equity security on the New York Stock
Exchange, subject to official notice of issuance. Accordingly, the Preferred
Securities are expected to trade at a price that takes into account the value,
if any, of accrued and unpaid distributions; thus, purchasers will not pay and
sellers will not receive any
4
<PAGE> 5
accrued and unpaid interest with respect to their undivided interests in Junior
Subordinated Debentures owned through the Preferred Securities that is not
included in the trading price of the Preferred Securities. However, interest on
the Junior Subordinated Debentures will be included in the gross income of U.S.
Holders (as defined herein) of Preferred Securities as it accrues, rather than
when it is paid. See "United States Taxation -- Income from Preferred
Securities" and "-- Sale of Preferred Securities".
BFGOODRICH CAPITAL
BFGoodrich Capital (the "Issuer") is a statutory business trust formed
under Delaware law pursuant to (i) a trust agreement executed by BFG, as sponsor
for the Issuer, and the trustees of such trust named therein and (ii) the filing
of a certificate of trust with the Delaware Secretary of State on June 1, 1995.
Such trust agreement will be amended and restated in its entirety (as so amended
and restated, the "Trust Agreement") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
Trust Agreement will be qualified as an indenture under the Trust Indenture Act.
The Issuer exists for the exclusive purposes of (i) issuing the Preferred
Securities and Common Securities representing undivided beneficial interests in
the assets of such Issuer, (ii) investing the gross proceeds of the sale of the
Preferred Securities and Common Securities in the Junior Subordinated Debentures
and (iii) engaging in only those other activities necessary or incidental
thereto. Pursuant to the Trust Agreement, the number of BFG Trustees will
initially be five. Three of the BFG Trustees (the "Administrative Trustees")
will be persons who are employees or officers of or who are affiliated with BFG.
The fourth trustee will be a financial institution that maintains its principal
place of business in the State of Delaware and is unaffiliated with BFG (the
"Delaware Trustee"). The fifth trustee will be a financial institution which
will serve as property trustee under the Trust Agreement and as indenture
trustee for purposes of the Trust Indenture Act (the "Property Trustee"). The
Administrative Trustees, the Delaware Trustee and the Property Trustee are
sometimes referred to collectively herein as the "BFG Trustees". Initially, The
Bank of New York, a New York banking corporation, and The Bank of New York
(Delaware), a Delaware banking corporation, will be the Property Trustee and the
Delaware Trustee, respectively, until removed or replaced by the holder of the
Common Securities. The Bank of New York will also act as indenture trustee under
the Guarantee (the "Guarantee Trustee").
All of the Common Securities will be owned by BFG. The Common Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Preferred Securities, except that upon the occurrence and continuance of an
event of default under the Trust Agreement, the rights of the holders of the
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Preferred Securities. BFG will acquire Common Securities having
an aggregate liquidation amount equal to 3% of the total capital of the Issuer.
The Issuer has a term of approximately 35 years, but may terminate earlier as
provided in the Trust Agreement.
CONDUCT OF THE ISSUER'S AFFAIRS
The Issuer's business and affairs will be conducted by the BFG Trustees. As
described above, the Trust will not engage in any business or activities other
than those activities necessary or incidental to issuance of the Issuer
Securities and investment of the proceeds of such issuance in the Junior
Subordinated Debentures. The holder of the Common Securities, or the holders of
a majority in liquidation preference of the Preferred Securities if an Event of
Default (as defined herein) has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee, the Delaware Trustee and the
Administrative Trustees. The duties and obligations of the Property Trustee, the
Delaware Trustee and the Administrative Trustees shall be governed by the Trust
Agreement, and the Property Trustee will be authorized to exercise discretion
only to the extent specifically stated therein. BFG will pay all fees and
expenses related to the Issuer and the issuance and sale of the Issuer
Securities.
5
<PAGE> 6
The office of the Delaware Trustee in the State of Delaware is White Clay
Center, Route 273, Newark, Delaware 19711. The principal place of business of
the Issuer is c/o The B.F.Goodrich Company, 3925 Embassy Parkway, Akron, Ohio
44333 (telephone number (216) 374-3985).
THE B.F.GOODRICH COMPANY
BFG manufactures and supplies a wide variety of supplies and component
parts for the aerospace industry and provides maintenance, repair and overhaul
services on commercial, regional and general aviation aircraft. BFG also
manufactures specialty plastics, specialty additives, sealants, coatings and
adhesives products for a variety of end user applications. In addition, BFG
produces chlor-alkali and olefins.
BFG, with 1994 sales of $2.2 billion, is organized into two principal
business segments: B.F.Goodrich Aerospace ("Aerospace") and B.F.Goodrich
Specialty Chemicals ("Specialty Chemicals").
BFG's Aerospace business is conducted through four major business groups:
- Landing Systems Group manufactures landing gear and aircraft wheels and
brakes for commercial, military, regional and business aviation
customers.
- Sensors and Integrated Systems Group manufactures sensors and related
equipment; fuel and integrated utility measurement and management
systems; engine ignition system components; electromechanical actuators;
and aircraft windshield wiper systems for commercial, military, regional
and business aviation customers.
- Safety Systems Group manufactures aircraft evacuation slides and rafts;
aircraft and helicopter de-icing systems; navigation, traffic alert and
collision avoidance systems; weather detection systems; and airport and
aircraft lighting components for commercial, military, regional, business
and general aviation customers.
- Maintenance, Repair and Overhaul Group provides maintenance, repair and
overhaul of commercial airframes and components including landing gear,
wheels and brakes, and instruments and avionics for commercial, regional,
business and general aviation customers.
BFG's Specialty Chemicals business is conducted through three major
business groups:
- Specialty Plastics Group manufactures thermoplastic polyurethane;
high-heat, corrosion-resistant and low-combustibility plastics; and
thermoset resins for reaction liquid polymer molded parts. Products are
marketed and sold to manufacturers for film and sheet applications;
fabric coatings; wire and cable coating and magnetic media. Specialty
plastics are also used in automotive products; recreational vehicles and
products; lawn and garden equipment; plumbing and industrial pipe; fire
sprinkler systems and building material components.
- Specialty Additives Group manufactures synthetic thickeners and
emulsifiers; controlled release and suspension agents; polymer emulsions;
dissolvable films; rubber and lubricant additives and plastic and
adhesive modifiers. These products are used by manufacturers of personal
care products; pharmaceuticals; liquid soaps and detergents; water
treatment products; electronics; tires and petroleum products and molded
plastics. Specialty additives are also used in textile printing
manufacturing; nonwoven manufacturing; paper coating and saturation;
graphic arts; and paints and industrial coatings.
- Sealants, Coatings and Adhesives Group manufactures insulating glass
sealants; construction sealants and water proofing coatings; commercial
glazing products and roofing products. This Group also manufactures
automotive sealants; adhesives and paint products; structural adhesives;
laminating adhesives and rust paints and primers. Products are sold to
manufacturers of windows; the construction and building maintenance
industry; and automotive and aircraft
6
<PAGE> 7
assembly industries. Other products are sold in the automotive repair and
residential maintenance markets.
BFG's Other Operations consist of the chlor-alkali and olefins businesses
which participate in a highly cyclical chlorine, caustic soda, ethylene and
olefin co-product commodity market. Sales and operating results are largely
dependent on industry supply and demand. BFG believes it does not have a
significant market share and, as a result, products produced by this business
are sold at established market prices.
BFG maintains patent and technical assistance agreements, licenses and
trademarks on its products, process technologies and expertise in most of the
countries in which it operates. BFG conducts its business through numerous
business groups of BFG and wholly- and majority-owned subsidiaries worldwide.
The net sales and operating income for BFG for the periods shown were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------
1995 1994 1994 1993 1992
------ ------ -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES:
Aerospace...................... $276.6 $255.8 $1,050.3 $ 855.4 $ 750.0
Specialty Chemicals............ 261.5 209.7 988.6 829.6 825.1
Other Operations............... 55.9 36.9 160.3 133.3 72.8
------ ------ -------- -------- --------
Total.......................... $594.0 $502.4 $2,199.2 $1,818.3 $1,647.9
====== ====== ======== ======== ========
OPERATING INCOME:
Aerospace...................... $ 27.8 $ 28.7 $ 121.9 $ 91.3 $ 83.2
Specialty Chemicals............ 12.0 10.1 86.7 45.0 40.9
Other Operations............... 19.4 (1.2) 24.1 4.0 14.5
Corporate...................... (11.7) (11.4) (53.0) (57.6) (63.6)
------ ------ -------- -------- --------
Total.......................... $ 47.5 $ 26.2 $ 179.7 $ 82.7 $ 75.0
====== ====== ======== ======== ========
</TABLE>
The principal executive offices of BFG are located in Bath Township, Summit
County, Ohio with a mailing address at 3925 Embassy Parkway, Akron, Ohio
44333-1799 (telephone (216) 374-3985).
BFG was incorporated under the laws of the State of New York on May 2, 1912
as the successor to a business founded in 1870.
7
<PAGE> 8
SUMMARY FINANCIAL INFORMATION OF BFG
The selected financial data presented below under the captions "Statement
of Income Data" and "Balance Sheet Data" have been derived from the consolidated
financial statements of BFG for each of the years in the five-year period ended
December 31, 1994, which have been audited by Ernst & Young LLP, independent
auditors. The selected financial data presented below for each of the quarters
ended March 31, 1995 and 1994 have been derived from BFG's unaudited
consolidated financial statements and reflect all adjustments and accruals that
are, in the opinion of BFG's management, necessary for a fair presentation of
BFG's results of operations and financial position for such quarters.
The audited consolidated financial statements of BFG as of December 31,
1994 and 1993 and for each of the years in the three-year period ended December
31, 1994, and the independent auditor's report thereon, and the unaudited
consolidated financial statements as of March 31, 1995 and 1994 and for each of
the periods then ended, have been incorporated by reference herein. See
"Incorporation of Certain Documents by Reference". This summary financial data
should be read in conjunction with such consolidated financial statements and
notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA1/:
Sales from continuing operations............. $1,420.5 $1,572.5 $1,647.9 $1,818.3 $2,199.2 $ 502.4 $ 594.0
Cost of sales................................ 964.8 1,098.4 1,133.1 1,278.3 1,523.3 359.0 416.1
Gross profit................................. 455.7 474.1 514.8 540.0 675.9 143.4 177.9
Selling and administrative expenses.......... 335.0 369.5 429.1 444.0 496.2 117.2 130.4
Total operating income....................... 120.7 93.1 75.0 82.7 179.7 26.2 47.5
Interest expense............................. 21.5 37.1 39.3 38.3 47.7 11.7 12.4
Interest income.............................. 24.8 10.7 3.9 5.2 1.8 .4 .4
Income tax (expense)......................... (4.4) (22.5) (2.5) -- (42.9) (3.1) (11.0)
Income from continuing operations before
cumulative effect of change in method of
accounting................................. 99.8 21.6 11.9 15.3 65.7 4.9 17.6
Income (loss) from discontinued operations... 36.5 (102.2) (21.3) 113.0 10.0 -- --
Cumulative effect of change in method of
accounting................................. -- -- (286.5) -- -- -- --
Net income (loss)............................ 136.3 (80.6) (295.9) 128.3 75.7 4.9 17.6
Income from continuing operations per share
of common stock............................ $ 3.60 $ .52 $ .14 $ .28 $ 2.24 $ .11 $ .61
Net income (loss) per share of common
stock...................................... 5.04 (3.50) (11.90) 4.68 2.63 .11 .61
Dividends per share of common stock.......... 2.12 2.20 2.20 2.20 2.20 .55 .55
Ratio of earnings to fixed charges2/......... 4.23 1.83 1.20 1.19 2.64 2.68
Ratio of earnings to fixed charges and
preferred dividends3/...................... 3.01 1.38 -- -- 2.20 2.27
Pro forma ratio of earnings to fixed
charges(4)................................. 2.31 2.36
Pro forma ratio of earnings to fixed charges
and preferred dividends(4)................. 2.31 2.36
BALANCE SHEET DATA:
Current assets............................... $ 947.6 $ 775.9 $ 797.1 $ 793.8 $ 878.8 $ 813.4 $ 920.8
Current liabilities.......................... 667.2 530.0 565.5 469.4 638.0 522.2 677.4
Net working capital.......................... 280.4 245.9 231.6 324.4 240.8 291.2 243.4
Net property................................. 1,155.3 1,171.0 1,215.8 836.0 873.3 834.9 877.8
Total assets................................. 2,414.2 2,270.6 2,451.7 2,359.9 2,468.9 2,378.1 2,510.8
Non-current long-term debt and capital lease
obligations................................ 209.8 344.2 403.1 486.5 427.1 460.1 419.7
Redeemable preferred stock................... 8.7 7.5 6.3 3.8 -- 3.8 --
Total shareholders' equity................... 1,358.9 1,214.0 828.8 895.3 922.6 886.2 924.6
</TABLE>
- - ---------------
1/ All Statement of Income Data have been restated to exclude results of the
former Geon Vinyl Division which was divested in 1993 and is now accounted
for as discontinued operations.
2/ For the purpose of computing the ratio of earnings to fixed charges,
"earnings" represent income from continuing operations before income taxes
and cumulative effect of change in method of accounting, fixed charges
(excluding capitalized interest), amortization of previously capitalized
interest and undistributed earnings (losses) of affiliated companies that are
accounted for on the equity method. "Fixed charges" consist of interest
expense (including capitalized interest and interest costs on company-owned
life insurance policies), amortization of deferred debt expenses and discount
or premium and the portion of rental expense representative of an interest
factor.
3/ In 1992 and 1993, earnings were insufficient to cover fixed charges and
preferred stock dividends by $0.6 and $0.9, respectively.
4/ Assuming the Underwriters' over-allotment option is not exercised.
8
<PAGE> 9
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be used by the
Issuer to purchase the Junior Subordinated Debentures issued by BFG, as
described herein. BFG expects to use the proceeds to redeem all of the
outstanding shares of BFG's $3.50 Cumulative Convertible Preferred Stock, Series
D, or for other general corporate purposes.
CAPITALIZATION
The following table sets forth the consolidated capitalization of BFG as of
March 31, 1995, and as adjusted to reflect the application of the estimated net
proceeds from the sale of the Preferred Securities (assuming the Underwriters'
over-allotment option is not exercised) as described under "Use of Proceeds".
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Short-term bank debt............................................. $ 121.1 $ 121.1
Current maturities of long-term debt and capital lease
obligations.................................................... 55.3 55.3
Long-term debt and capital lease obligations..................... 419.7 419.7
Company-obligated minority interest in subsidiary(1)............. -- 106.1
Shareholders' Equity:
$3.50 Cumulative Convertible Preferred Stock, Series D...... 110.0 --
Common Stock................................................ 129.8 129.8
Additional Capital.......................................... 402.5 402.5
Income retained in the business............................. 307.1 305.6
Translation adjustments, minimum pension liability and
unearned stock awards..................................... (21.3) (21.3)
Common stock held in Treasury............................... (3.5) (3.5)
-------- --------
Total Shareholders' Equity.................................. 924.6 813.1
-------- --------
Total Capitalization............................................. $1,520.7 $ 1,515.3
======== ========
</TABLE>
- - ---------------
(1) As described herein, substantially all of the assets of the Issuer will be
$110 of Junior Subordinated Debentures of BFG which will bear interest at
the rate of % per annum and which will constitute approximately 97% of the
total assets of the Issuer. Amount shown is less issuance costs.
RECENT DEVELOPMENTS
On May 4, 1995 BFG sold its wholly-owned subsidiary, Arrowhead Industrial
Water, Inc., for $80 million in cash, subject to adjustments. The proceeds were
used to reduce short-term debt. In addition, on May 17, 1995, BFG issued $20
million of long-term debt. These proceeds were also used to reduce short-term
debt.
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust Agreement among BFG as Depositor (the "Depositor"), The Bank of
New York, as Property Trustee, The Bank of New York (Delaware), as Delaware
Trustee and the three Administrative Trustees named therein, authorizes and
creates the Issuer. The Property Trustee, The Bank of New York, will act as the
indenture trustee for purposes of compliance with the provisions of the Trust
Indenture Act. The Preferred Securities and the Common Securities (together, the
"Issuer Securities") will be issued by the Administrative Trustees on behalf of
the Issuer pursuant to the terms of the Trust Agreement. The Preferred
Securities represent undivided beneficial interests in the assets of the Issuer
and entitle the holders thereof to a preference in certain circumstances with
respect to distributions and amounts
9
<PAGE> 10
payable on redemption or liquidation over the Common Securities, as well as
other benefits as described in the Trust Agreement. The following summaries of
certain provisions of the Trust Agreement are subject to, and are qualified in
their entirety by reference to, all the provisions of the Trust Agreement,
including the definitions therein of certain terms, and the Trust Indenture Act.
Wherever particular sections or defined terms of the Trust Agreement are
referred to, such sections or defined terms are incorporated herein by
reference. The Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
GENERAL
All of the Common Securities are owned by BFG. The Common Securities rank
pari passu, and payments will be made thereon pro rata, with the Preferred
Securities except as described under "-- Subordination of Common Securities".
(Section 4.03) The Junior Subordinated Debentures will be owned by the Property
Trustee and held in trust for the benefit of the holders of the Issuer
Securities. (Section 2.09) The Guarantee is a full and unconditional guarantee
with respect to the Preferred Securities but does not guarantee payment of
distributions or amounts payable on redemption or liquidation of the Preferred
Securities when the Issuer does not have funds legally available to make such
payments.
DISTRIBUTIONS
The distributions payable on each Preferred Security will be fixed at a
rate per annum of % of the stated liquidation amount of $25 per Preferred
Security. Distributions that are in arrears for more than one quarter will bear
interest on the amount thereof at the rate per annum of % thereof. The term
"distributions" as used herein includes any such interest payable, unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. (Sections
4.01(a) and 4.01(b)).
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1995, the date of initial issuance thereof, and will be
payable quarterly in arrears, on March 31, June 30, September 30 and December 31
of each year, commencing , 1995, except as otherwise described
below. In the event that any date on which distributions are otherwise payable
on the Preferred Securities is not a Business Day, payment of the distribution
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect to any such delay)
except that, if such Business Day is in the next succeeding calendar year,
payment of such distribution shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date (each
date on which distributions are otherwise payable in accordance with the
foregoing, a "Distribution Date"). A "Business Day" shall mean any day other
than a Saturday or a Sunday or a day on which banking institutions in The City
of New York are authorized or required by law or executive order to remain
closed or a day on which the Corporate Trust Office of the Property Trustee or
the Debenture Trustee (as defined herein) is closed for business. (Section
4.01(a)).
BFG has the right, under the Indenture pursuant to which it will issue the
Junior Subordinated Debentures (the "Indenture"), to extend the interest payment
period from time to time on the Junior Subordinated Debentures to a period not
exceeding 20 consecutive quarters, with the consequence that quarterly
distributions on the Preferred Securities would be deferred (but would continue
to accrue with interest thereon, including interest payable on unpaid interest
at the rate per annum set forth above, compounded quarterly) by the Issuer
during any such extended interest payment period. In the event that BFG
exercises this right, during such period BFG may not declare or pay any
dividends or distributions (other than dividends or distributions in common
stock of BFG) on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock, or make any guarantee payments with
respect to the foregoing (other than payments under the Guarantee). Prior to the
termination of any such extended interest payment period, BFG may further extend
the interest payment period, provided that such extended interest payment period
together with all such previous and further extensions thereof may not exceed 20
consecutive quarters or extend beyond the maturity of the Junior
10
<PAGE> 11
Subordinated Debentures. Upon the termination of any extended interest payment
period and the payment of all amounts then due, BFG may select a new extended
interest payment period, subject to the above requirements. See "Description of
the Junior Subordinated Debentures -- Interest" and "-- Option to Extend
Interest Payment Period".
It is anticipated that the income of the Issuer available for distribution
to the holders of the Preferred Securities will be limited to payments under the
Junior Subordinated Debentures in which the Issuer will invest the proceeds from
the issuance and sale of the Preferred Securities and the Common Securities. See
"Description of the Junior Subordinated Debentures". If BFG does not make
interest payments on the Junior Subordinated Debentures, the Property Trustee
will not have funds available to pay distributions on the Preferred Securities.
The payment of distributions (if and to the extent the Issuer has funds legally
available for the payment of such distributions and cash sufficient to make such
payments) is guaranteed on a limited basis by BFG as set forth herein under
"Description of the Guarantee".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry-only
form, will be one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the Trust
Agreement, each such payment will be made as described under "Book-Entry-Only
Issuance -- The Depository Trust Company" below. In the event the Preferred
Securities do not remain in book-entry-only form, the relevant record date shall
be the date 15 days prior to the relevant Distribution Date. (Section 4.01(d)).
REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity or upon earlier redemption as provided in the Indenture, the proceeds
from such repayment shall be applied by the Trustee to redeem a Like Amount (as
defined below) of Preferred Securities, upon not less than 30 nor more than 60
days' notice, at the Redemption Price. Such payment in redemption shall be due
without limitation and in all events. See "Description of the Junior
Subordinated Debentures -- Optional Redemption".
BFG has the right to redeem the Junior Subordinated Debentures (a) on or
after , 2000, in whole or in part, subject to the conditions
described under "Description of the Junior Subordinated Debentures -- Optional
Redemption", or (b) at any time, in whole but not in part, on occurrence of a
Tax Event (as defined below) and subject to the further conditions described
under "Description of the Junior Subordinated Debentures -- Optional
Redemption".
The stated liquidation amount of the Preferred Securities redeemed pursuant
to a redemption of the Junior Subordinated Debentures in either of the
circumstances referred to above may not exceed the amount derived, directly or
indirectly, by BFG from the issuance and sale of BFG's common stock within two
years preceding the date fixed for such redemption.
"Tax Event" means the receipt by the Administrative Trustees of an opinion
of counsel experienced in such matters to the effect that, as a result of (a)
any amendment to, clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, or (b) any judicial decision, official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to adopt such
procedures or regulations) ("Administrative Action"), or (c) any amendment to,
clarification of, or change in the official position or the interpretation of
such Administrative Action or judicial decision or any interpretation or
pronouncement that provides for a position with respect to such Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental authority
or regulatory body, irrespective of the manner in which such amendment,
clarification or change is made known, which amendment, clarification, or change
is effective or such pronouncement or decision is announced on or after the date
of issuance of the Preferred Securities, there is more than an insubstantial
risk that (i) the Issuer is, or will be, subject to United States Federal income
tax with respect to interest received on the Junior Subordinated Debentures,
(ii) interest payable by BFG on the
11
<PAGE> 12
Junior Subordinated Debentures is not, or will not be, fully deductible for
United States Federal income tax purposes, or (iii) the Issuer is, or will be,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
"Like Amount" means (i) with respect to a redemption of Preferred
Securities, Preferred Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture and the proceeds of which will be used
to pay the Redemption Price of such Preferred Securities and (ii) with respect
to a distribution to holders of Preferred Securities of Junior Subordinated
Debentures in connection with a liquidation of the Issuer upon the bankruptcy,
dissolution or liquidation of BFG, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Preferred Securities of
the holder to whom such Junior Subordinated Debentures are distributed.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each redemption date shall be redeemed at
the Redemption Price with the proceeds from the contemporaneous redemption of
Junior Subordinated Debentures. Redemptions of the Preferred Securities shall be
made and the Redemption Price shall be deemed payable on each Redemption Date
only to the extent that the Issuer has funds legally available for the payment
of such Redemption Price. (Section 4.02(e)). See also "-- Subordination of
Common Securities".
If the Issuer gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
time, on the Redemption Date, the Property Trustee will irrevocably deposit with
DTC funds sufficient to pay the applicable Redemption Price and will give DTC
irrevocable instructions and authority to pay the Redemption Price to the
holders of the Preferred Securities. See "Book-Entry-Only Issuance -- The
Depository Trust Company". If the Preferred Securities are no longer in
book-entry-only form, the Issuer will irrevocably deposit with the paying agent
for the Preferred Securities funds sufficient to pay the applicable Redemption
Price and will give such paying agent irrevocable instructions and authority to
pay the Redemption Price to the holders thereof upon surrender of their
certificates evidencing Preferred Securities. Notwithstanding the foregoing,
distributions payable on or prior to the redemption date for any Preferred
Securities called for redemption shall be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the Redemption Date, all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price, and such Preferred Securities will cease to
be outstanding. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Issuer or by BFG
pursuant to the Guarantee described herein under "Description of the Guarantee",
distributions on such Preferred Securities will continue to accrue at the then
applicable rate, from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), BFG or its subsidiaries may at any time and from time
to time purchase outstanding Preferred Securities by tender, in the open market
or by private agreement.
Payment of the Redemption Price on the Preferred Securities to holders of
Preferred Securities shall be made to the holders of record thereof as they
appear on the register for the Preferred Securities on the relevant record date,
which shall be one Business Day prior to the relevant Redemption Date; provided,
however, that in the event that the Preferred Securities do not remain in
book-entry-only form, the relevant record date shall be the date 15 days prior
to the Redemption Date. (Section 4.02(e)).
12
<PAGE> 13
If less than all the Issuer Securities are to be redeemed on a Redemption
Date, then the aggregate liquidation preference of such securities to be
redeemed shall be allocated 3% to the Common Securities and 97% to the Preferred
Securities. The particular Preferred Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Property Trustee from
the outstanding Preferred Securities not previously called for redemption, by
such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or
integral multiples thereof) of the liquidation preference of Preferred
Securities of a denomination larger than $25. The Property Trustee shall
promptly notify the security registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the liquidation preference thereof to be redeemed. For
all purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the liquidation preference of Preferred Securities that has been
or is to be redeemed. (Section 4.02(f)).
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the Redemption Price of, the Issuer
Securities, as applicable, shall be made pro rata based on the liquidation
amount of the Issuer Securities; provided, however, that if on any Distribution
Date or Redemption Date an Event of Default (as defined below, see "-- Events of
Default; Notice") under the Trust Agreement shall have occurred and be
continuing, no payment of any Distribution on, or Redemption Price of, any
Common Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid distributions on all outstanding Preferred
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all outstanding Preferred Securities, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all distributions on, or Redemption Price of,
Preferred Securities then due and payable. (Section 4.03).
In the case of any Event of Default under the Trust Agreement resulting
from an "Event of Default" under the Indenture, the holder of Common Securities
will be deemed to have waived any such Event of Default under the Trust
Agreement until the effect of all such Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until any
such Events of Default under the Trust Agreement with respect to the Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of the Preferred Securities
and not the holder of the Common Securities, and only the holders of the
Preferred Securities will have the right to direct the Property Trustee to act
on their behalf. (Section 4.03(b))
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Issuer shall be liquidated by the BFG
Trustees on the first to occur of: (i) December 31, 2030, the expiration of the
term of the Trust; (ii) the bankruptcy, dissolution or liquidation of BFG; and
(iii) the redemption of all of the Preferred Securities. (Sections 9.01 and
9.02).
If an early termination occurs as described in clause (ii) above, the
Issuer shall be liquidated by the BFG Trustees as expeditiously as the BFG
Trustees determine to be appropriate by causing the Property Trustee to
distribute to each holder of Preferred Securities and Common Securities a Like
Amount of Junior Subordinated Debentures, unless such distribution is determined
by the Property Trustee not to be practical, in which event such holders will be
entitled to receive, out of the assets of the Issuer available for distribution
to holders after satisfaction of liabilities to creditors, an amount equal to,
in the case of holders of Preferred Securities, the aggregate of the stated
liquidation preference of $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Issuer has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Issuer on the Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with
13
<PAGE> 14
the holders of the Preferred Securities, except that if an Event of Default has
occurred and is continuing under the Trust Agreement, the Preferred Securities
shall have a preference over the Common Securities. (Sections 9.04(a) and
9.04(d)).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement with respect to the Preferred Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of an "Event of Default" as defined in Section 501
of the Indenture (see "Description of Junior Subordinated Debentures --
Events of Default"); or
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Preferred Security or Common Security when it becomes due and
payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the BFG Trustees in the Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the Property Trustee by
the Holders of at least 10% in Liquidation Amount of the outstanding
Preferred Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee.
Within five Business Days after the occurrence of any Event of Default, the
Property Trustee shall transmit notice of any default actually known to the
Property Trustee to the holders of Preferred Securities and the Depositor,
unless such Event of Default shall have been cured or waived. (Section 8.02).
Unless an Event of Default shall have occurred and be continuing, the
Property Trustee may be removed at any time by act of the holder of the Common
Securities. If an Event of Default has occurred and is continuing, the Property
Trustee may be removed at such time by act of the holders of a majority in
liquidation preference of the Preferred Securities, delivered to the Property
Trustee (in its individual capacity and on behalf of the Issuer). No
registration or removal of the Property Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor Property Trustee in accordance with the provisions of the Trust
Agreement. (Section 8.10).
If an Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities upon dissolution
of the Issuer as described above. See "-- Liquidation Distribution Upon
Dissolution".
MERGER OR CONSOLIDATION OF A BFG TRUSTEE
Any corporation into which either the Property Trustee, the Delaware
Trustee or any Administrative Trustee that is not a natural person may be merged
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which any such BFG Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of any such BFG Trustee, shall be the successor to such BFG
Trustee under the Trust Agreement, provided such corporation is otherwise
qualified and eligible. (Section 8.12).
14
<PAGE> 15
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee --
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
(Section 6.01(a)).
If any proposed amendment to the Trust Agreement provides for, or the BFG
Trustees otherwise propose to effect (i) any action that would adversely affect
the powers, preferences or special rights of the holders of the Preferred
Securities, whether by way of amendment to the Trust Agreement or otherwise or
(ii) the dissolution, winding-up or termination of the Issuer, other than
pursuant to the Trust Agreement, then the holders of outstanding Preferred
Securities will be entitled to vote as a class on such amendment or proposal of
the BFG Trustees, and such amendment or proposal shall not be effective except
with the approval of the holders of 66 2/3% in liquidation preference of such
outstanding Preferred Securities. (Section 6.01(c)).
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Property Trustee shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee (as
defined herein), or executing any trust or power conferred on the Debenture
Trustee with respect to the Junior Subordinated Debentures, (ii) waive any past
default which is waivable under Section 513 of the Indenture, (iii) exercise any
right to rescind or annul a declaration that the principal of all the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of at least 66 2/3% in
liquidation preference of the outstanding Preferred Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debentures affected thereby, no such consent
shall be given by the Property Trustee without the prior consent of each holder
of Preferred Securities. The Property Trustee shall not revoke any action
previously authorized or approved by a vote of the Preferred Securities. The
Property Trustee shall notify all holders of the Preferred Securities of any
notice of default received from the Debenture Trustee. In addition to obtaining
the foregoing approvals of the holders of the Preferred Securities, prior to
taking any of the foregoing actions, the Property Trustee shall obtain an
opinion of counsel experienced in such matters to the effect that the Issuer
will not be classified as an association taxable as a corporation for United
States Federal income tax purposes on account of such action. (Section 6.01(b)).
Any required approval of holders of Preferred Securities may be given at a
separate meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement. (Section 6.02).
No vote or consent of the holders of Preferred Securities will be required
for the Issuer to redeem and cancel Preferred Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by BFG, the BFG Trustees or any affiliate of BFG or
any BFG Trustee, shall, for purposes of such vote or consent, be treated as if
they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default under the Trust Agreement shall have occurred
and be continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property (as defined in the Trust Agreement) may at the time be
located, the Administrative Trustees and the Property Trustee shall have power
to appoint, and upon the written request of the Property Trustee, BFG, as
Depositor, shall for such purpose join with the Property Trustee in the
execution, delivery and performance of all instruments and agreements necessary
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or proper to appoint one or more persons approved by the Property Trustee either
to act as co-property trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to act as separate property trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity, any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. If BFG, as Depositor, does not join in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default under the Indenture has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. (Section
8.09).
PAYMENT AND PAYING AGENT
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Preferred Securities are not held by DTC, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
shall appear on the Register. The Paying Agent shall initially be The Bank of
New York. The Paying Agent shall be permitted to resign as Paying Agent upon 30
days' written notice to the Administrative Trustees, the Property Trustee and
the Depositor. In the event that The Bank of New York chooses to no longer be
the Paying Agent, the Administrative Trustees shall appoint a successor to act
as Paying Agent (which shall be a bank or trust company acceptable to the
Property Trustee and the Depositor). (Sections 4.04 and 5.09).
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depository for the Preferred Securities. The
Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global Preferred Security certificates will be issued,
representing in the aggregate the total number of Preferred Securities, and will
be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement of securities transactions among Participants through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
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DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants are responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Preferred
Securities are being redeemed, DTC's practice is to determine by lot the amount
of the interest of each Direct Participant in such series to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those cases where a vote is
required, neither DTC nor Cede & Co. will itself consent or vote with respect to
Preferred Securities. Under its usual procedures, DTC would mail an Omnibus
Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Preferred Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made by the
Issuer to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, the Issuer or BFG, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the responsibility of the Issuer,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving 90 days' notice to the
Issuer. If DTC stops providing such services and a successor securities
depository is not obtained, Preferred Security certificates must be printed and
delivered. Additionally, the Administrative Trustees (with the consent of BFG)
could decide to discontinue use of the system of book-entry transfers through
DTC (or a successor depository). In that event, definitive certificates for the
Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuer believes to be reliable, but the
Issuer takes no responsibility for the accuracy thereof. The Issuer has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
REGISTRAR AND TRANSFER AGENT
The Bank of New York will act as registrar and transfer agent for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Issuer, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The Issuer will not be required to register or cause to be registered any
transfer of Preferred Securities after they have been called for redemption.
CONCERNING THE PROPERTY TRUSTEE
BFG and certain of its subsidiaries maintain deposit accounts and conduct
other banking transactions with the Property Trustee in the ordinary course of
their businesses.
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MISCELLANEOUS
The Preferred Securities have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance.
The Administrative Trustees are authorized and directed to conduct the
affairs of the Issuer and to operate the Issuer so that the Issuer will not be
deemed to be an "investment company" required to be registered under the 1940
Act or taxed as a corporation for United States Federal income tax purposes and
so that the Junior Subordinated Debentures will be treated as indebtedness of
BFG for United States Federal income tax purposes. In this connection, the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust or the Trust Agreement, that the
Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not adversely affect
the interests of the holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by BFG for the benefit of the holders from time
to time of Preferred Securities. The Guarantee will be qualified as an indenture
under the Trust Indenture Act. The Bank of New York will act as indenture
trustee (the "Guarantee Trustee") under the Guarantee for the purposes of
compliance with the Trust Indenture Act. The terms of the Guarantee will be
those set forth in such Guarantee and those made part of such Guarantee by the
Trust Indenture Act. The summary is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the Guarantee, which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and the Trust Indenture Act. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities.
GENERAL
BFG will fully and unconditionally agree, to the extent described herein,
to pay the Guarantee Payments (as defined below) in full to the holders of the
Preferred Securities (except to the extent paid by or on behalf of the Issuer),
as and when due, regardless of any defense, right of set-off or counterclaim
that the Issuer may have or assert. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the Issuer (the
"Guarantee Payments"), will be subject to the Guarantee (without duplication):
(i) any accrued and unpaid distributions required to be paid on the Preferred
Securities, to the extent the Issuer has funds legally available therefor, (ii)
the redemption price, including all accrued and unpaid distributions to the date
of redemption (the "Redemption Price"), with respect to any Preferred Securities
called for redemption by the Issuer, to the extent the Issuer has funds
available therefor and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Issuer (other than in connection with a
redemption of all of the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of payment, to the extent the Issuer has funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to holders of Preferred Securities in liquidation of
the Issuer. BFG's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by BFG to the holders of Preferred
Securities or by causing the Issuer to pay such amounts to such holders.
The Guarantee will be a full and unconditional guarantee with respect to
the Preferred Securities issued by the Issuer from the time of issuance of the
Preferred Securities, but will not apply to any payment of distributions if and
to the extent that the Issuer does not have funds legally available to make such
payments or to collection of payment. If BFG does not make interest payments on
the Junior Subordinated Debentures held by the Issuer, it is expected that the
Issuer will not pay distributions on the Preferred Securities. The Guarantee
will rank subordinate and junior in right of payment to all liabilities of BFG
(except those made pari passu by their terms). See "-- Status of the Guarantee".
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
terms of the Guarantee may be changed only with the prior approval of the
holders of not less than 66 2/3% in liquidation amount of the outstanding
Preferred Securities. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
BFG and shall inure to the benefit of the holders of the Preferred Securities
then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of BFG
to perform any of its payment obligations thereunder. The holders of a majority
in liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of the Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of
Preferred Securities may, after a period of 30 days has elapsed from such
holder's written request to the Guarantee Trustee to enforce the Guarantee,
institute a legal proceeding directly against BFG to enforce the Guarantee
Trustee's rights under such Guarantee without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other person or
entity.
BFG will be required to provide annually to the Guarantee Trustee a
statement as to the performance by BFG of certain of its obligations under the
Guarantee and as to any default in such performance.
BFG will also be required to file annually with the Guarantee Trustee an
officer's certificate as to BFG's compliance with all conditions under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default by BFG in
performance of the Guarantee, undertakes to perform only such duties as are
specifically set forth in the Guarantee and, after default with respect to the
Guarantee, must exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to this provision,
the Guarantee Trustee is under no obligation to exercise any of the powers
vested in it by the Guarantee at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of all Preferred Securities, the
distribution of Junior Subordinated Debentures to holders of Preferred
Securities in exchange for all of the Preferred Securities or upon full payment
of the amounts payable upon liquidation of the Issuer. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must restore payment of any sums paid
under the Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of BFG and will rank
(i) subordinate and junior in right of payment to all liabilities of BFG (except
liabilities that may be made pari passu by their terms), (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by BFG and
with any guarantee now or hereafter entered into by BFG in respect of any
preferred or preference stock of any affiliate of BFG and (iii) senior to BFG's
common stock. The Trust Agreement provides that each holder of Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Guarantee.
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The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Junior
Subordinated Debentures in which the Issuer will invest the proceeds of the
issuance and sale of the Issuer Securities. The following description is
qualified in its entirety by reference to the description in the Indenture (the
"Indenture") dated as of , 1995, between BFG and The Bank of New York,
as trustee with respect to the Junior Subordinated Debentures (the "Debenture
Trustee"), which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Whenever particular provisions or defined terms in
the Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section references used herein are references
to provisions of the Indenture unless otherwise noted.
GENERAL
The Junior Subordinated Debentures will be limited in aggregate principal
amount to approximately $130.4 million, such amount being the sum of the
aggregate stated liquidation preference of the Preferred Securities and the
consideration paid by BFG for the Common Securities. The Junior Subordinated
Debentures are unsecured, subordinated obligations of BFG which rank junior to
all of BFG's Senior Indebtedness (as defined below).
The entire outstanding principal amount of the Junior Subordinated
Debentures will become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as hereinafter defined), if
any, on , 2025.
OPTIONAL REDEMPTION
On or after , 2000 and subject to the Equity Call Requirement (as
defined below), BFG will have the right, at any time and from time to time, to
redeem the Junior Subordinated Debentures, in whole or in part, at a redemption
price equal to 100% of the principal amount of the Junior Subordinated
Debentures being redeemed, together with any accrued but unpaid interest,
including Additional Interest, if any, to the redemption date.
If a Tax Event shall occur and be continuing and, subject to the Equity
Call Requirement, BFG shall have the right to redeem the Junior Subordinated
Debentures in whole but not in part, at a Redemption Price equal to 100% of the
principal amount of Junior Subordinated Debentures then outstanding plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date.
The principal amount of the Junior Subordinated Debentures redeemed in the
circumstances described in either of the two immediately preceding paragraphs
may not exceed approximately 103% of the amount of the proceeds derived,
directly or indirectly, by BFG or its subsidiaries from the issuance and sale of
BFG's common stock within two years preceding the date fixed for redemption (the
"Equity Call Requirement"). For so long as the Issuer is the holder of all the
outstanding Junior Subordinated Debentures, the proceeds of any such redemption
will be used by the Issuer to redeem Preferred Securities in accordance with
their terms. BFG may not redeem the Junior Subordinated Debentures in part
unless all accrued and unpaid interest (including any Additional Interest) has
been paid in full on all outstanding Junior Subordinated Debentures for all
quarterly interest periods terminating on or prior to the date of redemption.
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Any optional redemption of the Junior Subordinated Debentures shall be made
upon not less than 30 nor more than 60 days' notice to the holders thereof, as
provided in the Indenture.
INTEREST
The Junior Subordinated Debentures shall bear interest at the rate of %
per annum. Such interest is payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing , 1995, to the person in whose name each Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
It is anticipated that the Issuer will be the sole holder of the Junior
Subordinated Debentures.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
BFG shall have the right at any time during the term of the Junior
Subordinated Debentures to extend the interest payment period from time to time
to a period not exceeding 20 consecutive quarters (the "Extension Period")
during which period interest will compound quarterly. At the end of this
Extension Period BFG must pay all interest then accrued and unpaid (together
with interest thereon at the rate specified for the Junior Subordinated
Debentures to the extent permitted by applicable law). However, during any such
Extension Period, BFG may not declare or pay any dividend or distribution (other
than a dividend or distribution in common stock of BFG) on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock,
or make any guarantee payments with respect to the foregoing (other than
payments under the Guarantee). Prior to the termination of any such Extension
Period, BFG may further extend the interest payment period, provided that such
Extension Period together with all such previous and further extensions thereof
shall not exceed 20 consecutive quarters at any one time or extend beyond the
maturity date of the Junior Subordinated Debentures. Upon the termination of any
such Extension Period and the payment of all amounts then due, BFG may select a
new Extension Period, subject to the above requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof. So long
as the Property Trustee shall be the sole holder of the Junior Subordinated
Debentures, BFG must give the Property Trustee, the Administrative Trustees and
the Debenture Trustee notice of its selection of such Extension Period at least
one Business Day prior to the earlier of (i) the date the distributions on the
Preferred Securities are payable or (ii) the date the Administrative Trustees
are required to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Preferred Securities of the
record date for the payment of such distributions or the date such distributions
are payable, but in any event not less than one Business Day prior to such
record date. The Administrative Trustees will be required to give notice of
BFG's selection of such Extension Period to the holders of the Preferred
Securities.
ADDITIONAL INTEREST
If at any time the Issuer shall be required to pay any interest on
distributions in arrears in respect of the Preferred Securities pursuant to the
terms thereof, BFG will pay as interest to the Issuer as the holder of the
Junior Subordinated Debentures an amount of additional interest ("Additional
Interest") equal to such interest on distributions in arrears. Accordingly, in
such circumstances, BFG will, to the fullest extent permitted by applicable law,
pay interest upon interest in order to provide for quarterly compounding on the
Junior Subordinated Debentures. In addition, if the Issuer would be required to
pay any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the
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United States or any other taxing authority, then, in any case, BFG will also
pay as Additional Interest such amounts as shall be required so that the net
amounts received and retained by the Issuer after paying such taxes, duties,
assessments or governmental charges will be not less than the amounts the Issuer
would have received had no such taxes, duties, assessments or governmental
charges been imposed.
SET-OFF
Notwithstanding anything to the contrary in the Indenture, BFG shall have
the right to set-off any payment it is otherwise required to make thereunder to
the extent BFG has theretofore made, or is concurrently on the date of such
payment making, a payment under the Guarantee.
SUBORDINATION
The Junior Subordinated Debentures are subordinate and junior in right of
payment to all Senior Indebtedness (as defined below) of BFG as provided in the
Indenture. The Junior Debentures rank equal with obligations to trade creditors
of BFG. No payment of principal of (including redemption and sinking fund
payments), or interest on, the Junior Subordinated Debentures may be made if BFG
has defaulted on any payment of Senior Indebtedness when due, any applicable
grace period with respect to such default has ended and such default has not
been cured or waived, or if the maturity of any Senior Indebtedness has been
accelerated because of a default. (Section 1102). Upon any payment or
distribution of assets of BFG to creditors upon any dissolution, winding-up,
liquidation or reorganization, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal of and
interest due or to become due on, all Senior Indebtedness must be paid in full
before the holders of the Junior Subordinated Debentures are entitled to receive
or retain any payment thereon. (Section 1103). Subject to the prior payment of
all Senior Indebtedness, the rights of the holders of the Junior Subordinated
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on the Junior Subordinated Debentures are
paid in full. (Section 1104).
The term "Senior Indebtedness" shall mean the principal of, premium, if
any, interest on and any other payment due pursuant to any of the following,
whether outstanding at the date of execution of the Indenture or thereafter
incurred, created or assumed:
(a) all indebtedness of BFG on a consolidated basis (other than any
obligations to trade creditors) evidenced by notes, debentures, bonds,
other securities or other instruments issued by BFG for money borrowed and
capitalized lease obligations;
(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by BFG or in effect
guaranteed by BFG; and
(c) all renewals, extensions or refundings of indebtedness of the
kinds described in either of the preceding clauses (a) or (b), unless, in
the case of any particular indebtedness, renewal, extension or refunding,
the instrument creating or evidencing the same or the assumption or
guarantee of the same expressly provides that such indebtedness, renewal,
extension or refunding is not superior in right of payment to or is pari
passu with the Junior Subordinated Debentures. (Section 101).
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued. As of April 30, 1995, BFG had approximately $609.5 million
of principal amount of indebtedness for borrowed money constituting Senior
Indebtedness on a consolidated basis. In addition, as of April 30, 1995, there
were approximately $70 million of contingent obligations constituting Senior
Indebtedness where there exists a financially viable and unrelated primary
obligor and where the risk of loss to BFG is, in the opinion of BFG, remote.
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CERTAIN COVENANTS OF BFG
Pursuant to the Indenture, BFG will covenant that it will not declare or
pay any dividends or distributions (other than dividends or distributions in
common stock of BFG) on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock, or make any guarantee
payments with respect to the foregoing (other than payments under the Guarantee)
if at such time (i) there shall have occurred any event of which BFG has actual
knowledge that (a) with the giving of notice or the lapse of time, or both,
would constitute an Event of Default under the Indenture and (b) in respect of
which BFG shall not have taken reasonable steps to cure, (ii) BFG shall be in
default with respect to its payment of any obligations under the Guarantee or
(iii) BFG shall have given notice of its selection of an Extension Period as
provided in the Indenture and such Extension Period, or any extension thereof,
shall be continuing. (Section 1005). BFG will also covenant (i) to maintain 100%
ownership of the Common Securities of the Issuer, (ii) not to voluntarily
dissolve, wind-up or terminate the Trust, except in connection with the
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in liquidation of the Issuer and (iii) to use its
reasonable efforts, consistent with the terms and provisions of the Trust
Agreement, to cause the Issuer to remain a business trust and otherwise not to
be classified as a corporation for United States Federal income tax purposes.
(Section 1005).
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, that has occurred and is continuing constitutes an "Event of Default"
with respect to the Junior Subordinated Debentures:
(a) failure for 10 days to pay interest on the Junior Subordinated
Debentures, including any Additional Interest in respect thereof, when due
(subject to the deferral of any due date in the case of an Extension
Period); or
(b) failure to pay principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption by declaration or otherwise;
or
(c) failure to observe or perform in any material respect any other
covenant contained in the Indenture for 90 days after written notice to BFG
from the Debenture Trustee or the holders of at least 25% in principal
amount of the outstanding Junior Subordinated Debentures; or
(d) certain events in bankruptcy, insolvency or reorganization of BFG.
(Section 501).
The holders of a majority in outstanding principal amount of the Junior
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee.
(Section 512). The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures may
declare the principal due and payable immediately upon an Event of Default, and
should the Debenture Trustee or such holders of Junior Subordinated Debentures
fail to make such declaration the holders of at least 25% in aggregate
liquidation preference of Preferred Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default 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. (Section 502).
The holders of a majority in outstanding principal amount of the Junior
Subordinated Debentures affected thereby may, on behalf of the holders of all
the Junior Subordinated Debentures, waive any past default, except a default in
the payment of principal or interest (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
Junior Subordinated Debenture. (Section 513). BFG is required to file annually
with the Debenture Trustee a certificate as to whether or not BFG is in
compliance with all the conditions and covenants applicable to it under the
Indenture. (Section 1004).
23
<PAGE> 24
In case any Event of Default (as defined in the Indenture) shall occur and
be continuing, the Property Trustee will have the right to declare the principal
of and the interest on the Junior Subordinated Debentures (including any
Additional Interest) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debentures.
A voluntary or involuntary dissolution of the Issuer prior to redemption or
maturity of the Junior Subordinated Debentures would not constitute an Event of
Default with respect to the Junior Subordinated Debentures. If the Issuer is
dissolved, an event BFG and the Issuer consider to be remote, any of the
following, among other things, could occur: (i) a distribution of the Junior
Subordinated Debentures to the holders of the Preferred Securities, (ii) a cash
distribution to the holders of the Preferred Securities out of the sale of
assets of the Issuer, after satisfaction of liabilities to creditors, (iii) a
permitted redemption at par of the Junior Subordinated Debentures, and a
consequent redemption of a Like Amount of the Preferred Securities, at the
option of BFG under the circumstances described in "-- Optional Redemption" or
(iv) the rollover of the Trust Property into another entity with similar
characteristics.
FORM, EXCHANGE, AND TRANSFER
The Junior Subordinated Debentures will be issuable only in registered
form, without coupons and only in denominations of $25 and integral multiples
thereof. (Section 302)
Subject to the terms of the Indenture, Junior Subordinated Debentures may
be presented for registration of transfer (duly endorsed or accompanied by
satisfactory instruments of transfer) at the office of the Security Registrar or
at the office of any transfer agent designated by BFG for such purpose. No
service charge will be made for any registration of transfer or exchange of
Junior Subordinated Debentures, but BFG may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Such transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the documents of
transfer, title and identity of the person making the request. BFG has appointed
the Trustee as Security Registrar. (Section 305) BFG may at any time designate
additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts. (Section
1002)
If the Junior Subordinated Debentures are to be redeemed in part, BFG will
not be required to issue, register the transfer of or exchange any Junior
Subordinated Debentures during a period beginning at the opening of business 15
days before the day of mailing of a notice of redemption of any such Junior
Subordinated Debentures that may be selected for redemption and ending at the
close of business on the day of such mailing, except the unredeemed portion of
any such Junior Subordinated Debentures being redeemed in part. (Section 305)
PAYMENT AND PAYING AGENTS
Payment of interest on a Junior Subordinated Debenture on any Interest
Payment Date will be made to the Person in whose name such Junior Subordinated
Debenture (or one or more predecessor securities) is registered at the close of
business on the Regular Record Date for such interest. (Section 307)
Principal of and any interest on the Junior Subordinated Debentures will be
payable at the office of such Paying Agent or Paying Agents as BFG may designate
for such purpose from time to time, except that at the option of BFG payment of
any interest may be made by check mailed to the address of the Person entitled
thereto as such address appears in the Security Register or by wire transfer.
The corporate trust office of the Debenture Trustee in The City of New York is
designated as BFG's sole Paying Agent for payments with respect to the Junior
Subordinated Debentures. BFG may at any time designate additional Paying Agents
or rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts. (Section 1002)
24
<PAGE> 25
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting BFG and the Debenture Trustee,
with the consent of the holders of not less than 66 2/3% of the principal amount
of the outstanding Junior Subordinated Debentures, to modify the Indenture in a
manner affecting the rights of the holders of the Junior Subordinated
Debentures; provided that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture, (i) change the fixed
maturity of the Junior Subordinated Debentures, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon,
or modify the subordination provisions in the Indenture in a manner adverse to
the holders of the Junior Subordinated Debentures, (ii) reduce the percentage of
principal amount of Junior Subordinated Debentures, the holders of which are
required to consent to any such modification of the Indenture or (iii) modify
certain provisions of the Indenture relating to the waiver of past defaults or
compliance by BFG with the covenants therein. The Indenture also requires the
consent of the holders of the Preferred Securities in respect of certain
amendments to or termination of the Indenture and in respect of compliance by
BFG with certain covenants in the Indenture. (Section 902)
CONSOLIDATION, MERGER AND SALE
BFG may not consolidate with or merge into, or convey, transfer or lease
its properties and assets substantially as an entirety to, any Person (a
"successor Person"), and may not permit any Person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, BFG
unless (i) the successor Person (if any) is a corporation, partnership, trust or
other entity organized and validly existing under the laws of any domestic
jurisdiction and assumes BFG's obligations on the Junior Subordinated Debentures
and under the Indenture, (ii) immediately after giving effect to the
transaction, and treating any indebtedness which becomes an obligation of BFG or
any Subsidiary as a result of the transaction as having been incurred by it at
the time of the transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing (iii) such consolidation or merger or conveyance,
transfer or lease of properties or assets of BFG is permitted under, and does
not give rise to any breach or violation of, the Trust Agreement or the
Guarantee and certain other conditions are met. (Section 801).
SATISFACTION AND DISCHARGE
Under the terms of the Indenture, BFG will be discharged from any and all
obligations in respect of the Junior Subordinated Debentures (except in each
case for certain obligations to register the transfer or exchange of Junior
Subordinated Debentures, replace stolen, lost or mutilated Junior Subordinated
Debentures and hold moneys for payment in trust) if BFG deposits with the
Debenture Trustee, in trust, moneys in an amount sufficient to pay all the
principal of, and interest on, the Junior Subordinated Debentures on the dates
such payments are due in accordance with the terms of such Junior Subordinated
Debentures. (Section 401).
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the laws of the State of New York. (Section
112).
MISCELLANEOUS
BFG will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of BFG; provided, that, in the event of any such assignment, BFG will remain
liable for all such obligations. The Issuer may not assign any of its rights
under the Indenture without the prior written consent of BFG. Subject to the
foregoing, the Indenture will be binding upon and inure to the benefit of the
parties thereto and their respective successors and assigns. The Indenture
provides that it may not otherwise be assigned by the parties thereto. (Section
109).
25
<PAGE> 26
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation preference of the
Preferred Securities and the Common Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the distribution rate and distribution and other payment dates for the
Preferred Securities; (iii) the Trust Agreement provides that BFG shall pay for
all, and the Issuer shall not be obligated to pay, directly or indirectly, for
any, costs, expenses and liabilities of the Issuer, including any income taxes,
duties and other governmental charges, and all costs and expenses with respect
thereto, to which the Issuer may become subject, except for United States
withholding taxes and the Issuer's obligations to Preferred Securityholders (as
defined herein) under the Preferred Securities; and (iv) the Trust Agreement
further provides that the BFG Trustees shall not cause or permit the Issuer to,
among other things, engage in any activity that is not consistent with the
limited purposes of the Issuer.
Payments of distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
distributions) are guaranteed by BFG as and to the extent set forth under
"Description of the Guarantee." If and to the extent that BFG does not make
payments on the Junior Subordinated Debentures, the Issuer will not pay
distributions or other amounts due on the Preferred Securities.
If the Guarantee Trustee fails to enforce the Guarantee, a holder of a
Preferred Security may, after a period of 30 days has elapsed from the date of
such holder's written request to the Guarantee Trustee to enforce the Guarantee,
institute a legal proceeding directly against BFG to enforce its rights under
the Guarantee without first instituting a legal proceeding against the Issuer or
any other person or entity.
The Preferred Securities evidence the rights of the holders thereof to the
benefits of the Trust, a trust that exists for the sole purpose of issuing its
Issuer Securities and investing the proceeds thereof in debt securities of BFG,
while the Junior Subordinated Debentures represent indebtedness of BFG. A
principal difference between the rights of a holder of a Preferred Security and
a holder of a Junior Subordinated Debenture is that a holder of a Junior
Subordinated Debenture will accrue, and (subject to the permissible extension of
the interest period) is entitled to receive, interest on the principal amount of
Junior Subordinated Debentures held, while a holder of Preferred Securities is
only entitled to receive distributions if and to the extent the Issuer has funds
legally available for the payment of such distributions.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Issuer, the holders of Preferred Securities will be entitled to receive, out
of assets legally available for distribution to holders, the Liquidation
Distribution in cash. See "Description of the Preferred Securities --
Liquidation Distribution Upon Dissolution". Upon any voluntary or involuntary
liquidation or bankruptcy of BFG, the Issuer, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of BFG, subordinated
in right of payment to all Senior Indebtedness, but entitled to receive payment
in full of principal and interest, before any stockholders of BFG receive
payments or distributions. Since BFG is Guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Issuer (other than
United States withholding taxes and other than the Issuer's obligations to
Preferred Securityholders under the Preferred Securities), the positions of a
holder of Preferred Securities and a holder of Junior Subordinated Debentures
relative to other creditors and to stockholders of BFG in the event of
liquidation or bankruptcy of BFG would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Junior Subordinated
Debentures. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness, the subordination provisions of the Junior Subordinated
Debentures provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior Indebtedness has been paid in full or
any payment default thereunder has been cured or
26
<PAGE> 27
waived. Failure to make required payments on the Junior Subordinated Debentures
would constitute an Event of Default under the Indenture.
UNITED STATES TAXATION
GENERAL
This section is a summary of the principal United States Federal income tax
considerations that may be relevant to prospective purchasers of Preferred
Securities and represents the opinion of White & Case, special counsel to BFG
and the Issuer, insofar as it relates to matters of law and legal conclusions
with respect thereto. This section is based upon current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
Treasury Regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change (which change may be retroactive).
Subsequent changes may cause tax consequences to vary substantially from the
consequences described below.
The following discussion does not address all United States Federal income
tax matters affecting holders of Preferred Securities ("Preferred
Securityholders"). Moreover, the discussion addresses the United States Federal
income tax considerations of Preferred Securityholders who are citizens or
residents of the United States, corporations, partnerships or other entities
created or organized in or under the laws of the United States or any political
subdivision thereof or therein, estates or trusts the income of which is subject
to United States Federal income taxation regardless of its source or other
holders who otherwise are subject to United States Federal income taxation on a
net income basis with respect to Preferred Securities ("U.S. Holders") that hold
the Preferred Securities as a capital asset and does not address the tax
consequences to Preferred Securityholders who are not U.S. Holders ("Non-U.S.
Holders"). This summary does not address tax considerations applicable to
Preferred Securityholders that may be subject to special tax rules, such as
banks, insurance companies, tax-exempt organizations or dealers in securities or
currencies, or to Preferred Securityholders that will hold Preferred Securities
as part of a position in a "straddle" or as part of a "hedging" or "conversion"
transaction for United States Federal income tax purposes or that have a
"functional currency" other than the United States dollar. In addition, this
summary does not address the tax consequences to Preferred Securityholders that
do not purchase Preferred Securities as part of their initial distribution.
Accordingly, each prospective Preferred Securityholder, including Non-U.S.
Holders, should consult, and should depend on, his or her own tax advisor in
analyzing the United States Federal, state, local and foreign tax consequences
of the purchase, ownership, sale or exchange of Preferred Securities.
While BFG believes, based upon the advice of its special counsel, that the
Junior Subordinated Debentures should be treated as indebtedness for United
States Federal income tax purposes, Preferred Securityholders should note that
the Internal Revenue Service (the "Service") may attempt to treat the Junior
Subordinated Debentures as equity rather than indebtedness for tax purposes. If
the Service were successful in such attempt, the Preferred Securities would be
subject to redemption at the option of BFG as described under "Description of
the Preferred Securities -- Redemption."
INCOME FROM PREFERRED SECURITIES
In the opinion of White & Case, the Issuer will not be classified as an
association taxable as a corporation for United States Federal income tax
purposes. Each Preferred Securityholder will be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures. Accordingly, each
U.S. Holder will be required to include in its gross income its share of the
interest income accrued with respect to the Junior Subordinated Debentures
whether or not actually distributed to the Preferred Securityholders. No portion
of such income will be eligible for the dividends received deduction.
SALE OF PREFERRED SECURITIES
Any gain or loss will be recognized by a U.S. Holder on a sale of Preferred
Securities, including a redemption for cash, and will be equal to the difference
between the amount realized and the Preferred Securityholder's adjusted tax
basis in the Preferred Securities sold. A U.S. Holder's adjusted tax basis in a
Preferred Security generally will equal the issue price of such Preferred
Security increased by the
27
<PAGE> 28
amount of original issue discount previously includible in the gross income of
such holder and decreased by the amount of any payments received on such
Preferred Security. Any gain or loss recognized by a U.S. Holder on the sale of
a Preferred Security held for more than one year generally will be taxable as
long-term capital gain or loss.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, BFG has the option to extend from time to time the
interest payment period on the Junior Subordinated Debentures to a period not
exceeding 20 consecutive quarters but not beyond the maturity date of the Junior
Subordinated Debentures. BFG's option to extend the interest payment period will
cause the Junior Subordinated Debentures to be treated as issued with "original
issue discount" for United States Federal income tax purposes. Accordingly, a
U.S. Holder will accrue interest income (i.e., original issue discount) under a
constant yield basis over the term of the Junior Subordinated Debentures
(including any Extension Period), regardless of the receipt of cash with respect
to the period to which such income is attributable.
As a result, U.S. Holders of record during an Extension Period will include
interest in gross income in advance of the receipt of cash, and any such holders
who dispose of Preferred Securities prior to the record date for the payment of
distributions following such Extension Period will include interest in gross
income but will not receive any cash related thereto. The tax basis of a
Preferred Security will be increased by the amount of any original issue
discount that is included in income without a receipt of cash, and will be
decreased when and if such cash is subsequently received by such U.S. Holder.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments on,
and proceeds from the sale of, a Preferred Security to a noncorporate United
States person within the United States and "backup withholding" at a rate of 31%
will apply to such payments if such United States person fails to provide an
accurate taxpayer identification number. Generally, such information reporting
will be made on Forms 1099 by the 31st of January following each calendar year.
Payments of the proceeds from the sale of Preferred 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 certifies as to its
non-United States status or otherwise establishes an exemption from information
reporting and backup withholding.
These backup withholding tax and information reporting rules are subject to
proposed Treasury Regulations and currently are under review by the United
States Treasury. Accordingly, the application of such rules to the Preferred
Securities could be changed.
28
<PAGE> 29
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, BFG and
the Issuer have agreed that the Issuer will issue and sell to each of the
Underwriters named below, and each of the Underwriters, for whom Goldman, Sachs
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, PaineWebber
Incorporated, Prudential Securities Incorporated and Smith Barney Inc. are
acting as Representatives, has severally agreed to purchase from the Issuer the
respective number of Preferred Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
------------------------------------------------------------------ --------------------
<S> <C>
Goldman, Sachs & Co...............................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated................
PaineWebber Incorporated..........................................
Prudential Securities Incorporated................................
Smith Barney Inc..................................................
---------
Total................................................... 4,400,000
=========
</TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Preferred Securities
offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession of $.50 per Preferred Security. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $.25 per Preferred
Security to certain brokers and dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Representative.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures, the
Underwriting Agreement provides that BFG will pay as compensation
("Underwriters' Compensation"), for the Underwriters' arranging the investment
therein of such proceeds, an amount in New York Clearing House (next day) funds
of $.7875 per Preferred Security for the accounts of the several Underwriters.
The Issuer has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to 660,000 additional Preferred
Securities to cover over-allotments, if any, at the initial public offering
price (with additional Underwriters' Compensation), as set forth on the cover
page of this Prospectus. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of
Preferred Securities to be purchased by each of them, as shown in the foregoing
table, bears to the number of Preferred Securities initially offered hereby.
BFG and the Issuer have agreed, during the period beginning from the date
of the Underwriting Agreement and continuing to and including the earlier of (i)
the date, after the closing date, on which the distribution of the Preferred
Securities and the Guarantee ceases, as determined by the Underwriters, or
29
<PAGE> 30
(ii) 90 days after the closing date, not to offer, sell, contract to sell, or
otherwise dispose of any Preferred Securities, any other interests of the
Issuer, or any preferred stock or any other securities of the Issuer or BFG
which are substantially similar to the Preferred Securities including the
Guarantee, or any securities convertible into or exchangeable for Preferred
Securities, preferred stock or such substantially similar securities of either
the Issuer or BFG, without the prior written consent of the Representatives.
In accordance with Section 34 of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., no sales of Preferred Securities may be
made to a discretionary account without the prior written approval of the
customer.
Prior to this offering, there has been no public market for the Preferred
Securities. The Preferred Securities have been approved for listing on the New
York Stock Exchange (the "Exchange"), subject to official notice of issuance. In
order to meet one of the requirements for listing the Preferred Securities on
the Exchange, the Underwriters will undertake to sell lots of 100 or more
Preferred Securities to a minimum of 400 beneficial holders. Trading of the
Preferred Securities on the Exchange is expected to commence within a seven-day
period after the initial delivery of the Preferred Securities. The
Representatives have advised BFG that they intend to make a market in the
Preferred Securities prior to commencement of trading on the Exchange, but are
not obligated to do so and may discontinue any such market making at any time
without notice.
The Issuer and BFG have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, BFG in the ordinary course of business. John
L. Weinberg, Senior Chairman and a retired general partner of Goldman, Sachs &
Co., is a director of the Company. Goldman, Sachs & Co. has rendered financial
advisory services to the Company from time to time and has received customary
fees for its services.
EXPERTS
The consolidated financial statements of The B.F.Goodrich Company
incorporated by reference in The B.F.Goodrich Company's Form 10-K for the year
ended December 31, 1994, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
VALIDITY OF THE SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the validity of the Trust Agreement and the formation of the Issuer
are being passed upon by Richards, Layton & Finger, special Delaware counsel to
the Issuer. The validity of the Guarantee and the Junior Subordinated Debentures
will be passed upon on behalf of the Issuer and BFG by Nicholas J. Calise, Vice
President, Associate General Counsel and Secretary of BFG, and on behalf of the
Underwriters by Sullivan & Cromwell, counsel to the Underwriters. Certain other
matters will be passed upon on behalf of BFG and the Issuer by White & Case,
counsel to BFG and the Issuer. As of May 27, 1995, Mr. Calise owned
approximately 3,420 shares of BFG's common stock. In addition, he held 2,000
shares of Restricted Stock and 6,100 Performance Shares under BFG's Key
Employees' Stock Option Plan and Performance Share Plan, all of which are
subject to forfeiture; held options to purchase 35,500 shares of common stock of
BFG; and had credited to his account in BFG's Retirement Plus Savings Plan
approximately 6,126 shares of common stock of BFG.
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<PAGE> 31
- - ------------------------------------------------------
- - ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
SUCH INFORMATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors.......................... 3
BFGoodrich Capital.................... 5
The B.F.Goodrich Company.............. 6
Summary Financial Information of
BFG................................. 8
Use of Proceeds....................... 9
Capitalization........................ 9
Description of the Preferred
Securities.......................... 9
Description of the Guarantee.......... 18
Description of the Junior Subordinated
Debentures.......................... 20
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee........ 26
United States Taxation................ 27
Underwriting.......................... 29
Experts............................... 30
Validity of the Securities............ 30
</TABLE>
- - ------------------------------------------------------
- - ------------------------------------------------------
- - ------------------------------------------------------
- - ------------------------------------------------------
4,400,000
PREFERRED SECURITIES
BFGOODRICH CAPITAL
% CUMULATIVE
QUARTERLY INCOME PREFERRED
SECURITIES, SERIES A
guaranteed to the extent
set forth herein by
THE B.F.GOODRICH
COMPANY
-------------------
PROSPECTUS
-------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
- - ------------------------------------------------------
- - ------------------------------------------------------
