<PAGE>
PURSUANT TO RULE NO. 424(b)(1)
REGISTRATION NO. 333-30792
REGISTRATION NO. 333-30792-01
PROSPECTUS
ASTORIA CAPITAL TRUST I
Offer to Exchange its 9.75% Capital Securities, Series B
(liquidation amount $1,000 per capital security)
Which Have Been Registered Under The Securities Act of 1933
For Any and All Of Its Outstanding 9.75% Capital Securities, Series A
(liquidation amount $1,000 per capital security)
Fully and unconditionally guaranteed, to the extent described in this
prospectus, by
[Astoria Financial Corporation Logo]
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME ON April 11, 2000, UNLESS EXTENDED.
Astoria Capital Trust I is offering and selling upon the terms and subject
to the conditions described in this prospectus, as amended and supplemented
from time to time, and in the accompanying letter of transmittal, which
together constitute the exchange offer, to exchange up to and including
$125,000,000 aggregate liquidation amount of its 9.75% capital securities,
Series B, referred to as the exchange capital securities, which have been
registered under the Securities Act of 1933, as amended, by a registration
statement of which this prospectus is a part, for a like amount of its
outstanding 9.75% capital securities, Series A, referred to as the original
capital securities, of which $125,000,000 aggregate liquidation amount are
issued and outstanding.
This prospectus and the letter of transmittal are first being mailed to all
holders of the 9.75% capital securities, Series A on or about March 10, 2000.
See "Risk Factors" beginning on page 21 to read about the risks that you
should consider in deciding whether to tender the 9.75% capital securities,
Series A in the exchange offer.
These securities are not deposits or accounts and are not insured by the
Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities
commission or regulator has approved or disapproved these securities or
determined that this prospectus is accurate or complete. It is illegal for
anyone to tell you otherwise.
The date of this Prospectus is March 10, 2000
<PAGE>
AVAILABLE INFORMATION
Astoria Financial Corporation is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, referred to as the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. You may also obtain
copies of such material by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. If available, you may also access such information through the
Commission's electronic data gathering, analysis and retrieval system, commonly
referred to as EDGAR, via electronic means, including the Commission's home
page on the Internet (http://www.sec.gov). The common stock of Astoria
Financial is traded on the Nasdaq National Market under the symbol "ASFC." You
may inspect the reports, proxy statements and other information concerning us
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
No separate financial statements of the Trust have been included in this
prospectus and no separate financial statements will be prepared in the future.
We do not consider that such financial statements would be material to holders
of the exchange capital securities offered by this prospectus because: (i) the
Trust is a newly-formed special purpose entity, (ii) has no operating history
or independent operations and (iii) is not engaged in and does not propose to
engage in any activity other than holding as trust assets our junior
subordinated debentures, issuing the capital and common securities,
collectively referred to as the trust securities, and engaging in incidental
activities. We do not expect that the Trust will file reports, proxy statements
and other information under the Exchange Act with the Commission.
This prospectus constitutes a part of a registration statement on Form S-4
filed by us and the Trust with the Commission under the Securities Act of 1933,
as amended, also referred to as the Securities Act. This prospectus does not
contain all the information set forth in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission, and reference is made to the registration statement and to the
exhibits relating to such registration statement for further information with
respect to Astoria Financial and the exchange securities. Any statements
contained in this prospectus concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the registration statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we have filed with the Commission are
incorporated into this prospectus by reference:
. Astoria Financial's Annual Report on Form 10-K for the year ended
December 31, 1998;
. Astoria Financial's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999;
. Astoria Financial's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999;
. Astoria Financial's Quarterly Report on Form 10-Q for quarter ended
September 30, 1999;
. Astoria Financial's Current Report on Form 8-K dated October 20, 1999;
and
. Astoria Financial's Current Report on Form 8-K dated February 16, 2000.
All documents subsequently filed by Astoria Financial pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the termination of the offering of the exchange
2
<PAGE>
capital securities offered by this prospectus shall be deemed to be
incorporated by reference into this prospectus and to be a part of this
prospectus from the date of filing of such document. Any statement contained in
this prospectus or in a document incorporated or deemed to be incorporated by
reference in this prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this prospectus modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus. You may obtain a copy of our filings with the Commission at no
cost, by writing or telephoning us at the following address:
Astoria Financial
Corporation
Attention: Investor
Relations
One Astoria Federal
Plaza
Lake Success, New
York 11042
(516) 327-3000
When we refer to this prospectus, we mean not only this prospectus but also
any documents which are incorporated or deemed to be incorporated in this
prospectus by reference. You should rely only on the information incorporated
by reference or provided in this prospectus or any supplement. We have not
authorized anyone else to provide you with additional or different information.
This prospectus is used to offer and sell the exchange capital securities
referred to in this prospectus, and only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of the date of this prospectus.
As used in this prospectus, "we" and "us" and "our" refer to Astoria
Financial Corporation and its consolidated subsidiaries, including Astoria
Federal Savings and Loan Association, depending on the context.
FORWARD LOOKING STATEMENTS
Some of the information presented or incorporated by reference into this
prospectus contains "forward-looking" statements, and may be identified by the
use of such words as "believe," "expect," "anticipate," "should," "planned,"
"estimated" and "potential." Examples of forward-looking statements include,
but are not limited to, estimates with respect to our financial condition,
results of operations and business that are subject to various factors which
could cause actual results to differ materially from these estimates. These
factors include, but are not limited to:
. general economic conditions;
. changes in interest rates, deposit flows, loan demand, real estate
values and competition;
. changes in accounting principles, policies, or guidelines;
. changes in legislation or regulation; and
. other economic, competitive, governmental, regulatory, and technological
factors affecting our operations, pricing, products and services.
Our actual results could vary materially from the future results covered in
our forward-looking statements. The statements in the "Risk Factors" section of
this prospectus are cautionary statements identifying important factors,
including certain risks and uncertainties, that could cause our results to vary
materially from the future results covered in such forward-looking statements.
Other factors, such as the general state of the United States economy, could
also cause actual results to vary materially from the future results covered in
such forward-looking statements. We disclaim any obligation to announce
publicly future events or developments that affect the forward-looking
statements in this prospectus.
3
<PAGE>
SUMMARY
The following information is a summary of the significant terms of the
offering of our exchange capital securities. You should carefully read this
prospectus to understand fully the terms of the exchange capital securities, as
well as the tax and other considerations that are important to you in making a
decision about whether to exchange your original capital securities for the
exchange capital securities. You should pay special attention to the "Risk
Factors" section beginning on page 21 of this prospectus to determine whether
an investment in the exchange capital securities is appropriate for you.
Astoria Financial Corporation
We are a corporation organized on June 14, 1993, and are a unitary savings
and loan association holding company for Astoria Federal Savings and Loan
Association, which we refer to as Astoria Federal. At September 30, 1999, on a
consolidated basis, we had total assets of $22.86 billion, deposits of $9.44
billion, and total stockholders' equity of $1.36 billion.
Our primary business is the operation of our wholly owned subsidiary,
Astoria Federal. In addition to directing, planning and coordinating the
business activities of Astoria Federal, we invest primarily in U.S. Government
and federal agency securities, mortgage-backed securities and other securities.
We have acquired, and may continue to acquire or organize, either directly or
indirectly through Astoria Federal, other operating subsidiaries, including
other financial institutions.
Astoria Federal's principal business is attracting retail deposits from the
general public and investing those deposits, together with funds generated from
operations, principal repayments and borrowings, primarily in one-to-four
family residential mortgage loans and mortgage-backed securities and, to a
lesser extent, multi-family residential mortgage loans, commercial real estate
loans, commercial loans and consumer loans. In addition, Astoria Federal
invests in U.S. Government and federal agency securities and in other
investments permitted by federal laws and regulations. Astoria Federal's
revenues are derived principally from interest on its mortgage loan and
mortgage-backed securities portfolios and interest and dividends on its other
securities portfolio. Astoria Federal's cost of funds consists of interest
expense on deposits and borrowings.
Astoria Capital Trust I
Astoria Capital Trust I is a statutory business trust created under Delaware
law upon the filing of a certificate of trust with the Delaware Secretary of
State. The Trust's business and affairs are conducted by the property trustee,
the Delaware trustee and the three individual administrative trustees, who are
officers of Astoria Financial. The Trust exists for the exclusive purposes of:
. issuing and selling the original capital securities and the exchange
capital securities, collectively referred to as the capital securities;
. using the proceeds from the sale of the capital securities to acquire
junior subordinated debentures issued by Astoria Financial; and
. engaging in only those other activities necessary, advisable or
incidental to the above.
Accordingly, the junior subordinated debentures are the sole assets of the
Trust, and payments under the junior subordinated debentures will be the sole
revenues of the Trust.
All of the common securities of the Trust are owned by Astoria Financial.
4
<PAGE>
The Exchange Offer
The Exchange Offer.......... Up to and including $125,000,000 aggregate
liquidation amount of exchange capital securities
are being offered in exchange for a like
aggregate liquidation amount of original capital
securities. Original capital securities may be
tendered for exchange in whole or in part in a
liquidation amount of $100,000 (100 original
capital securities) or any integral multiple of
$1,000 (one original capital security) in excess
of $100,000. Under the exchange offer, we will
exchange as soon as practicable after the date of
this prospectus our $125,000,000 aggregate
principal amount of junior subordinated
debentures, Series B, also referred to as the
original junior subordinated debentures, for a
like aggregate principal amount of our junior
subordinated debentures, Series A, also referred
to as the exchange debentures. We refer to the
original junior subordinated debentures and the
exchange debentures collectively as the junior
subordinated debentures.
We together with the Trust are making the
exchange offer in order to satisfy our respective
obligations under the registration rights
agreement relating to the original capital
securities. For a description of the procedures
for tendering original capital securities, please
read "The Exchange Offer -- Procedures for
Tendering Original Capital Securities."
Expiration Date............. 5:00 p.m., New York City time, on April 11, 2000
unless the exchange offer is extended by us and
the Trust, in which case the expiration date will
be the latest date and time to which the exchange
offer is extended.
Conditions to the Exchange The exchange offer is subject to certain
Offer....................... conditions, which may be waived by us and the
Trust in our sole discretion. The exchange offer
is not conditioned upon any minimum liquidation
amount of original capital securities being
tendered.
Terms of the Exchange We and the Trust reserve the right in our sole
Offer....................... and absolute discretion, subject to applicable
law, at any time and from time to time, (i) to
delay the acceptance of the original capital
securities, (ii) to terminate the exchange offer
if certain specified conditions have not been
satisfied, (iii) to extend the expiration date of
the exchange offer and retain all original
capital securities tendered as a result of the
exchange offer, subject, however, to the right of
holders of original capital securities to
withdraw their tendered original capital
securities, or (iv) to waive any condition or
otherwise amend the terms of the exchange offer
in any respect.
Withdrawal Rights........... Tenders of original capital securities may be
withdrawn at any time on or prior to the
expiration date by delivering a written notice of
such withdrawal to the exchange agent in
conformity with certain procedures as set forth
under "The Exchange Offer -- Withdrawal Rights."
5
<PAGE>
Procedures for Tendering Certain brokers, dealers, commercial banks, trust
Original companies and other nominees who hold original
Capital Securities.......... capital securities through The Depository Trust
Company, or DTC, must effect tenders by book-
entry transfer through DTC's Automated Tender
Offer Program, or ATOP. Beneficial owners of
original capital securities registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact
such person promptly if they wish to tender
original capital securities under the exchange
offer. Tendering holders of original capital
securities that do not use ATOP must complete and
sign a letter of transmittal in accordance with
the instructions contained in such letter and
forward the same by mail, facsimile transmission
or hand delivery, together with any other
required documents, to the exchange agent, either
with the certificates of the original capital
securities to be tendered or in compliance with
the specified procedures for guaranteed delivery
of original capital securities. Tendering holders
of original capital securities that use ATOP
will, by so doing, acknowledge that they are
bound by the terms of the letter of transmittal.
Letters of transmittal and certificates
representing original capital securities should
not be sent to us or the Trust. Such documents
should only be sent to the exchange agent.
Resales of Exchange Capital We and the Trust are making the exchange offer in
Securities.................. reliance on the position of the staff of the
Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, neither we nor the Trust
has sought our own interpretive letter and there
can be no assurance that the staff of the
Commission would make a similar determination
with respect to the exchange offer as it has in
such interpretive letters to third parties. Based
on these interpretations by the staff of the
Commission, and subject to the two immediately
following sentences, we and the Trust believe
that exchange capital securities issued under
this exchange offer in exchange for original
capital securities may be offered for resale,
resold and otherwise transferred by a holder of
such exchange capital securities, other than a
holder who is a broker-dealer, without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such exchange capital securities
are acquired in the ordinary course of such
holder's business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution, within the meaning of the
Securities Act, of such exchange capital
securities. However, any holder of original
capital securities who is an affiliate of us or
the Trust or who intends to participate in the
exchange offer for the purpose of distributing
the exchange capital securities, or any broker-
dealer who purchased the original capital
securities from the Trust to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act:
6
<PAGE>
. will not be able to rely on the
interpretations of the staff of the
Commission set forth in the above-
mentioned interpretive letters;
. will not be permitted or entitled to
tender such original capital securities in
the exchange offer; and
. must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any sale
or other transfer of such original capital
securities unless such sale is made in
reliance on an exemption from such
requirements.
In addition, as described in this prospectus, if
any broker-dealer holds original capital
securities acquired for its own account as a
result of market-making or other trading
activities and exchanges such original capital
securities for exchange capital securities, then
such broker-dealer must deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resales of such exchange
capital securities.
Each holder of original capital securities who
wishes to exchange original capital securities
for exchange capital securities in the exchange
offer will be required to represent that:
. it is not an affiliate of us or the Trust;
. any exchange capital securities to be
received by it are being acquired in the
ordinary course of its business;
. it has no arrangement or understanding
with any person to participate in a
distribution, within the meaning of the
Securities Act, of such exchange capital
securities; and
. if such holder is not a broker-dealer,
such holder is not engaged in, and does
not intend to engage in, a distribution,
within the meaning of the Securities Act
of such exchange capital securities.
Each broker-dealer that receives exchange capital
securities for its own account in exchange for
original capital securities, where such original
capital securities were acquired by such broker-
dealer as a result of market-making activities or
other trading activities, must acknowledge that
it will deliver a prospectus meeting the
requirements of the Exchange Act in connection
with any resale of such exchange capital
securities. See "Plan of Distribution."
The letter of transmittal states that, by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act. Based on the position taken by
the staff of the Commission in the interpretive
letters referred to above, we and the Trust
believe that participating broker-dealers who
acquired original capital securities for their
own accounts as a result of market-making
7
<PAGE>
activities or other trading activities may
fulfill their prospectus delivery requirements
with respect to the exchange capital securities
received upon exchange of such original capital
securities, other than original capital
securities that represent an unsold allotment
from the initial sale of the original capital
securities, with a prospectus meeting the
requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so
long as it contains a description of the plan of
distribution with respect to the resale of such
exchange capital securities. Accordingly, this
prospectus, as it may be amended or supplemented
from time to time, may be used by a participating
broker-dealer in connection with resales of
exchange capital securities received in exchange
for original capital securities where such
original capital securities were acquired by such
participating broker-dealer for its own account
as a result of market-making or other trading
activities. Subject to certain provisions set
forth in the registration rights agreement and to
the limitations described in this prospectus
under "The Exchange Offer -- Resales of Exchange
Capital Securities," we and the Trust have agreed
that this prospectus, as it may be amended or
supplemented from time to time, may be used by a
participating broker-dealer in connection with
resales of such exchange capital securities for a
period ending 90 days after the expiration date,
subject to extension under certain limited
circumstances, or, if earlier, when all such
exchange capital securities have been disposed of
by such participating broker-dealer. Any
participating broker-dealer who is an affiliate
of us or the Trust may not rely on such
interpretive letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
resale transaction.
Exchange Agent.............. The exchange agent with respect to the exchange
offer is the property trustee of the Trust,
Wilmington Trust Company. The address, telephone
and facsimile number of the exchange agent are
set forth in "The Exchange Offer -- Exchange
Agent" and in the letter of transmittal.
Use of Proceeds............. Neither we nor the Trust will receive any cash
proceeds from the issuance of the exchange
capital securities.
Certain Federal Income Tax The exchange of original capital securities for
Considerations.............. exchange capital securities will not be a taxable
exchange for federal income tax purposes, and you
should not recognize any taxable gain or loss or
any interest income as a result of such exchange.
ERISA Considerations........ You should review the information set forth under
"ERISA Considerations" prior to tendering
original capital securities in the exchange
offer.
8
<PAGE>
The Exchange Capital Securities
Securities Offered.......... Up to $125,000,000 aggregate liquidation amount
of exchange capital securities, liquidation
amount $1,000 per exchange capital security, will
have been registered under the Securities Act.
The exchange capital securities will be issued as
were the original capital securities under the
amended and restated declaration of trust, dated
as of October 28, 1999, as amended, relating to
the trust by and among us, as Sponsor, Wilmington
Trust Company, as property trustee, Wilmington
Trust Company, as Delaware trustee, and the
administrative trustees, also referred to as the
trust agreement. The exchange capital securities
and any original capital securities that remain
outstanding after consummation of the exchange
offer will vote together as a single class for
purposes of determining whether holders of the
requisite percentage in outstanding liquidation
amount have taken certain actions or exercised
certain rights under the trust agreement. The
terms of the exchange capital securities are
identical in all material respects to the terms
of the original capital securities, except that
the exchange capital securities have been
registered under the Securities Act, will not be
subject to certain restrictions on transfer
applicable to the original capital securities and
will not provide for any increase in the
distribution rate.
Distributions............... You will be entitled to receive cumulative cash
distributions at the annual rate of 9.75% of the
liquidation amount of $1,000 per exchange capital
security. Distributions will accumulate from the
date the Trust issued the original capital
securities and will be paid semi-annually in
arrears on May 1st and November 1st of each year,
beginning on May 1, 2000. The record dates will
be the 15th day of the month immediately
preceding the month in which the relevant payment
occurs. In the event the exchange offer is
consummated prior to the first record date, April
15, 2000, each exchange capital security will pay
cumulative distributions from and after October
28, 1999 and no distributions will be paid on any
original capital security tendered for an
exchange capital security. However, in the event
the exchange offer is consummated after April 15,
2000, distributions will be paid on the original
capital securities accumulated from and after
October 28, 1999 through May 1, 2000, and
distributions will be paid on the exchange
capital securities from and after May 1, 2000.
The amount of each distribution with respect to
the capital securities will include amounts
accrued to, but excluding the date the
distribution is due. Because of the foregoing
procedures regarding distributions, the amount of
the distributions received by holders whose
original capital securities are accepted for
exchange will not be affected by the exchange.
9
<PAGE>
Deferral Periods............ So long as no event of default under the exchange
debentures has occurred and is continuing, we
have the right, at one or more times, to defer
interest payments on the exchange debentures for
up to 10 consecutive semi-annual periods. All
deferrals will end on an interest payment date
and will not extend beyond November 1, 2029, the
stated maturity date of the exchange debentures.
If we defer interest payments on the exchange
debentures, the Trust will also defer
distributions on the exchange capital securities.
During this deferral period, the exchange
debentures will continue to accrue interest and
the exchange capital securities will continue to
accumulate distributions. During a deferral
period, you will also accumulate additional
distributions at the annual rate of 9.75% on any
accumulated and unpaid distributions, to the
extent permitted by law. If the Trust defers your
distributions, you will still be required to
accrue interest income and include it in your
gross income for federal income tax purposes,
even if you are a cash basis taxpayer.
Ranking..................... Our obligations under the exchange debentures are
unsecured and subordinated to payment of our
senior and subordinated debt, to the extent and
in the manner set forth in the indenture, dated
as of October 28, 1999, as amended and
supplemented from time to time, between us and
Wilmington Trust Company, as debenture trustee,
relating to the exchange debentures, also
referred to as the indenture, and will be
effectively subordinated to all of the existing
and future liabilities and obligations of our
subsidiaries, including Astoria Federal's deposit
liabilities.
Exchange Guarantee.......... We are offering to exchange our guarantee, also
referred to as the exchange guarantee, of
payments of cash distributions and payments in
liquidation of the Trust or redemption of the
exchange capital securities for the existing
guarantee, also referred to as the original
guarantee, in respect of the original capital
securities. We refer to the original guarantee
and the exchange guarantee collectively as the
guarantees. Under the trust agreement creating
Astoria Capital Trust I, our exchange debentures
and related indenture and our exchange guarantee,
we will, on a subordinated basis, fully,
irrevocably and unconditionally guarantee:
. payment of distributions on the exchange
capital securities;
. payments on liquidation of the Trust; and
. payments on maturity or earlier redemption
of the exchange capital securities.
If we do not make a payment on the exchange
debentures, the Trust will not have sufficient
funds to make payments on the exchange capital
securities. Our exchange guarantee does not
assure the payment of distributions when the
Trust does not have sufficient funds to pay the
distributions. Our obligations under the exchange
guarantee are unsecured and subordinated to
payment of
10
<PAGE>
our senior and subordinated debt and will be
effectively subordinated to all of the existing
and future liabilities and obligations of our
subsidiaries, including Astoria Federal's deposit
liabilities.
Distribution of Exchange At any time, we will have the right, subject to
Debentures.................. receipt of any required regulatory approval, to
liquidate the Trust and cause the exchange
debentures to be distributed to holders of
exchange capital securities and common securities
in liquidation of the Trust. The exchange
debentures will have identical terms and
conditions as the exchange capital securities. We
will, for instance, have the same rights, subject
to the receipt of any required regulatory
approval, to redeem such exchange debentures as
if the exchange debentures were held by the
Trust.
In the event of the involuntary or voluntary
liquidation, dissolution, winding up or
termination of the Trust in which the exchange
debentures are not distributed to you, then you,
as the holders of the exchange capital
securities, will be entitled to receive for each
exchange capital security, after satisfaction of
creditors of the Trust, a liquidation amount of
$1,000 plus accumulated and unpaid distributions
thereon (including interest thereon) to the date
of payment. The Trust will be able to make this
distribution in cash only if the exchange
debentures are redeemed by us.
Maturity and Redemption..... The exchange debentures will mature on November
1, 2029, unless redeemed prior to such date if
certain conditions are met. The Trust will redeem
the exchange capital securities when we pay the
exchange debentures at maturity or upon any
earlier redemption of the exchange debentures.
Our ability to redeem some or all of the exchange
debentures on or after November 1, 2009 is
subject to certain conditions. In addition, we
may redeem the exchange debentures at our option,
in whole but not in part, at any time prior to
November 1, 2009:
. if certain tax events occur;
. if there is a change in the way the exchange
debentures would be treated for regulatory
capital purposes; or
. if there is a change in the Investment
Company Act of 1940 that requires the
Trust to register under that law.
We may have to obtain regulatory approvals,
including the approval of the Office of Thrift
Supervision, before we redeem any exchange
debentures prior to maturity. If we redeem the
exchange debentures, you will receive the
liquidation amount of $1,000 per exchange capital
security plus any accrued and unpaid
distributions to the date of redemption, and if
such redemption occurs prior to November 1, 2019,
you will be entitled to a premium.
11
<PAGE>
Transfer Restriction........ The exchange capital securities will be issued,
and may be transferred, only in blocks having a
liquidation amount of not less than $100,000 (100
exchange capital securities). Any such transfer
of exchange capital securities in a block having
a liquidation amount of less than $100,000 shall
be deemed to be void and of no legal effect
whatsoever.
Absence of Market for the
Exchange Capital
Securities..................
The exchange capital securities will be a new
issue of securities for which there is no market.
Although the initial purchaser intends to make a
market in the exchange capital securities, in a
manner permitted under applicable securities
laws, Sandler O'Neill & Partners, L.P., the
initial purchaser, is not obligated to do so, and
any such market making may be discontinued at any
time without notice. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the exchange capital securities.
Neither we nor the Trust intend to apply for
listing of the exchange capital securities on any
securities exchange or for quotation through the
Nasdaq Stock Market.
Ratings..................... The exchange capital securities have been rated
"BB" by Standard & Poor's, "BBB-" by Duff &
Phelps Credit Rating Co., "BBB-" by Thomson
Financial BankWatch and "ba2" by Moody's
Investors Service. If another rating agency were
to rate the exchange capital securities, such
rating agency may assign a rating different from
the ratings described above. A security rating is
not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization.
ERISA Considerations........ For a discussion of certain prohibited
transactions and fiduciary duty issues pertaining
to purchases by or on behalf of an employee
benefit plan, you should see "ERISA
Considerations."
Voting Rights............... As a holder of the exchange capital securities,
you will have no voting rights, except in limited
circumstances. You should read "Description of
Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement" for more
information.
Risk Factors................ For a discussion of considerations relevant to an
investment in the capital securities or the
exchange of original capital securities for
exchange capital securities which should be
carefully considered by you, please read "Risk
Factors."
12
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are our selected consolidated financial and other data as
of, and for the periods ended September 30, 1999 and 1998 and as of, and for,
each of the five years ended December 31, 1998. This financial data is derived
in part from, and should be read in conjunction with, our consolidated
financial statements and related notes incorporated herein by reference.
Following the close of business on September 30, 1998, Long Island Bancorp,
Inc. was merged with and into us. The merger has been accounted for as a
pooling-of-interests and, accordingly, the financial results for all periods
reported have been restated, where applicable, to include Long Island Bancorp,
Inc.
<TABLE>
<CAPTION>
At September 30, At September 31,
----------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
Total assets............ $22,863,758 $19,321,130 $20,587,741 $16,432,337 $12,586,694 $11,478,912 $9,133,804
Federal funds sold and
repurchase
agreements............. 127,209 339,956 266,437 110,550 89,480 110,100 324,140
Mortgage-backed and
other securities
available-for-sale..... 9,554,949 6,944,102 8,196,444 4,807,305 4,194,418 3,688,223 1,222,038
Mortgage-backed and
other securities
held-to-maturity ...... 1,960,656 2,280,464 2,108,811 2,632,672 1,984,111 3,009,284 3,987,678
Loans held-for-sale..... 38,478 319,087 212,909 163,962 58,643 49,901 7,956
Loans receivable, net... 9,933,228 8,388,332 8,739,319 7,782,716 5,677,490 4,037,855 3,205,580
Mortgage servicing
rights, net............ 49,957 43,613 50,237 41,789 29,687 11,328 759
Deposits................ 9,440,223 9,676,488 9,668,286 9,951,421 8,146,103 7,836,950 6,848,467
Borrowed funds.......... 11,664,572 7,746,839 9,022,797 4,774,237 3,089,537 2,338,366 1,091,871
Stockholders' equity.... 1,358,743 1,541,965 1,462,384 1,445,799 1,107,923 1,116,859 1,044,284
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, For the Year Ended December 31,
--------------------------- -------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------ ---------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
Interest income......... $ 1,116,555 $ 902,010 $1,224,448 $978,155 $842,469 $755,896 $573,483
Interest expense........ 710,733 568,851 775,465 603,591 501,343 433,294 280,302
------------- ----------- ---------- -------- -------- -------- --------
Net interest income..... 405,822 333,159 448,983 374,564 341,126 322,602 293,181
Provision for loan loss-
es..................... 3,119 8,780 15,380 9,061 10,163 8,477 15,688
------------- ----------- ---------- -------- -------- -------- --------
Net interest income
after provision for
loan losses............ 402,703 324,379 433,603 365,503 330,963 314,125 277,493
Non-interest income..... 69,859 48,149 62,263 62,686 51,917 38,500 30,796
Non-interest expense:
General and administra-
tive.................. 150,351 183,045 232,888 212,570 208,177 191,384 172,810
Real estate operations
and provision for real
estate losses, net.... (60) 36 (119) 3,072 (5,400) (1,854) 10,190
Goodwill litigation.... 4,041 1,120 1,665 1,101 370 -- 11
Amortization of good-
will.................. 14,592 14,809 19,754 11,722 8,968 8,518 1,788
Acquisition costs and
restructuring
charges............... -- -- 124,168 -- -- -- --
SAIF recapitalization
assessment............ -- -- -- -- 47,202 -- --
------------- ----------- ---------- -------- -------- -------- --------
Total non-interest ex-
pense................. 168,924 199,010 378,356 228,465 259,317 198,048 184,799
------------- ----------- ---------- -------- -------- -------- --------
Income before income
taxes, extraordinary
item and cumulative
effect of accounting
changes................ 303,638 173,518 117,510 199,724 123,563 154,577 123,490
Income tax expense...... 127,514 72,929 61,825 81,840 54,435 65,640 48,926
------------- ----------- ---------- -------- -------- -------- --------
Income before
extraordinary item and
cumulative effect of
accounting changes..... 176,124 100,589 55,685 117,884 69,128 88,937 74,564
Extraordinary item, net
of tax................. -- -- (10,637) -- -- -- --
Cumulative effect of
accounting changes..... -- -- -- -- -- -- 8,648
------------- ----------- ---------- -------- -------- -------- --------
Net income.............. 176,124 100,589 45,048 117,884 69,128 88,937 83,212
Preferred dividends de-
clared................. (4,500) (4,500) 6,000 1,500 -- -- --
------------- ----------- ---------- -------- -------- -------- --------
Net income available to
common stockholders.... $ 171,624 $ 96,089 $ 39,048 $116,384 $ 69,128 $ 88,937 $ 83,212
============= =========== ========== ======== ======== ======== ========
Basic earnings per com-
mon share.............. $ 3.32 $ 1.90 $ 0.77 $ 2.51 $ 1.49 $ 1.81 $ 1.62
Diluted earnings per
common share........... $ 3.24 $ 1.82 $ 0.74 $ 2.39 $ 1.44 $ 1.76 $ 1.61
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
At or For the Nine Months
Ended September 30, At or For the Year Ended December 31,
------------------------- --------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------ -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial
Ratios and Other Data:
Return on average
assets................. 1.03% 0.75% 0.25% 0.84% 0.58% 0.82% 0.95%
Return on average
stockholders' equity... 16.83 8.93 3.02 9.83 6.27 8.25 9.29
Return on average
tangible stockholders'
equity................. 20.28 10.80 3.65 11.16 6.95 9.16 9.35
Average stockholders'
equity to average
assets................. 6.15 8.40 8.13 8.56 9.18 9.89 10.23
Average tangible stock-
holders' equity to av-
erage tangible assets.. 5.16 7.05 6.83 7.62 8.36 9.00 10.16
Stockholders' equity to
total assets........... 5.94 7.98 7.10 8.80 8.80 9.73 11.43
Core deposits to total
deposits............... 48.55 46.26 47.84 43.40 41.89 43.65 50.34
Net interest spread..... 2.17 2.21 2.20 2.38 2.56 2.70 3.10
Net interest margin..... 2.47 2.62 2.58 2.78 2.96 3.09 3.48
Operating income to
average assets (1)..... 0.29 0.25 0.28 0.34 0.37 0.34 0.33
General and
administrative expense
to average assets...... 0.88 1.37 1.27 1.52 1.73 1.76 1.97
Efficiency ratio (2).... 33.02 50.01 46.56 50.27 54.01 53.24 53.66
Average interest-earning
assets to average in-
terest-bearing liabili-
ties................... 1.07x 1.09x 1.09x 1.09x 1.09x 1.10x 1.11x
Book value per common
share.................. $ 24.08 $ 27.34 $ 25.84 $ 25.93 $ 22.24 $ 21.23 19.02
Tangible book value per
common share........... 19.87 22.72 21.34 21.04 20.13 19.11 18.93
Cash dividends paid per
common share........... 0.72 0.60 0.80 0.56 0.43 0.20 --
Dividend payout ratio... 22.22% 32.97% 108.11% 23.43% 29.86% 11.36% --
Asset Quality Ratios:
Non-performing loans to
total loans (3)(4)..... 0.58 0.98 1.23 1.12 1.50 2.42 3.69
Non-performing loans to
total assets (3)(4).... 0.25 0.45 0.54 0.55 0.69 0.87 1.32
Non-performing assets to
total assets (4)(5).... 0.28 0.53 0.58 0.70 0.87 1.15 1.69
Allowance for loan
losses to non-
performing loans....... 129.21 88.80 66.99 82.23 55.41 47.78 39.58
Allowance for loan
losses to non-accrual
loans.................. 136.01 91.60 70.00 86.79 60.58 50.72 43.14
Allowance for loan
losses to total loans.. 0.74 0.87 0.83 0.93 0.83 1.15 1.46
Earnings to Fixed
Charges Ratio (6):
Including interest on
deposits............... 1.43x 1.31x 1.15x 1.33x 1.25x 1.36x 1.44x
Excluding interest on
deposits............... 1.69x 1.66x 1.31x 1.86x 1.80x 2.41x 3.76x
Capital Ratios (Astoria
Federal):
Tangible ratio.......... 5.55% 5.84% 5.34% 6.25% 6.58% 6.97% 9.23%
Leverage ratio.......... 5.55% 5.84% 5.34% 6.25% 6.58% 6.97% 9.23%
Risk-based capital
ratio.................. 14.50% 15.19% 13.53% 15.57% 16.45% 18.19% 23.18%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
For the
Nine Months
Ended
September 30, For the Year Ended December 31,
-------------- --------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Non-GAAP
Disclosures (7)
Return on average
assets................. 0.97% 0.75% 0.79% 0.84% 0.81% 0.82% 0.95%
Cash return on average
assets (8)............. 1.12 1.02 1.05 1.09 1.04 1.01 1.07
Return on average
stockholders' equity... 15.76 8.93 9.76 9.83 8.76 8.25 9.29
Cash return on average
stockholders' equity
(8).................... 18.21 12.19 12.86 12.77 11.35 10.22 10.51
Return on average
tangible stockholders'
equity................. 19.00 10.80 11.78 11.16 9.71 9.16 9.35
Cash return on average
tangible stockholders'
equity (8)............. 21.94 14.73 15.53 14.49 12.57 11.34 10.58
Cash general and
administrative expense
to average assets (9).. 0.84 1.26 1.17 1.38 1.59 1.64 1.87
Cash efficiency ratio
(2)(9)................. 31.25 46.03 42.92 45.70 49.41 49.80 50.82
</TABLE>
- --------
(1) Operating income represents total non-interest income less net gains on
sales of securities and fixed assets. For the nine months ended September
30, 1999, operating income also excludes the net gain on sale and
disposition of banking and loan production offices. Operating income
totaled $49.5 million, $32.9 million, $51.2 million, $48.3 million, $44.3
million, $36.9 million and $28.9 million for the nine months ended
September 30, 1999 and 1998 and the years ended December 31, 1998, 1997,
1996, 1995 and 1994, respectively.
(2) Efficiency ratio represents general and administrative expense divided by
the sum of net interest income plus operating income.
(3) Non-performing loans consist of all non-accrual loans and all mortgage
loans delinquent 90 days or more as to their maturity date but not their
interest payments.
(4) Non-performing loans and assets exclude loans which have been restructured
and are accruing and performing in accordance with the restructured terms.
Restructured accruing loans totaled $9.9 million, $7.3 million, $6.9
million, $9.1 million, $11.8 million, $12.1 million and $12.8 million at
September 30, 1999 and 1998 and December 31, 1998, 1997, 1996, 1995 and
1994, respectively.
(5) Non-performing assets consist of all non-performing loans, real estate
owned and non-performing investments in real estate, net.
(6) For purposes of computing the ratios of earnings to fixed charges, earnings
represent income before income taxes, extraordinary item and cumulative
effect of accounting changes plus fixed charges. Fixed charges represent
total interest expense, including and excluding interest on deposits.
(7) The information presented is not in conformity with generally accepted
accounting principles, or GAAP. The following infrequently occurring items
have been excluded from the return calculations: For 1999, $11.3 million,
after-tax, for net gain on sale and disposition of banking and loan
production offices. For 1998, $89.7 million, after tax, for costs
associated with the acquisition of Long Island Bancorp Inc. and $10.6
million, after tax, of other infrequently occurring charges. For 1996,
$27.6 million, after tax, special assessment for the recapitalization of
the Savings Association Insurance Fund, or SAIF. This information is being
presented since we consider it a more accurate presentation of our actual
results of operations.
(8) Excludes non-cash charge for amortization of goodwill and amortization
relating to allocation of Employee Stock Ownership Plan, or ESOP, stock and
earned portion of the Recognition and Retention Plan, or RRP, stock and
related tax benefit.
(9) Excludes non-cash charge for amortization relating to allocation of ESOP
stock and earned portion of RRP stock.
16
<PAGE>
RECENT DEVELOPMENTS
The summary information presented below at or for each of the three months
and year ended December 31, 1999 and 1998 is taken from our incomplete
unaudited consolidated financial statements, incomplete in that it omits the
statement of cash flows and footnote disclosures. In our opinion, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the financial condition and results of operations for the
unaudited periods presented have been included. The following information is
only a summary and you should read it in conjunction with our audited December
31, 1998 consolidated financial statements and related notes incorporated by
reference in this prospectus.
<TABLE>
<CAPTION>
At or For the Three At or For the
Months Ended Year Ended
December 31, December 31,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Selected Operating Data:
Net interest income...... $ 134,126 $ 115,824 $ 539,948 $ 448,983
Provision for loan
losses.................. 1,000 6,600 4,119 15,380
Non-interest income...... 16,837 14,114 86,696 62,263
General and
administrative expense.. 44,915 49,843 195,266 232,888
Other non-interest
expense................. 9,252 129,503 27,825 145,468
Net income (loss)........ 59,546 (55,541) 235,670 45,048
Diluted earnings (loss)
per common share........ 1.14 (1.11) 4.37 0.74
Selected Financial Data:
Total assets............. $22,696,536 $20,587,741 $22,696,536 $20,587,741
Mortgage-backed and other
securities available-
for-sale ............... 8,862,749 8,196,444 8,862,749 8,196,444
Mortgage-backed and other
securities held-to-
maturity ............... 1,899,957 2,108,811 1,899,957 2,108,811
Loans held-for-sale...... 11,376 212,909 11,376 212,909
Loans receivable, net.... 10,289,074 8,813,722 10,289,074 8,813,722
Mortgage servicing
rights, net............. 48,369 50,237 48,369 50,237
Deposits................. 9,554,534 9,668,286 9,554,534 9,668,286
Borrowed funds........... 11,401,521 9,022,797 11,401,521 9,022,797
Stockholders' equity..... 1,196,912 1,462,384 1,196,912 1,462,384
Book value per common
share................... 22.17 25.84 22.17 25.84
Tangible book value per
common share............ 17.84 21.34 17.84 21.34
Significant Ratios:
Return on average
assets.................. 1.05% (1.13)% 1.04% 0.25%
Return on average
stockholders' equity.... 18.67 (15.06) 17.31 3.02
Return on average
tangible stockholders'
equity.................. 22.71 (18.14) 20.92 3.65
Average stockholders'
equity to average
assets.................. 5.60 7.50 5.99 8.13
Average tangible
stockholders' equity to
average tangible
assets.................. 4.65 6.31 5.01 6.83
Net interest spread...... 2.07 2.15 2.14 2.20
Net interest margin...... 2.41 2.47 2.46 2.58
General and
administrative expense
to average assets....... 0.79 1.01 0.86 1.27
Efficiency ratio (1)..... 29.76 37.14 32.21 46.56
Asset Quality Ratios:
Non-performing loans to
total loans............. 0.52% 1.23% 0.52% 1.23%
Non-performing loans to
total assets............ 0.24 0.54 0.24 0.54
Non-performing assets to
total assets............ 0.26 0.58 0.26 0.58
Allowance for loan losses
to non-performing
loans................... 143.49 66.99 143.49 66.99
Allowance for loan losses
to non-accrual loans.... 151.77 70.00 151.77 70.00
Allowance for loan losses
to total loans.......... 0.75 0.83 0.75 0.83
Other Non-GAAP
Disclosures (2):
Return on average
assets.................. 1.05% 0.91% 0.99% 0.79%
Cash return on average
assets (3).............. 1.18 1.11 1.13 1.05
Return on average
stockholders' equity.... 18.67 12.16 16.48 9.76
Cash return on average
stockholders' equity
(3)..................... 21.07 14.77 18.92 12.86
Return on average
tangible stockholders'
equity.................. 22.71 14.64 19.91 11.78
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
At or For the Three At or For the
Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(Dollars in thousands, except per share
data)
<S> <C> <C> <C> <C>
Cash return on average tangible
stockholders' equity (3) ........ 25.63% 17.78% 22.86% 15.53%
Cash general and administrative
expense to average assets (4) ... 0.76 0.94 0.82 1.17
Cash efficiency ratio (1)(4)...... 28.54 34.43 30.57 42.92
Earnings to Fixed Charges Ratio
(5):
Including interest on deposits.... 1.39x 0.73x 1.42x 1.15x
Excluding interest on deposits.... 1.63x 0.50x 1.67x 1.31x
Capital Ratios (Astoria Federal):
Tangible ratio.................... 5.98% 5.35% 5.98% 5.35%
Leverage ratio.................... 5.98% 5.35% 5.98% 5.35%
Risk-based capital ratio.......... 15.33% 13.53% 15.33% 13.53%
</TABLE>
- --------
(1) Efficiency ratio represents general and administrative expense divided by
the sum of net interest income plus operating income.
(2) The information presented is not in conformity with GAAP. Excluded from the
return calculations are a net gain on disposition of banking and loan
production offices of $11.3 million, net of tax, for the year ended
December 31, 1999 and acquisition, restructuring and other infrequently
occurring charges of $100.3 million, net of tax, for the quarter and year
ended December 31, 1998.
(3) Excludes non-cash charge for amortization of goodwill and amortization
relating to allocation of ESOP stock and earned portion of RRP stock and
related tax benefit.
(4) Excludes non-cash charge for amortization relating to allocation of ESOP
stock and earned portion of RRP stock.
(5) For purposes of computing the ratios of earnings to fixed charges, earnings
represent income before income taxes, extraordinary item and cumulative
effect of accounting changes plus fixed charges. Fixed charges represent
total interest expense, including and excluding interest on deposits.
We had net income of $59.5 million, or $1.14 diluted earnings per common
share, for the quarter ended December 31, 1999. For the year ended December 31,
1999, net income totaled $235.7 million or $4.37 diluted earnings per common
share. The 1999 results include a net gain on the sale and disposition of our
upstate New York banking offices and certain loan production offices, net of
taxes, of $11.3 million, or $0.21 diluted earnings per common share.
Operating earnings are net income excluding the sale and disposition of
banking and loan production offices in 1999 and the $100.3 million, after-tax,
of infrequently occurring charges in 1998 primarily associated with the
acquisition of Long Island Bancorp, Inc. Fourth quarter 1999 operating earnings
of $59.5 million, or $1.14 diluted operating earnings per common share were 33%
and 39% greater than the 1998 fourth quarter operating results of $44.8
million, or $0.82 diluted operating earnings per common share. The 1999 fiscal
year operating results of $224.3 million, or $4.16 diluted operating earnings
per common share, were 54% and 58% greater than the 1998 fiscal year operating
results of $145.4 million, or $2.64 diluted operating earnings per common
share. Operating earnings for the quarter and year-to-date generated annualized
returns on average equity of 18.67% and 16.48%, respectively, compared to
12.16% and 9.76%, respectively, for the comparable 1998 periods and generated
returns on average assets of 1.05% and 0.99%, respectively, compared to 0.91%
and 0.79%, respectively, for the comparable 1998 periods.
1999 Fourth Quarter and Full Year Earnings Summary
Net interest income for the fourth quarter of 1999 increased 16% to $134.1
million, from $115.8 million in the 1998 fourth quarter. For the fiscal year
ended December 31, 1999, net interest income increased 20%, or $90.9 million,
to $539.9 million, from $449.0 million for 1998. The quarter and fiscal year
increases are attributable to the increase in average interest-earning assets
primarily in the mortgage loan and mortgage-backed securities portfolios,
partially offset by a lower net interest margin.
Our net interest margin was 2.41% for the quarter ended December 31, 1999,
compared to 2.39% for the previous quarter and 2.47% for the 1998 fourth
quarter. For the year ended December 31, 1999 the net interest margin was 2.46%
compared to 2.58% for the 1998 full year period.
18
<PAGE>
Non-interest income, exclusive of net gains (losses) on the sale of
securities of $25,000 and $(4.3) million for the fourth quarter 1999 and 1998,
respectively, totaled $16.8 million for the fourth quarter of 1999 compared to
$18.4 million for the 1998 fourth quarter. The 1998 fourth quarter non-interest
income also includes an increase in loan servicing fees due to a positive
valuation adjustment of $4.3 million to mortgage servicing rights.
Full year non-interest income, exclusive of the net gain on the sale of
securities of $739,000 and $11.0 million for 1999 and 1998, respectively, and
the 1999 net gain on the sale and disposition of upstate New York banking and
certain loan production offices of $19.2 million, totaled $66.8 million for
1999 compared to $51.3 million for 1998.
General and administrative expense for the quarter ended December 31, 1999,
totaled $44.9 million compared to $49.8 million for the comparable 1998 period.
For the fiscal year 1999, general and administrative expense totaled $195.3
million compared to $232.9 million for the prior year. The decrease in general
and administrative expense is attributable to the full recognition of the cost
savings associated with the acquisition of Long Island Bancorp, Inc. at the end
of the third quarter of 1998 and the cost savings associated with the sale and
disposition of the five upstate New York banking offices and certain loan
production offices in 1999. The fourth quarter 1999 compensation and benefits
expense includes a reduction to pension expense of approximately $1.7 million
($1.0 million, after-tax, or $0.02 diluted earnings per common share) to adjust
the estimated expense for the full year to the actuarial calculated accrual.
Our ratio of general and administrative expense to average assets decreased
to 0.79% and 0.86%, respectively, for the quarter and fiscal year ended
December 31, 1999, from 1.01% and 1.27%, respectively, for the comparable 1998
periods. The efficiency ratios for the quarter and fiscal year, ended December
31, 1999 were 29.76% and 32.21%, respectively, compared to 37.14% and 46.56%
for the comparable 1998 periods.
Goodwill litigation expense for the 1999 fourth quarter totaled $2.4 million
compared to $545,000 for the comparable 1998 quarter. For the full fiscal year,
goodwill litigation expense totaled $6.4 million compared to $1.7 million for
the comparable 1998 period.
Balance Sheet Summary
Total assets at December 31, 1999 totaled $22.70 billion compared to $22.86
billion at the end of the previous quarter. For the fiscal year, assets
increased $2.11 billion, or 10%, from $20.59 billion reported at fiscal year
end 1998. The increase for the full fiscal year was due primarily to the
increases in the mortgage loan and mortgage-backed securities portfolios which
were funded primarily through medium and long-term borrowings.
Mortgage lending activity for the quarter and fiscal year ended December 31,
1999 remained concentrated in one-to-four family mortgage loans. Gross mortgage
loan originations totaled $651.1 million and $1.33 billion for the fourth
quarter of 1999 and 1998, respectively, and $3.76 billion and $5.19 billion for
the year ended December 31, 1999 and 1998, respectively.
Loans receivable, net, increased $279.3 million, or 3% in the 1999 fourth
quarter and $1.47 billion, or 17% in the fiscal year 1999.
While the loan portfolio continued to increase, non-performing loans
declined to $53.4 million, or 0.24% of total assets at December 31, 1999, from
$57.5 million, or 0.25% of total assets at September 30, 1999, and ratio of
allowances for loan losses to non-performing loans at December 31, 1999
increased to 143.49% from 129.21% at September 30, 1999.
19
<PAGE>
Mortgage-backed securities and other securities totaled $10.76 billion at
December 31, 1999, a decrease of $752.9 million from $11.52 billion at
September 30, 1999.
At December 31, 1999, deposits totaled $9.55 billion, compared to $9.67
billion at December 31 1998. The decrease is primarily due to the sale of the
upstate New York banking office deposits totaling $156.4 million in the 1999
third quarter. Deposits increased in the 1999 fourth quarter by $114.3 million.
Our core deposits, which include passbook, money market and checking accounts,
increased to 48.4% of total deposits at December 31, 1999, from 47.8% at
December 31, 1998. Borrowings at December 31, 1999 totaled $11.40 billion
compared to $11.66 billion at the end of the previous quarter.
Stockholders' equity at December 31, 1999 was $1.20 billion, or 5.27% of
total assets, compared to $1.36 billion, or 5.94% of total assets at September
30, 1999. The change in stockholders' equity in the fourth quarter was
primarily attributable to the positive effect of net income and the
amortization relating to stock plans and related tax benefit, offset by the
repurchase of common shares during the fourth quarter, the increase in the
unrealized loss on securities available-for-sale, net of taxes, and dividends
paid. The 1999 fourth quarter increase from $222.3 million to $344.2 million in
the unrealized loss on securities available-for-sale, net of taxes, component
of stockholders' equity, is a reflection of the effect of increasing market
interest rates since September 30, 1999 on the available-for-sale securities
portfolio market value and is not the result of any sale transactions from that
portfolio. Astoria Federal continues to maintain capital ratios in excess of
regulatory requirements. At December 31, 1999, core, tangible and risk-based
capital ratios of Astoria Federal were 5.98%, 5.98% and 15.33%, respectively.
20
<PAGE>
RISK FACTORS
Prospective purchasers of the exchange capital securities should carefully
review the information contained elsewhere or incorporated by reference, in
this prospectus and should particularly consider the following factors, which
do not necessarily appear in the order of importance. Investors should consider
all of these factors to be important. Because holders of the exchange capital
securities may receive exchange debentures in exchange therefor upon
liquidation of the Trust, prospective purchasers of the exchange capital
securities are also making an investment decision with regard to the exchange
debentures and should carefully review all the information regarding the
exchange debentures contained in this prospectus.
Risks Related To Your Investment In The Exchange Capital Securities
Astoria Financial cannot make payments under the exchange guarantee or the
exchange debentures if Astoria Financial defaults on its obligations that are
more senior.
Our obligations under the exchange guarantee and the exchange debentures are
unsecured and rank
. junior to all of our other borrowings, except those borrowings that by
their terms are equal or junior;
. junior to all of our subsidiaries' liabilities, including Astoria
Federal's deposit accounts; and
. senior to our common stock and preferred stock.
This means that we cannot pay under the exchange guarantee or the exchange
debentures if we default on payments of any of our other borrowings, unless, by
their terms, those borrowings are equal or junior to the exchange guarantee. In
addition, if the maturity of the exchange debentures is accelerated, we cannot
pay under the exchange guarantee or the exchange debentures until all of our
more senior borrowings are paid in full. Finally, if we liquidate, go bankrupt
or dissolve, we would be able to pay under the exchange guarantee and the
exchange debentures only after we have paid all of our liabilities that are
senior to the exchange guarantee.
If we default on our obligations to pay principal, premium or interest on
the exchange debentures, the Trust will not have sufficient funds to make
distribution, redemption or liquidation payments on the exchange capital
securities. As a result, you will not be able to rely upon our exchange
guarantee for payment of these amounts. Instead, you may seek legal redress
against us directly to collect payments owed to you or rely on the property
trustee to enforce the rights of the Trust under the exchange debentures
against us.
The exchange capital securities, exchange guarantee, the exchange debentures
and the indenture do not limit our ability to incur additional debt, including
debt that is senior in priority of payment.
The ability of the Trust to make payments due on the exchange capital
securities is solely dependent on us making payments on the exchange debentures
as and when required.
For more information on payments under the exchange guarantee and the
exchange debentures, you should refer to "Description of Exchange Guarantee --
Status of the Exchange Guarantee" and "Description of Exchange Debentures --
Subordination."
Banking laws and regulations limit Astoria Financial's access to funds, which
may prevent Astoria Financial from making payments under the exchange
debentures and the exchange guarantee.
We are a unitary savings and loan association holding company regulated by
the Office of Thrift Supervision, or OTS, and almost all of our operating
assets are owned by Astoria Federal. We rely primarily on dividends from
Astoria Federal to meet our obligations for payment of corporate expenses, to
pay cash dividends to our common and preferred stockholders and to engage in
share repurchase programs, and will rely on such dividends to pay principal,
premium and interest on the exchange debentures and make payments under the
exchange guarantee. The OTS limits all capital distributions by Astoria Federal
directly or indirectly to us, including dividend payments. As the subsidiary of
a savings and loan holding company, Astoria Federal
21
<PAGE>
currently must file a notice with the OTS for each capital distribution.
However, if the total amount of all capital distributions (including each
proposed capital distribution) for the applicable calendar year exceeds net
income for that year to date plus the retained net income for the preceding two
years, then Astoria Federal must file an application to receive the approval of
the OTS for the proposed capital distribution.
Under the prompt corrective action provisions of the Federal Deposit
Insurance Act, Astoria Federal is prohibited from making capital distributions,
including the payment of dividends, if, after making any capital distribution,
Astoria Federal would become undercapitalized as defined under the Federal
Deposit Insurance Act. Based on Astoria Federal's current financial condition,
we do not expect that this provision will have any impact on our ability to
obtain dividends from Astoria Federal. Payment of dividends by Astoria Federal
also may be restricted at any time at the discretion of the appropriate
regulator if it deems the payment to constitute unsafe or unsound banking
practice. Currently, approximately $191.6 million is available for the payment
of dividends to us without further approval from the OTS.
We cannot assure you that Astoria Federal will be able to pay dividends at
past levels, or at all, in the future. See the section entitled "Regulation and
Supervision" in our Annual Report on Form 10-K for the year ended December 31,
1998, which is incorporated in this prospectus by reference.
In addition to regulatory restrictions on the payment of dividends, Astoria
Federal is subject to certain restrictions imposed by federal law on any
extensions of credit it makes to its affiliates and on investments in stock or
other securities of its affiliates. We are considered an affiliate of Astoria
Federal. These restrictions prevent affiliates of Astoria Federal, including
us, from borrowing from Astoria Federal, unless various types of collateral
secure the loans. Federal law limits the aggregate amount of loans to and
investments in any single affiliate to 10% of the Astoria Federal's capital
stock and surplus and also limits the aggregate amount of loans to and
investments in all affiliates to 20% of the Astoria Federal's capital stock and
surplus. As of September 30, 1999, approximately $135.2 million of credit was
available to us under this limitation.
If we do not receive sufficient cash dividends or borrowings from Astoria
Federal, then it is unlikely that we will have sufficient funds to make
payments on the exchange debentures and the exchange guarantee, thereby leaving
insufficient funds for the Trust to make payments to you on the exchange
capital securities.
Also, as a holding company, our right to receive any distribution of assets
of any subsidiary, upon such subsidiary's liquidation or reorganization or
otherwise (and thus your right to benefit indirectly from such distribution),
is subject to the prior claims of creditors of that subsidiary, except to the
extent we are also recognized as a creditor of that subsidiary. For example, if
Astoria Federal, our only direct operating subsidiary, is liquidated or
reorganized, depositors of Astoria Federal would have the right to receive
distributions from Astoria Federal before us unless we were considered a
creditor of Astoria Federal. At September 30, 1999, Astoria Federal had total
liabilities, including deposits, of $21.54 billion.
Astoria Financial can defer interest payments on the exchange debentures,
causing your payments under the exchange capital securities to stop, which will
have tax consequences to you and may affect the market price of the exchange
capital securities.
We have the right, at one or more times, unless an event of default exists
under the exchange debentures, to defer interest payments on the exchange
debentures for up to 10 consecutive semi-annual periods, but not beyond
November 1, 2029. If we defer interest payments, the Trust will defer paying
distributions to you on your exchange capital securities during the deferral
period. Additionally, during this period, any unpaid distributions on the
exchange capital securities will accumulate additional distributions at the
rate of 9.75% per year, compounded semi-annually, to the extent permitted by
law. During this time, we will be prohibited from declaring or paying cash
dividends on our common stock and preferred stock and making payments on
certain of our debt securities. For more information, please refer to
"Description of Exchange Capital Securities -- Distributions."
22
<PAGE>
When any deferral period ends and we pay all interest then accrued and
unpaid on the exchange debentures, we may elect to begin a new deferral period.
There is no limitation on the number of times that we may elect to begin a
deferral period. See "Description of Exchange Capital Securities --
Distributions" and "Description of Exchange Debentures -- Option to Extend
Interest Payment Date."
If we exercise our right to defer payments of interest on the exchange
debentures, you will be required to accrue income (as original issue discount)
in respect of the deferred stated interest allocable to your exchange capital
securities for federal income tax purposes, which will be allocated but not
distributed to you. As a result, you will be required to recognize income for
federal income tax purposes before you receive any cash. Furthermore, if you
dispose of your exchange capital securities prior to the record date for the
distribution payment, you will not receive, from the Trust, the cash related to
this interest income.
As a result of our right to defer interest payments, the market price of the
exchange capital securities, which represent preferred beneficial interests in
the Trust, may be more volatile than the market prices of other securities that
are not subject to such deferral options. We do not currently intend to
exercise our right to defer interest payments on the exchange debentures.
However, if we exercise this right in the future, the market price of the
exchange capital securities will probably be affected. The exchange capital
securities may trade at a price that does not fully reflect the value of
accrued but unpaid interest on the exchange debentures. If you sell your
exchange capital securities during a deferral period, you may not receive the
same return on your investment as someone else who continues to hold the
exchange capital securities.
Distribution of exchange debentures may have a possible adverse effect on
trading price.
We have the right to dissolve the Trust at any time if such dissolution and
any distribution of the exchange debentures would not result in a taxable event
to the holders of the exchange capital securities. If we dissolve the Trust,
the Trust will be liquidated by distribution of the exchange debentures to
holders of the exchange capital securities and the common securities.
Under current federal income tax laws, a distribution of exchange debentures
to you on the dissolution of the Trust would not be a taxable event to you.
Nevertheless, if the Trust is classified for federal income tax purposes as an
association taxable as a corporation at the time it is dissolved, the
distribution of exchange debentures to you would be a taxable event. In
addition, if there is a change in law, a distribution of exchange debentures to
you on the dissolution of the Trust could also be a taxable event.
Your investment in the exchange capital securities may decrease in value if
the exchange debentures are distributed to you in liquidation of the Trust. We
cannot predict the liquidity of the market or market prices for the exchange
debentures that may be distributed. Accordingly, the exchange debentures that
you receive upon a distribution, or the exchange capital securities you hold
pending such distribution, may trade at a discount to the price that you paid
to purchase the exchange capital securities.
Because you may receive the exchange debentures, you must also make an
investment decision with regard to the exchange debentures. You should
carefully review all of the information regarding the exchange debentures
contained in this prospectus.
You will have limited voting rights.
As a holder of exchange capital securities, you will have limited voting
rights. You can vote only to modify certain terms of the exchange capital
securities or on the removal of the property and Delaware trustees of the Trust
upon a limited number of events. We, along with the property trustee and the
administrative trustees, may amend the trust agreement without your consent
even if these actions adversely affect your interests, to ensure that the
Trust:
. will continue to be classified as a grantor trust for federal income tax
purposes; and
. will not be required to register as an "investment company" under the
Investment Company Act of 1940.
23
<PAGE>
You will not have any voting rights regarding Astoria Financial or the
administrative trustees or with respect to any matters submitted to a vote of
our common stockholders. See "Description of Exchange Capital Securities --
Voting Rights; Amendment of the Trust Agreement" and "-- Removal of Issuer
Trustees" for more information on your limited voting rights.
The limited covenants relating to the exchange capital securities and the
exchange debentures do not protect you.
The covenants in the governing documents relating to the exchange capital
securities and the exchange debentures are limited. As a result, the governing
documents do not protect you in the event of an adverse change in our financial
condition or results of operations. In addition, the governing documents do not
limit our ability, or the ability of our subsidiaries, to incur additional
debt. You should not consider the terms of the governing documents to be a
significant factor in evaluating whether we will be able to comply with our
obligations under the exchange debentures or the guarantee.
Trading characteristics of the exchange capital securities may create adverse
tax consequences for you.
The exchange capital securities may trade at a price that does not reflect
the value of the accrued but unpaid interest on the underlying exchange
debentures. If you dispose of your exchange capital securities between the
record date for payments on the exchange capital securities, you may have
adverse tax consequences. Under these circumstances, you will be required to
include accrued but unpaid interest on the exchange debentures allocable to the
exchange capital securities through the date of disposition in your income. If
interest on the exchange debentures is included in income under the original
issue discount provisions, you would add this amount to your adjusted tax basis
in your share of the underlying exchange debentures deemed disposed. If your
selling price is less than your adjusted tax basis, which will include all
accrued but unpaid original issue discount interest included in your income,
you could recognize a capital loss which cannot be applied to offset ordinary
income for federal income tax purposes, subject to exceptions. See "Certain
Federal Income Tax Consequences -- Interest Income and Original Issue Discount"
and "-- Sales or Redemptions of Capital Securities" for more information on
possible adverse tax consequences to you.
Your failure to exchange original capital securities may adversely affect your
ability to sell such securities.
The original capital securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption from the applicable securities laws or in a
transaction not subject to such laws, and in each case in compliance with
certain other conditions and restrictions. Original capital securities which
remain outstanding after consummation of the exchange offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the exchange offer, holders of original capital securities
which remain outstanding will not be entitled to any rights to have such
original capital securities registered under the Securities Act or to any
similar rights under the registration rights agreement, subject to certain
limited exceptions. We and the Trust do not intend to register under the
Securities Act any original capital securities which remain outstanding after
consummation of the exchange offer, subject to such limited exceptions, if
applicable. To the extent that original capital securities are tendered and
accepted in the exchange offer, your ability to sell untendered original
capital securities could be adversely affected.
The exchange capital securities and any original capital securities which
remain outstanding after consummation of the exchange offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding liquidation amount thereof have taken certain actions
or exercised certain rights under the trust agreement. See "Description of
Exchange Capital Securities--Voting Rights; Amendment of the Trust Agreement."
24
<PAGE>
Absence of public market; restrictions on resale.
The original capital securities were issued to, and we believe such
securities are currently owned by, a relatively small number of beneficial
owners. The original capital securities have not been registered under the
Securities Act and will be subject to restrictions on transferability if they
are not exchanged for the exchange capital securities. Although the exchange
capital securities may be resold or otherwise transferred by the holders, who
are not affiliates of Astoria Financial or the Trust, without compliance with
the registration requirements under the Securities Act, they will constitute a
new issue of securities with no established trading market and will be
transferable only in blocks having a liquidation amount of not less than
$100,000 (100 exchange capital securities).
If a public trading market develops, future trading prices of the exchange
capital securities will depend on many factors, including, among others,
prevailing interest rates, our operating results and the market for similar
securities. The initial purchaser has informed the Trust and us that it intends
to make a market in the capital securities. However, the initial purchaser is
not obligated to do so and any such activity may be terminated at any time
without notice to the holders of the capital securities. In addition, any
market making activity will be subject to the limits of the Securities Act and
may be limited during the pendency of the exchange offer. Accordingly, we
cannot assure you that an active public or other market will develop for the
exchange capital securities, or as to the liquidity of or the trading market
for the exchange capital securities. If an active public market does not
develop, the market price and liquidity of the exchange capital securities may
be adversely affected. In addition, neither we nor the Trust intend to apply
for listing of the exchange capital securities on any securities exchange or
for quotation through the Nasdaq Stock Market, Inc. See "Plan of Distribution."
Notwithstanding the registration of the exchange capital securities in the
exchange offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of us or the Trust may publicly offer for sale or resell the
exchange capital securities only in compliance with the provisions of Rule 144
under the Securities Act.
Each broker-dealer that receives exchange capital securities for its own
account in exchange for original capital securities, where such original
capital securities were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such exchange capital
securities. See "Plan of Distribution."
We are not obligated to notify you of defects or irregularities in the exchange
offer procedures.
Subject to conditions set forth under "The Exchange Offer -- Conditions to
the Exchange Offer," issuance of the exchange capital securities in exchange
for original capital securities under the exchange offer will be made only
after a timely receipt by the Trust of:
. a book-entry confirmation evidencing the tender of such original capital
securities through ATOP; or
. certificates representing such original capital securities, a properly
completed and duly executed letter of transmittal, with any required
signature guarantees, and all other required documents.
Therefore, holders of the original capital securities desiring to tender such
original capital securities should allow sufficient time to ensure timely
delivery. See "The Exchange Offer -- Acceptance for Exchange and Issuance of
Exchange Capital Securities" and "-- Procedures for Tendering Original Capital
Securities." Neither we nor the Trust is under any duty to give notification of
defects or irregularities with respect to the tenders of original capital
securities for exchange.
Risks Relating to Astoria Financial and Astoria Federal
Rising interest rates may reduce our net income.
Astoria Federal's primary source of income is its net interest income, which
is the difference between the interest income earned on its interest earning
assets and the interest expense incurred on its interest bearing
25
<PAGE>
liabilities. At September 30, 1999, our one year interest rate sensitivity gap
(the difference between our interest rate sensitive assets maturing or
repricing within one year and our interest rate sensitive liabilities maturing
or repricing within one year, expressed as a percentage of total assets) was
2.29%. Included in this calculation were $1.01 billion of securities and $3.13
billion of borrowings, categorized according to their contractual maturity,
which are callable within one year. If these securities and borrowings had been
categorized according to their call dates, our one year interest rate
sensitivity gap would have been negative. Although our recent experience has
been that the initial, and in some cases, subsequent, call dates on these
securities and borrowings have passed without the securities or borrowings
being called, there is no guarantee that this will continue, particularly in a
rising interest rate environment. In a rising interest rate environment, an
institution with a negative gap would generally be expected, absent the effects
of other factors, to experience a greater increase in its cost of liabilities
relative to its yield on assets, and thus decrease an institution's net
interest income.
Changes in interest rates may reduce stockholders' equity and the value of our
future cash flows.
At September 30, 1999, $9.55 billion of our securities were classified as
available-for-sale under generally accepted accounting principles. The
estimated market value of our available-for-sale securities portfolio may
increase or decrease depending on changes in interest rates. Generally, as
interest rates increase, the estimated market value of our fixed rate
securities portfolio will decrease because the average yield on the portfolio,
relatively, will be less than the yields on securities available in the market
at that time. Under generally accepted accounting principles, we are required
to increase or decrease stockholder's equity by the amount of the change in
estimated market value of our available-for-sale securities portfolio, net of
the related tax benefit, under the category of accumulated other comprehensive
income. Therefore, a decline in the estimated market value of this portfolio
will result in a decline in reported stockholder's equity, as well as book
value per common share and tangible book value per common share. This decrease
will occur even though the securities are not sold. If these securities are
never sold, the decrease will be recovered over the life of the securities. At
September 30, 1999, the decline in stockholder's equity due to a decline in the
estimated market value of the available-for-sale securities portfolio was
$222.3 million compared to $14.6 million at December 31, 1998.
If our callable borrowings are called prior to their contractual maturity
during a period of rising interest rates, we could be required either to renew
the borrowings at a potentially higher rate of interest, which would negatively
impact net interest income, or sell a portion of our available-for-sale
securities to fund the repayment. If we sell the securities, any decline in
estimated market value would be realized, resulting in a loss upon such sale.
As a federal savings and loan association, Astoria Federal is required to
monitor changes in the net present value of the expected future cash flows of
our assets and liabilities, which is referred to as net portfolio value, or
NPV. In addition, we monitor our NPV ratio, which is our NPV divided by the
estimated market value of total assets. The NPV ratio can be viewed as a
corollary to our capital ratios. To monitor our overall sensitivity to changes
in interest rates, we simulate the effect of instantaneous changes in interest
rates of up to 200 basis points on our assets and liabilities. As of September
30, 1999, such an increase in interest rates of 200 basis points would have
reduced our NPV by approximately 39% resulting in an NPV ratio of 6.30%. There
can be no assurance that future changes in our mix of assets and liabilities
will not result in more extensive declines in our NPV and NPV ratio.
Low demand for mortgage loans may lower our profitability.
One-to-four family residential mortgage loans and securities backed by one-
to-four family residential mortgage loans represent a significant portion of
our assets as of September 30, 1999, and are our primary source of interest
income. If customer demand for residential mortgage loans decreases in our
market area, our loan originations will likely decrease, and if customer demand
decreases nationwide, the availability of mortgage-backed securities with cash
flow and credit risk characteristics that satisfy our criteria may be
26
<PAGE>
diminished. Our profits may then decrease because our alternative investments
earn less revenue for us than residential mortgage loans and mortgage-backed
securities. Customer demand for residential mortgage loans may be reduced by a
weaker economy, an increase in unemployment, a decrease in real estate values
or an increase in interest rates.
Strong competition within our market area may reduce our customer base.
Competition in the banking and financial services industry is intense. We
have competed for customers by offering excellent service and competitive rates
on our loans and deposit products. We compete with commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms. Some of
these competitors have greater resources than we do and may offer services that
we do not provide. For example, we do not provide a wide array of insurance
products, trust or investment services, nor do we provide banking services
through home computers or other technologically advanced services. Customers
who seek "one stop shopping" may be drawn to these institutions. Our
profitability depends upon our continued ability to successfully compete in our
market area.
27
<PAGE>
USE OF PROCEEDS
Neither we nor the Trust will receive any cash proceeds from the issuance of
the exchange capital securities and the exchange guarantee. In consideration
for issuing the exchange capital securities in exchange for original capital
securities as described in this prospectus, the Trust will receive original
capital securities in like liquidation amount. The original capital securities
surrendered in exchange for the exchange capital securities will be retired and
canceled.
All of the proceeds from the sale by the Trust of its original capital
securities and common securities were invested by the Trust in the original
junior subordinated debentures. The net proceeds we received from the sale of
the $125,000,000 aggregate principal amount of our junior subordinated
debentures, Series A, also referred to as the original junior subordinated
debentures, were approximately $122.8 million, net of estimated commissions and
other estimated offering expenses. We used approximately $31.3 millions of the
net proceeds to increase Astoria Federal's capital level, and have and will use
the remaining net proceeds for general corporate purposes, including the
repurchase of our common stock. Initially, we invested the net proceeds in
short-term liquid investments, including U.S. Government and agency securities
and repurchase agreements backed by U.S. Government and agency securities.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as our subsidiary,
and, accordingly, the accounts of the Trust are included in our consolidated
financial statements. The capital securities are presented as a separate line
item in our consolidated statements of financial condition and appropriate
disclosures about the capital securities, the guarantees and the junior
subordinated debentures are included in the notes to consolidated financial
statements. For financial reporting purposes, we will record distributions
payable on the capital securities as a non-interest expense in the consolidated
statements of income.
Future reports we file under the Exchange Act will include a footnote to the
consolidated financial statements stating that:
. the Trust is wholly-owned;
. the sole assets of the Trust are the junior subordinated debentures
(specifying the principal amount, interest rate and maturity date of
such junior subordinated debentures); and
. our obligations under the trust agreement, the junior subordinated
debentures and related indenture and the original guarantee and the
exchange guarantee, collectively referred to as the guarantees, in the
aggregate, constitute a full and unconditional guarantee by us of the
obligations of the Trust under the capital securities.
We expect that the Trust will not be required to provide separate reports
under the Exchange Act.
28
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization at September
30, 1999, and as adjusted to give effect to the issuance of the original
capital securities offered by the Trust, and the receipt and application by us
of the net proceeds from the corresponding sale of the original junior
subordinated debentures to the Trust. Consummation of the exchange offer will
have no effect on such capitalization. You should read this table in
conjunction with our consolidated financial statements and related notes, which
are incorporated by reference into this prospectus.
<TABLE>
<CAPTION>
September 30, 1999
------------------------
Actual As Adjusted
------ -----------
(In thousands)
<S> <C> <C>
Long-term borrowings................................. $11,264,485 $11,264,485
----------- -----------
Guaranteed preferred beneficial interest in junior
subordinated
debentures (1)...................................... $ -- $ 125,000
----------- -----------
Stockholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares
authorized:
Series A (325,000 shares authorized and -0- shares
issued and outstanding)............................. -- --
Series B (2,000,000 shares authorized, issued and
outstanding)....................................... 2,000 2,000
Common stock, $.01 par value; (200,000,000 shares
authorized, 55,498,296 shares issued and
54,340,443 shares outstanding)..................... 555 555
Additional paid in capital........................... 797,541 797,541
Retained earnings.................................... 864,741 864,741
Treasury stock (1,157,853 shares, at cost)........... (50,086) (50,086)
Accumulated other comprehensive income (2)........... (222,258) (222,258)
Unallocated common stock held by ESOPs............... (33,645) (33,645)
Unearned common stock held by RRP.................... (105) (105)
----------- -----------
Total stockholders' equity........................ 1,358,743 1,358,743
----------- -----------
Total long-term borrowings and stockholders'
equity........................................... 12,623,228 12,748,228
=========== ===========
Capital ratios (Astoria Federal) (3):
Tangible............................................. 5.55% 5.68%
Leverage............................................. 5.55% 5.68%
Risk-based........................................... 14.50% 14.82%
</TABLE>
- --------
(1) As described in this prospectus, the sole assets of the Trust, which is our
subsidiary, are the junior subordinated debentures, which mature on
November 1, 2029, unless redeemed prior to such date in accordance with
their terms. We own all of the common securities issued by the Trust.
(2) Includes only net unrealized loss on securities available-for-sale.
(3) We contributed $31.3 million of proceeds from the sale of the original
junior subordinated debentures to Astoria Federal.
29
<PAGE>
ASTORIA FINANCIAL CORPORATION
General
We are headquartered in Lake Success, New York and, through our subsidiary
Astoria Federal, operate eighty-seven retail banking offices in New York State:
eighty-four on Long Island, including Brooklyn, Queens, Nassau and Suffolk
counties, and three in Westchester County. Established in 1888, Astoria Federal
provides retail banking and mortgage and consumer lending to approximately
700,000 customers. In addition, Astoria Federal originates mortgage loans
through its banking and loan production offices in the New York Metropolitan
area and through an extensive broker network in thirteen states: New York, New
Jersey, Connecticut, Pennsylvania, Massachusetts, Delaware, Maryland, Ohio,
Virginia, North Carolina, South Carolina, Georgia and Florida. With $22.85
billion in assets at September 30, 1999, Astoria Federal is the largest thrift
in New York State and sixth largest in the United States.
Our primary business is the operation of our wholly owned subsidiary,
Astoria Federal. In addition to directing, planning and coordinating the
business activities of Astoria Federal, we invest primarily in U.S. Government
and federal agency securities, mortgage-backed securities and other securities.
We have acquired, and may continue to acquire or organize, either directly or
indirectly through Astoria Federal, other operating subsidiaries, including
other financial institutions.
Astoria Federal's principal business is attracting retail deposits from the
general public and investing those deposits, together with funds generated from
operations, principal repayments and borrowings, primarily in one-to-four
family residential mortgage loans and mortgage-backed securities and, to a
lesser extent, multi-family residential mortgage loans, commercial real estate
loans, commercial loans and consumer loans. In addition, Astoria Federal
invests in U.S. Government and federal agency securities and in other
investments permitted by federal laws and regulations. Astoria Federal's
revenues are derived principally from interest on its mortgage loan and
mortgage-backed securities portfolios and interest and dividends on its other
securities portfolio. Astoria Federal's cost of funds consists of interest
expense on deposits and borrowings.
At September 30, 1999, we had total assets of $22.86 billion, consisting
primarily of $9.93 billion in total loans, net, and $10.02 billion in mortgage-
backed securities. Within our $9.93 billion loan portfolio, one-to-four family
residential mortgage loans comprised $8.80 billion of our assets. As of
September 30, 1999, on a consolidated basis, we had total liabilities of $21.51
billion, consisting primarily of deposits of $9.44 billion, 48.6% of which are
core deposits (savings, money market, money manager and NOW accounts) and
$11.66 billion of borrowed funds, and total stockholders' equity of $1.36
billion.
A key element in our growth strategy over the past twenty-five years has
been to become a leading financial institution in terms of deposit market share
in our major markets. To accomplish this goal, we remain alert for
opportunities to enhance and expand our banking franchise through acquisitions.
Since 1973 we have successfully acquired and integrated nine institutions with
86 banking offices, transforming ourselves into a leading competitor in the
Long Island banking market. Our current acquisition strategy is focused on
further complementing our existing Long Island franchise and driving additional
efficiencies that will enable us to enhance stockholder value while achieving
long-term benefits for our customers and the communities we serve.
In April of 1998, we announced our agreement to acquire Long Island Bancorp,
Inc., the parent company of The Long Island Savings Bank, FSB. With $6.58
billion in assets and $3.58 billion in deposits, the acquisition added 35
banking offices to our Long Island franchise. Following on the heels of our
successful 1997 acquisition of The Greater New York Savings Bank, which gave us
an entry into the Brooklyn market, the Long Island Bancorp acquisition
complemented and strengthened our presence in Queens, Nassau and Suffolk
counties. After the consolidation of five banking offices and the opening of a
new office in Brooklyn in February 1999, we operate a total of 87 full service
banking offices of which 84 are located on Long Island. The Long Island
network, with deposits averaging $108 million per banking office at September
30, 1999,
30
<PAGE>
and core deposits representing 48.6% of total deposits, anchors our position as
a low cost provider of quality products and services. The importance of the
Long Island banking market is underscored by its size: the population of seven
million makes Long Island the equivalent of the twelfth largest state in the
United States. Each of the four counties on Long Island is among the 25 largest
in the nation, with two of the four having median household incomes higher than
the U.S. average of $36,656. Nassau and Suffolk counties combined rank among
the most prosperous, with combined effective annual buying income of $51.40
billion.
REGULATION AND SUPERVISION
We are subject to extensive federal and, to a lesser extent, state
regulation. We are subject to examination and supervision by the OTS, as our
chartering agency, and by the Federal Deposit Insurance Corporation, or the
FDIC, as the deposit insurer. We, as a unitary savings and loan holding
company, are regulated, examined and supervised by the OTS. We are required to
file certain reports with, and otherwise comply with the rules and regulations
of the OTS and of the Commission under the federal securities laws. The OTS has
primary enforcement responsibility over federally chartered savings
associations and has substantial discretion to impose enforcement action on an
institution that fails to comply with its regulatory requirements, particularly
with respect to its capital requirements. In addition, the FDIC has the
authority to recommend to the Director of the OTS that enforcement action be
taken with respect to a particular federally chartered savings association and,
if action is not taken by the Director, the FDIC has authority to take such
action under certain circumstances.
This regulation and supervision establish a comprehensive framework of
activities in which we can engage and is intended primarily for the protection
of the deposit insurance fund and depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Regulations affecting
banks and financial services companies undergo continuous modification and the
ultimate effect of such changes cannot be predicted. Regulations and laws may
be modified at any time, and new legislation may be enacted that affects us,
our bank and non-bank subsidiaries. Any change in such regulation, whether by
the OTS, the FDIC or Congress could have a material adverse impact on our
operations.
Almost all of our assets consist of our investment in Astoria Federal, our
principal subsidiary. Thus, our ability to pay principal of, and premium and
interest on, the junior subordinated debentures depends almost entirely on cash
dividends we receive from Astoria Federal.
The OTS limits all capital distributions by Astoria Federal directly or
indirectly to us, including dividend payments. As the subsidiary of a savings
and loan holding company, Astoria Federal currently must file a notice with the
OTS for each capital distribution. However, if the total amount of all capital
distributions (including each proposed capital distribution) for the applicable
calendar year exceeds net income for that year to date plus the retained net
income for the preceding two years, then Astoria Federal must file an
application to receive the approval of the OTS for the proposed capital
distribution. Currently, approximately $191.6 million is available for the
payment of dividends to us without further approval from the OTS.
In addition to the OTS limits, Astoria Federal may not pay dividends to us
if, after paying those dividends, it would fail to meet the required minimum
levels under risk-based capital guidelines and the minimum leverage and
tangible capital ratio requirements. Under the Federal Deposit Insurance Act,
an insured depositary institution such as Astoria Federal is prohibited from
making capital distributions, including the payment of dividends, if, after
making such distribution, the institution would become "undercapitalized" (as
such term is used in the FDIA). Based on Astoria Federal's current financial
condition, we do not expect that this provision will have any impact on our
ability to obtain dividends from Astoria Federal. Payment of dividends by
Astoria Federal also may be restricted at any time at the discretion of the
appropriate regulator if
31
<PAGE>
it deems the payment to constitute an unsafe and unsound banking practice. We
cannot assure you that Astoria Federal will be able to pay dividends at past
levels, or at all, in the future.
If we do not receive sufficient cash dividends from Astoria Federal, it is
unlikely that we will have sufficient funds to make payments on the junior
subordinated debentures or that the Trust will be able to make the related
payments on the capital securities. See "Description of Exchange Capital
Securities" and "Description of Exchange Debentures."
Other statutes and regulations that affect us and Astoria Federal are
summarized in "Item 1. Business -- Regulation and Supervision" of our Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, which is
incorporated into this prospectus by reference.
ASTORIA CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law upon the
filing of a certificate of trust with the Delaware Secretary of State. The
Trust exists for the exclusive purposes of:
. issuing and selling the capital securities and the common securities;
. using the proceeds from the sale of the capital securities and the
common securities to acquire the junior subordinated debentures issued
by us; and
. engaging in only those other activities necessary, advisable or
incidental thereto, including the exchange offer.
The junior subordinated debentures are the sole assets of the Trust, and,
accordingly, payments under the junior subordinated debentures will be the sole
revenues of the Trust. We own all of the common securities of the Trust, which
have an aggregate liquidation amount equal to at least 3% of the total capital
of the Trust. The common securities rank pari passu, and payments will be made
thereon pro rata, with the capital securities, except that upon the occurrence
and continuance of an event of default under the trust agreement resulting from
an event of default under the junior subordinated debentures, our rights as
holder of the common securities to payments in respect of distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the capital securities. See "Description of Exchange
Capital Securities -- Subordination of Common Securities." The Trust has a term
of approximately 35 years, but may dissolve earlier as provided in the trust
agreement. The Trust's business and affairs are conducted by Wilmington Trust
Company, as property trustee and as the Delaware trustee, and three
administrative trustees, collectively referred to as the issuer trustees.
Wilmington Trust Company also acts as trustee under the guarantees and the
indenture. See "Description of Exchange Guarantee" and "Description of Exchange
Debentures." The holder of the common securities of the Trust or, if an event
of default under the trust agreement has occurred and is continuing, the
holders of a majority in liquidation amount of the capital securities will be
entitled to appoint, remove or replace the property trustee and/or the Delaware
trustee. In no event will the holders of the exchange capital securities have
the right to vote to appoint, remove or replace the administrative trustees;
such voting rights will be vested exclusively in the holder of the common
securities. The duties and obligations of each issuer trustee are governed by
the trust agreement. As issuer of the exchange debentures, we will pay all
fees, expenses, debts and obligations (other than the payment of principal of,
and premium and interest on, the capital securities) related to the Trust and
the offering of the exchange capital securities and pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the Trust. The
principal executive office of the Trust is c/o Astoria Financial Corporation,
One Astoria Federal Plaza, Lake Success, New York 11042, and its telephone
number is (516) 327-3000.
32
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the original capital securities, we and the
Trust entered into the registration rights agreement with the initial
purchaser, under which we and the Trust agreed to file and to use our best
efforts to cause to become effective with the Commission a registration
statement with respect to the exchange of the original capital securities for
exchange capital securities with terms identical in all material respects to
the terms of the original capital securities. A copy of the registration rights
agreement has been filed as an exhibit to the registration statement of which
this prospectus is a part.
The exchange offer is being made to satisfy our and the Trust's contractual
obligations under the registration rights agreement. The form and terms of the
exchange capital securities are the same as the form and terms of the original
capital securities except that the exchange capital securities have been
registered under the Securities Act and will not provide for any increase in
the distribution rate and certain restrictions on transfer applicable to the
original capital securities. In that regard, the original capital securities
provide, among other things, that, if a registration statement relating to the
exchange offer has not been filed with the Commission on or prior to the 150th
day after the issue date, the distribution rate borne by the original capital
securities will increase by 25 basis points per annum until the exchange offer
is consummated. Upon consummation of the exchange offer, holders of original
capital securities will not be entitled to any increase in the distribution
rate on the original capital securities or any further registration rights
under the registration rights agreement, except under limited circumstances.
See "Risk Factors."
The exchange offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of original capital securities in any jurisdiction
in which the exchange offer or its acceptance would not be in compliance with
the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
exchange offer means any person in whose name the original capital securities
are registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
original capital securities are held of record by DTC who desires to deliver
such original capital securities by book-entry transfer at DTC.
Under the exchange offer, we will exchange as soon as practicable after the
date of this prospectus the original guarantee for the exchange guarantee and
the original junior subordinated debentures, in an amount corresponding to the
original capital securities accepted for exchange, for a like aggregate
principal amount of the exchange debentures. The exchange guarantee and
exchange debentures have been registered under the Securities Act.
Terms of the Exchange Offer
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this prospectus and in the accompanying letter of transmittal, to
exchange up to $125,000,000 aggregate liquidation amount of exchange capital
securities for a like aggregate liquidation amount of original capital
securities properly tendered on or prior to the expiration date and not
properly withdrawn in accordance with the procedures described below. The Trust
will issue, promptly after the expiration date, an aggregate liquidation amount
of up to $125,000,000 of exchange capital securities in exchange for a like
principal amount of outstanding original capital securities tendered and
accepted in connection with the exchange offer. Holders may tender their
original capital securities in whole or in part in a liquidation amount of not
less than $100,000 (100 capital securities) or any integral multiple of $1,000
liquidation amount (one capital security) in excess of $100,000.
33
<PAGE>
The exchange offer is not conditioned upon any minimum liquidation amount of
original capital securities being tendered. As of the date of this prospectus,
$125,000,000 aggregate liquidation amount of the original capital securities is
outstanding.
Holders of original capital securities do not have any appraisal or
dissenters' rights in connection with the exchange offer. Original capital
securities which are not tendered for or are tendered but not accepted in
connection with the exchange offer will remain outstanding and be entitled to
the benefits of the trust agreement, but will not be entitled to any further
registration rights under the registration rights agreement, except under
limited circumstances. See "Risk Factors" and "Description of Original Capital
Securities."
If any tendered original capital securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
in this prospectus or otherwise, certificates for any such unaccepted original
capital securities will be returned, without expense, to the tendering holder
promptly after the expiration date.
Holders who tender original capital securities in connection with the
exchange offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of original capital securities in connection with the
exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. See
"-- Fees and Expenses."
Neither we, our Board of Directors nor any issuer trustee of the Trust makes
any recommendation to you as to whether to tender or refrain from tendering all
or any portion of your original capital securities pursuant to the exchange
offer. In addition, no one has been authorized to make any such recommendation.
You must make your own decisions whether to tender pursuant to the exchange
offer and, if so, the aggregate amount of original capital securities to tender
based your own financial positions and requirements.
Expiration Date; Extensions; Amendments
The term "expiration date" means 5:00 p.m., New York City time, on April 11,
2000, unless we or the Trust extends the exchange offer, in which case the term
"expiration date" shall mean the latest date and time to which the exchange
offer is extended.
We and the Trust expressly reserve the right in our sole and absolute
discretion, subject to applicable law, at any time and from time to time:
. to delay the acceptance of the original capital securities for exchange;
. to terminate the exchange offer, whether or not any original capital
securities have theretofore been accepted for exchange, if the Trust
determines, in its sole and absolute discretion, that any of the events
or conditions referred to under "-- Conditions to the Exchange Offer"
have occurred or exist or have not been satisfied;
. to extend the expiration date of the exchange offer and retain all
original capital securities tendered under the exchange offer, subject,
however, to the right of holders of original capital securities to
withdraw their tendered original capital securities as described under
"-- Withdrawal Rights;" and
. to waive any condition or otherwise amend the terms of the exchange
offer in any respect.
If the exchange offer is amended in a manner determined by us and the Trust to
constitute a material change, or if we and the Trust waive a material condition
of the exchange offer, we and the Trust will promptly disclose such amendment
by means of a prospectus supplement that will be distributed to the holders of
the original capital securities, and we and the Trust will extend the exchange
offer to the extent required by Rule 14e-1 under the Exchange Act.
34
<PAGE>
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice to the exchange agent and by making
a public announcement, and such announcement in the case of an extension will
be made no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. Without limiting the manner in
which we and the Trust may choose to make any public announcement and subject
to applicable law, we and the Trust shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Capital Securities
Upon the terms and subject to the conditions of the exchange offer, the
Trust will exchange, and will issue to the exchange agent, exchange capital
securities for original capital securities validly tendered and not withdrawn
promptly after the expiration date.
In all cases, delivery of exchange capital securities in exchange for
original capital securities tendered and accepted for exchange under the
exchange offer will be made only after timely receipt by the exchange agent of
(i) the book-entry confirmation described below under "-- Procedures for
Tendering Original Capital Securities-- Book-Entry Transfer" or (ii)
certificates representing such original capital securities, the letter of
transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by the
letter of transmittal.
Subject to the terms and conditions of the exchange offer, the Trust will be
deemed to have accepted for exchange, and thereby exchanged, original capital
securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the exchange agent of the Trust's acceptance of such
original capital securities for exchange under the exchange offer. The exchange
agent will act as agent for the Trust for the purpose of receiving tenders of
book-entry confirmations or certificates representing original capital
securities, letters of transmittal and related documents, and as agent for
tendering holders for the purpose of receiving book-entry confirmations or
certificates representing original capital securities, letters of transmittal
and related documents and transmitting exchange capital securities to validly
tendering holders. Such exchange will be made promptly after the expiration
date. If for any reason whatsoever, acceptance for exchange or the exchange of
any original capital securities tendered pursuant to the exchange offer is
delayed, whether before or after the Trust's acceptance for exchange of
original capital securities, or the Trust extends the exchange offer or is
unable to accept for exchange or exchange original capital securities tendered
under the exchange offer, then, without prejudice to the Trust's rights set
forth in this prospectus, the exchange agent may, nevertheless, on behalf of
the Trust and subject to Rule l4e-1 (c) under the Exchange Act, retain tendered
original capital securities and such original capital securities may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under "-- Withdrawal Rights."
In accordance with the letter of transmittal, a holder of original capital
securities will warrant and agree that it has full power and authority to
tender, exchange, sell, assign and transfer the original capital securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered original capital securities, free and clear of all liens,
restrictions, charges and encumbrances, and the original capital securities
tendered for exchange are not subject to any adverse claims or proxies. Such
holder also will warrant and agree that it will, upon request, execute and
deliver any additional documents deemed by the Trust or the exchange agent to
be necessary or desirable to complete the exchange, sale, assignment, and
transfer of the original capital securities tendered under the exchange offer.
Tendering holders of original capital securities that use ATOP will, by so
doing, acknowledge that they are bound by the terms of the letter of
transmittal.
Procedures for Tendering Original Capital Securities
Valid Tender. Except as set forth in this prospectus, in order for original
capital securities to be validly tendered under the exchange offer, a properly
completed and duly executed letter of transmittal (or facsimile
35
<PAGE>
thereof), with any required signature guarantees and any other required
documents, must be received by the exchange agent at its address set forth
under "-- Exchange Agent," and, in addition, one of the following:
. tendered original capital securities must be received by the exchange
agent;
. such original capital securities must be tendered pursuant to the
procedures for book-entry transfer set forth in this prospectus and a
book-entry confirmation must be received by the exchange agent, in each
case on or prior to the expiration date; or
. the guaranteed delivery procedures set forth in this prospectus must be
complied with.
If less than all of the original capital securities are tendered, a
tendering holder should fill in the amount of original capital securities being
tendered in the appropriate box on the letter of transmittal or so indicate in
an agent's message in lieu of the letter of transmittal. The entire amount of
original capital securities delivered to the exchange agent will be deemed to
have been tendered unless otherwise indicated.
The method of delivery of the book-entry confirmations or certificates, the
letter of transmittal and all other required documents is at the option and
sole risk of the tendering holder, and delivery will be deemed made only when
actually received by the exchange agent. If delivery is by mail, we recommend
using registered mail, return receipt requested, properly insured, or an
overnight delivery service. In all cases, sufficient time should be allowed to
ensure timely delivery.
Book-Entry Transfer. For purposes of the exchange offer, the exchange agent
will establish an account with respect to the original capital securities at
DTC as soon as practicable. Any tendering financial institution that is a
participant in DTC's book-entry transfer facility system must make a book-entry
delivery of the original capital securities by causing DTC to transfer such
original capital securities into the exchange agent's account at DTC in
accordance with DTC's ATOP procedures for transfers. Such holder of original
capital securities using ATOP should transmit its acceptance to DTC on or prior
to the expiration date, or comply with the guaranteed delivery procedures set
forth below. DTC will verify such acceptance, execute a book-entry transfer of
the tendered original capital securities into the exchange agent's account at
DTC and then send to the exchange agent confirmation of such book-entry
transfer, including an agent's message confirming that DTC has received an
express acknowledgment from such holder that such holder has received and
agrees to be bound by the letter of transmittal and that we and the Trust may
enforce the letter of transmittal against such holder, book-entry confirmation.
A beneficial owner of original capital securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial owner wishes to participate in the exchange offer.
Certificates. If the tender is not made through ATOP, certificates
representing original capital securities, as well as the letter of transmittal,
or facsimile thereof, properly completed and duly executed, with any required
signature guarantees, and any other required documents required by the letter
of transmittal, must be received by the exchange agent at its address set forth
under "-- Exchange Agent" on or prior to the expiration date in order for such
tender to be effective, or the guaranteed delivery procedure set forth herein
must be complied with.
If less than all of the original capital securities are tendered, a
tendering holder should fill in the amount of original capital securities being
tendered in the appropriate box on the letter of transmittal. The entire amount
of original capital securities delivered to the exchange agent will be deemed
to have been tendered unless otherwise indicated.
36
<PAGE>
Signature Guarantees. Certificates for the original capital securities need
not be endorsed and signature guarantees on the letter of transmittal are
unnecessary unless:
. a certificate for the original capital securities is registered in a
name other than that of the person surrendering the certificate; or
. the holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the letter of transmittal.
In the case of the above conditions, such certificates for original capital
securities must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the letter of
transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (a) a bank; (b) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (c) a
credit union; (d) a national securities exchange, registered securities
association or clearing agency; or (e) a savings association that is a
participant in a Securities Transfer Association, an eligible institution,
unless surrendered on behalf of such eligible institution. See Instruction 1 to
the letter of transmittal.
Delivery. The method of delivery of the book-entry confirmation or
certificates representing tendered original capital securities, the letter of
transmittal, and all other required documents is at the option and sole risk of
the tendering holder, and delivery will be deemed made only when actually
received by the exchange agent. If delivery is by mail, registered mail, return
receipt requested, properly insured, or an overnight delivery service is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Notwithstanding any other provision hereof, the delivery of exchange capital
securities in exchange for original capital securities tendered and accepted
for exchange pursuant to the exchange offer will in all cases be made only
after timely receipt by the exchange agent of:
. a book-entry confirmation with respect to such original capital
securities; or
. certificates representing original capital securities and a properly
completed and duly executed letter of transmittal, or facsimile thereof,
together with any required signature guarantees and any other documents
required by the letter of transmittal.
Accordingly, the delivery of exchange capital securities might not be made to
all tendering holders at the same time, and will depend upon when book-entry
confirmations with respect to original capital securities or certificates
representing original capital securities and other required documents are
received by the exchange agent.
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the exchange agent.
Guaranteed Delivery. If a holder desires to tender original capital
securities under the exchange offer and the certificates for such original
capital securities are not immediately available or time will not permit all
required documents to reach the exchange agent on or prior to the expiration
date, or the procedure for book-entry transfer cannot be completed on a timely
basis, such original capital securities may nevertheless be tendered, provided
that all of the following guaranteed delivery procedures are complied with:
. such tenders are made by or through an eligible institution;
. properly completed and duly executed notice to the exchange agent
guaranteeing delivery to the exchange agent of either certificates
representing original capital securities or a book-entry confirmation in
compliance with the requirements set forth in this prospectus, the
notice of guaranteed delivery, substantially in the form accompanying
the letter of transmittal, is received by the exchange agent, as
provided herein, on or prior to expiration date; and
37
<PAGE>
. a book-entry confirmation or the certificates representing all tendered
original capital securities, in proper form for transfer, together with
a properly completed and duly executed letter of transmittal, or
facsimile thereof, with any required signature guarantees and any other
documents required by the letter of transmittal, are, in any case,
received by the exchange agent within three Nasdaq National Market
trading days after the date of execution of such notice of guaranteed
delivery.
The notice of guaranteed delivery may be delivered by hand, or transmitted
by facsimile or mail to the exchange agent and must include a guarantee by an
eligible institution in the form set forth in such notice.
The Trust's acceptance for exchange of original capital securities tendered
in compliance with any of the procedures described above will constitute a
binding agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the exchange offer.
Determination of Validity. We and the Trust will determine all questions as
to the form of documents, validity, eligibility, including time of receipt, and
acceptance for exchange of any tendered original capital securities, in our
sole discretion, and the determination shall be final and binding on all
parties. We and the Trust reserve the absolute right, in our sole and absolute
discretion, to reject any and all tenders determined by us not to be in proper
form or the acceptance of which, or exchange for, may, in the opinion of
counsel to us and the Trust, be unlawful. We and the Trust also reserve the
absolute right, subject to applicable law, to waive any of the conditions of
the exchange offer as set forth under "-- Conditions to the Exchange Offer" or
any condition or irregularity in any tender of original capital securities of
any particular holder whether or not similar conditions or irregularities are
waived in the case of other holders.
The Trust's and our interpretation of the terms and conditions of the
exchange offer, including the letter of transmittal and the instructions
thereto, will be final and binding. No tender of original capital securities
will be deemed to have been validly made until all irregularities with respect
to such tender have been cured or waived. Neither us, the Trust, any affiliates
or assigns of us or the Trust, the exchange agent or any other person shall be
under any duty to give any notification of any irregularities in tenders or
incur any liability for failure to give any such notification.
If any letter of transmittal, endorsement, bond power, power of attorney, or
any other document required by the letter of transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by us and the
Trust, proper evidence satisfactory to us and the Trust, in our sole
discretion, of such person's authority to so act must be submitted.
Resales of Exchange Capital Securities
The Trust is making the exchange offer for the exchange capital securities
in reliance on the position of the staff of the Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither we nor the Trust sought our own interpretive letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the exchange offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Commission, and subject to the two immediately following sentences, we and the
Trust believe that exchange capital securities issued under this exchange offer
in exchange for original capital securities may be offered for resale, resold
and otherwise transferred by a holder, other than a holder who is a broker-
dealer, without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such exchange
capital securities are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution, within the
meaning of the Securities Act, of such exchange capital securities. However,
any holder of original capital securities who is an affiliate of us or the
Trust or who intends to participate in the exchange offer for the purpose of
distributing exchange capital securities, or any broker-dealer who purchased
original capital
38
<PAGE>
securities from the Trust to resell pursuant to Rule 144A or any other
available exemption under the Securities Act:
. will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters;
. will not be permitted or entitled to tender such original capital
securities in the exchange offer; and
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or other transfer of
such original capital securities or, if distributed, junior subordinated
debentures, unless such sale is made in reliance on an exemption from
such requirements.
In addition, as described below, if any broker-dealer holds original capital
securities acquired for its own account as a result of market-making or other
trading activities and exchanges such original capital securities for exchange
capital securities, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
exchange capital securities.
Each holder of original capital securities who wishes to exchange original
capital securities for exchange capital securities in the exchange offer will
be required to represent that:
. it is not an affiliate of us or the Trust;
. any exchange capital securities to be received by it are being acquired
in the ordinary course of its business;
. it has no arrangement or understanding with any person to participate in
a distribution, within the meaning of the Securities Act, of such
exchange capital securities; and
. if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution, within the meaning of
the Securities Act, of such exchange capital securities.
We and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the exchange offer, to furnish to us and the
Trust (or an agent thereof) in writing information as to the number of
"beneficial owners," within the meaning of Rule 13d-3 under the Exchange Act,
on behalf of whom such holder holds the capital securities to be exchanged in
the exchange offer. Each broker-dealer that receives exchange capital
securities for its own account as a result of the exchange offer must
acknowledge that it acquired the original capital securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such exchange capital
securities. The letter of transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an underwriter within the meaning of the Securities Act. Based on the position
taken by the staff of the Commission in the interpretive letters referred to
above, we and the Trust believe that participating broker-dealers who acquired
original capital securities for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the exchange capital securities received upon
exchange of such original capital securities, other than original capital
securities which represent an unsold allotment from the initial sale of the
original capital securities, with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such exchange capital securities. Accordingly, this prospectus,
as it may be amended or supplemented from time to time, may be used by a
participating broker-dealer during the period referred to below in connection
with resales of exchange capital securities received in exchange for original
capital securities where such original capital securities were acquired by such
participating broker-dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
registration rights agreement, we and the Trust have agreed that this
prospectus, as it may be amended or supplemented from time to time, may be used
by a participating broker-dealer in connection with resales of such exchange
capital securities for a period ending 90
39
<PAGE>
days after the expiration date, subject to extension under certain limited
circumstances described below, or, if earlier, when all such exchange capital
securities have been disposed of by such participating broker-dealer. See "Plan
of Distribution." However, a participating broker-dealer who intends to use
this prospectus in connection with the resale of exchange capital securities
received in exchange for original capital securities pursuant to the exchange
offer must notify us or the Trust, or cause us or the Trust to be notified, on
or prior to the expiration date, that it is a participating broker-dealer. Such
notice may be given in the space provided for that purpose in the letter of
transmittal or may be delivered to the exchange agent at the address set forth
herein under "-- Exchange Agent." Any participating broker-dealer who is an
affiliate of us or the Trust may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each participating broker-dealer who surrenders original capital securities
under the exchange offer will be deemed to have agreed, by execution of the
letter of transmittal, that upon receipt of notice from us or the Trust of the
occurrence of any event or the discovery of:
. any fact which makes any statement contained or incorporated by
reference in this prospectus untrue in any material respect;
. any fact which causes this prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were
made, not misleading; or
. the occurrence of certain other events specified in the registration
rights agreement,
such participating broker-dealer will suspend the sale of exchange capital
securities, or the exchange guarantee or the exchange debentures, as
applicable, pursuant to this prospectus until we or the Trust has amended or
supplemented this prospectus to correct such misstatement or omission and has
furnished copies of the amended and supplemented prospectus to such
participating broker-dealer, or we or the Trust has given notice that the sale
of the exchange capital securities, or the exchange guarantee or the exchange
debentures, as applicable, may be resumed, as the case may be.
If we or the Trust gives such notice to suspend the sale of the exchange
capital securities, or the exchange guarantee or the exchange debentures, as
applicable, the 90-day period referred to above shall be extended during which
participating broker-dealers are entitled to use this prospectus in connection
with the resale of exchange capital securities by the number of days during the
period from and including the date of the giving of such notice to and
including the date when participating broker-dealers shall have received copies
of the amended or supplemented prospectus necessary to permit resales of the
exchange capital securities or to and including the date on which we or the
Trust has given notice that the sale of exchange capital securities, or the
exchange guarantee or the exchange debentures, as applicable, may be resumed,
as the case may be.
Withdrawal Rights
Except as otherwise provided in this prospectus, tenders of original capital
securities may be withdrawn at any time on or prior to the expiration date.
In order for a withdrawal to be effective, a written or facsimile
transmission of such notice of withdrawal must be timely received by the
exchange agent at the address set forth under "-- Exchange Agent" on or prior
to the expiration date. Any such notice of withdrawal must specify the name of
the person who tendered the original capital securities to be withdrawn, the
aggregate principal amount of original capital securities to be withdrawn, and,
if certificates for such original capital securities have been tendered, the
name of the registered holder of the original capital securities as set forth
on such certificates if different from that of the person who tendered such
original capital securities. If certificates representing original capital
securities have been delivered or otherwise identified to the exchange agent,
then prior to the physical release of such certificates, the tendering holder
must submit the serial numbers shown on the particular certificates to be
withdrawn and
40
<PAGE>
the signature on the notice of withdrawal must be guaranteed by an eligible
institution, except in the case of original capital securities tendered for the
account of an eligible institution. If original capital securities have been
tendered in accordance with the procedures for book-entry transfer set forth in
"-- Procedures for Tendering Original Capital Securities -- Book-Entry
Transfer," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of original capital
securities. Withdrawals of tenders of original capital securities may not be
rescinded. Original capital securities properly withdrawn will not be deemed
validly tendered for purposes of the exchange offer, but may be retendered at
any subsequent time on or prior to the expiration date by following any of the
procedures described above under "-- Procedures for Tendering Original Capital
Securities."
All questions as to the validity, form and eligibility, including time of
receipt, of such withdrawal notices will be determined by us and the Trust, in
our sole discretion, whose determination shall be final and binding on all
parties. Neither we, the Trust, any affiliates or assigns of us or the Trust,
the exchange agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any original capital
securities which have been tendered but which are withdrawn will be returned to
the holder thereof promptly after withdrawal.
Distributions on Exchange Capital Securities
Holders of exchange capital securities whose original capital securities are
accepted for exchange will be entitled to receive cumulative cash distributions
arising from the payment of interest on the exchange debentures at the annual
rate of 9.75% of the liquidation amount of $1,000 per exchange capital
security, accumulating from October 28, 1999, and will be payable semi-annually
in arrears on May 1st and November 1st of each year, beginning on May 1, 2000.
The record dates will be the 15th day of the month immediately preceding the
month in which the relevant payment occurs. In the event the exchange offer is
consummated prior to the first record date, April 15, 2000, each exchange
capital security will pay cumulative distributions from and after October 28,
1999 and no distributions will be paid on any original capital security
tendered for an exchange capital security. However, in the event the exchange
offer is consummated after April 15, 2000, distributions will be paid on the
original capital securities accumulated from and after October 28, 1999 through
May 1, 2000, and distributions will be paid on the exchange capital securities
from and after May 1, 2000. The amount of each distribution with respect to the
capital securities will include amounts accrued to, but excluding the date the
distribution is due. Because of the foregoing procedures regarding
distributions, the amount of the distributions received by holders whose
original capital securities are accepted for exchange will not be affected by
the exchange.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the exchange offer, or any extension
of the exchange offer, we and the Trust will not be required to accept for
exchange, or to exchange, any original capital securities for any exchange
capital securities, and, as described below, may terminate the exchange offer
(whether or not any original capital securities have theretofore been accepted
for exchange) or may waive any conditions to or amend the exchange offer, if
any of the following conditions have occurred or exists or have not been
satisfied:
. there shall occur a change in the current interpretation by the staff of
the Commission which permits the exchange capital securities issued
pursuant to the exchange offer in exchange for original capital
securities to be offered for resale, resold and otherwise transferred by
holders, other than broker-dealers and any such holder which is an
affiliate of us or the Trust within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such exchange
capital securities are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such exchange capital
securities;
. any law, statute, rule or regulation shall have been adopted or enacted
which, in the judgment of us or the Trust, would reasonably be expected
to impair its ability to proceed with the exchange offer;
41
<PAGE>
. a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the registration
statement, or proceedings shall have been initiated or, to the knowledge
of us or the Trust, threatened for that purpose, or any governmental
approval has not been obtained, which approval we or the Trust shall, in
its sole discretion, deem necessary for the consummation of the exchange
offer as contemplated hereby; or
. we determine in good faith that there is a reasonable likelihood that,
or a material uncertainty exists as to whether, consummation of the
exchange offer would result in an adverse tax consequence to the Trust
or us.
Exchange Agent
Wilmington Trust Company, as property trustee of the Trust, has been
appointed as Exchange Agent for the exchange offer. Delivery of the letters of
transmittal and any other required documents, questions, requests for
assistance, and requests for additional copies of this prospectus or of the
letter of transmittal should be directed to the exchange agent as follows:
By Hand, Overnight Delivery, Registered or Certified Mail:
Wilmington Trust Company, as Exchange Agent
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration -
Astoria Capital Trust I Exchange Offer
Confirm by Telephone: (302) 651-1000
Facsimile Transmission: (302) 651-8882
(Eligible Institutions Only)
Delivery to another address other than the above address or facsimile number
will not constitute a valid delivery.
Fees and Expenses
We have agreed to pay the exchange agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection with the exchange offering. We will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this prospectus and related
documents to the beneficial owners of original capital securities, and in
handling or tendering for their customers.
Holders who tender their original capital securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
exchange capital securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the original capital
securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of original capital securities in connection with the exchange
offer, then the amount of any such transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering
holder.
Neither we nor the Trust will make any payment to brokers, dealers or other
nominees soliciting acceptances of the exchange offer.
42
<PAGE>
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Under the terms of the trust agreement, the issuer trustees on behalf of the
trust will issue the exchange capital securities. The exchange capital
securities will represent beneficial interests in the trust and their holders
will be entitled to a preference over the common securities in certain
circumstances with respect to distributions and amounts payable on redemption
of the trust securities or liquidation of the Trust. See "-- Subordination of
Common Securities." The trust agreement will be qualified under the Trust
Indenture Act of 1939, as amended, referred to as the Trust Indenture Act. This
summary describes the material provisions of the exchange capital securities.
It is not complete and is subject to, and qualified by, the trust agreement,
including the definitions used in the trust agreement, and the Trust Indenture
Act. We have incorporated the definitions used in the trust agreement in this
prospectus. You can receive a complete copy of the form of trust agreement by
requesting a copy from Astoria Financial.
General
The exchange capital securities will constitute beneficial interests in the
Trust. As a holder of exchange capital securities, you will be entitled to a
preference over the common securities in certain circumstances with respect to
distributions and amounts payable on redemption of the exchange capital
securities or liquidation of the Trust, as described under "-- Subordination of
Common Securities." The trust agreement will not be qualified under the Trust
Indenture Act, except upon effectiveness of the exchange offer registration
statement or the shelf registration statement. By its terms, however, the trust
agreement will incorporate certain provisions of the Trust Indenture Act, and,
upon consummation of the exchange offer or effectiveness of the shelf
registration statement, the trust agreement will be subject to and governed by
the Trust Indenture Act.
The exchange capital securities have been rated "BB" by Standard & Poor's,
"BBB-" by Duff & Phelps Credit Rating Co., "BBB-" by Thomson Financial
BankWatch and "ba2" by Moody's Investors Service. See "Ratings."
The exchange capital securities will be limited to $125 million aggregate
liquidation amount at any one time outstanding. The exchange capital securities
will rank equal to, and payments will be made on a pro rata basis with, the
common securities, except as described under "-- Subordination of Common
Securities." The property trustee will have legal title to the exchange
debentures and will hold them in trust for the benefit of you and the other
holders of the exchange capital securities. Our exchange guarantee for the
benefit of the holders of the exchange capital securities will be a guarantee
on a subordinated basis with respect to the exchange capital securities, but
will not guarantee payment of distributions or amounts payable on redemption of
the exchange capital securities or liquidation of the Trust when the Trust does
not have funds legally available for such payments. You should read
"Description of Exchange Guarantee" for more information about our guarantee.
Distributions
Distributions on the exchange capital securities will be cumulative, and
will accumulate from the date that the original capital securities are first
issued. Distributions will be payable at the annual rate of 9.75% of the
liquidation amount, payable semi-annually in arrears on the distribution dates,
which are May 1st and November 1st of each year, commencing May 1, 2000, to the
holders of the exchange capital securities on the relevant record dates. The
record dates will be the 15th day of the month immediately preceding the month
in which the relevant distribution date occurs. In the event the exchange offer
is consummated prior to the first record date, April 15, 2000, each exchange
capital security will pay cumulative distributions from and after October 28,
1999 and no distributions will be paid on any original capital security
tendered for an exchange capital security. However, in the event the exchange
offer is consummated after April 15, 2000, distributions will be paid on the
original capital securities accumulated from and after October 28, 1999 through
May 1, 2000, and distributions will be paid on the exchange capital securities
from and after May 1, 2000. The amount of distributions will be paid on each
distribution with respect to the capital securities will include amounts
43
<PAGE>
accrued to, but excluding the date the distribution is due. Because of the
foregoing procedures regarding distributions, the amount of the distributions
received by holders whose original capital securities are accepted for exchange
will not be affected by the exchange. The amount of distributions payable for
any distribution period will be based on a 360-day year of twelve 30-day
months.
If any distribution date would otherwise fall on a day that is not a
business day, the required payment will be made on the next business day
without any additional payments for the delay, unless the distribution would
fall in the next calendar year, in which case the distribution date will be the
last business day of the calendar year. A business day means any day other than
a Saturday or a Sunday, or a day on which banking institutions in New York, New
York or Wilmington, Delaware are authorized or required by law or executive
order to remain closed.
The Trust's revenue available for distribution to holders of the exchange
capital securities will be limited to our payments to the Trust under our
exchange debentures. For more information, please refer to "Description of
Exchange Debentures -- General." If we do not make interest payments on the
exchange debentures, the property trustee will not have funds available to pay
distributions on the exchange capital securities. Our guarantee only covers the
payment of distributions if and to the extent that the Trust has funds legally
available to pay the distributions. You should read "-- Description of Exchange
Guarantee" for more information about the extent of our exchange guarantee.
Option to Defer Interest Payments
As long as no event of default under the exchange debentures exists, we have
the right under the indenture to elect to defer the payment of interest on the
exchange debentures, at any time or from time to time, for no more that 10
consecutive semi-annual periods, provided that no deferral period will end on a
date other than an interest payment date, or extend beyond November 1, 2029,
the stated maturity date of the exchange debentures. If we defer payments, the
Trust will defer semi-annual distributions on the exchange capital securities
during the deferral period. During any deferral period, distributions will
continue to accumulate on the exchange capital securities and on any
accumulated and unpaid distributions, compounded semi-annually from the
relevant distribution date at the applicable distribution rate, which will be
equal to the applicable interest rate on the exchange debentures. The term
distributions includes any accumulated additional distributions.
Before the end of any deferral period, we may extend the deferral period, as
long as the extension does not cause the deferral period to exceed 10
consecutive semi-annual periods or to end on a date other than an interest
payment date or extend beyond November 1, 2029. At the end of any deferral
period and upon the payment of all amounts then due on any interest payment
date, we may elect to begin a new deferral period, subject to the above
requirements. No interest shall be due and payable during a deferral period
until the deferral period ends. We must give the property trustee, the
administrative trustees and the debenture trustee notice of our election to
defer interest payments or to extend a deferral period at least five business
days before the earlier of:
. the date the distributions on the exchange capital securities would have
been payable, except for the election to begin a deferral period; and
. the date the administrative trustees are required to give notice to any
securities exchange or automated quotation system or to holders of the
exchange capital securities of the record date or the date such
distributions are payable, but in any event not less than five business
days prior to such record date.
There is no limitation on the number of times that we may elect to begin a
deferral period. Please refer to "Description of Exchange Debentures -- Option
to Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
44
<PAGE>
During any deferral period, we may not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock;
. make any payment of principal of, or interest or premium, if any, on, or
repay, repurchase or redeem any debt securities that rank equal or
junior to the exchange debentures; or
. make any guarantee payments with respect to any guarantee of the debt
securities of any of our subsidiaries if such guarantee ranks equal or
junior to the exchange debentures.
Notwithstanding the foregoing, during a deferral period the following is
permitted:
. a payment of dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, our common
stock;
. a declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan
in the future, or the redemption or repurchase of any such rights under
such plan;
. a payment under the guarantee;
. a reclassification of our capital stock or the exchange or conversion of
one class or series of our capital stock for another class or series of
our capital stock;
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged; and
. the purchase of common stock related to the issuance of common stock or
rights under any of our benefit plans for our directors, officers or
employees or any of our dividend reinvestment plans.
We do not currently intend to exercise our right to defer payments of
interest on the exchange debentures.
Redemption
Upon repayment at maturity on November 1, 2029 or prepayment, in whole or
in part prior to November 1, 2029, of the exchange debentures (other than
following the distribution of the exchange debentures to you as a holder of
the exchange capital securities and us, as the holder of the common
securities), the property trustee will apply the proceeds from the repayment
or prepayment of the exchange debentures (as long as the property trustee has
received written notice no later than 45 days before the repayment) to redeem
at the applicable redemption price exchange capital securities and common
securities having an aggregate liquidation amount equal to the principal
amount of the exchange debentures paid to the Trust. The Trust will give
notice of any redemption of exchange capital securities between 30 to 60 days
prior to the redemption date.
If we prepay less than all of the exchange debentures on the stated
maturity date or a redemption date, then the property trustee will allocate
the proceeds of the prepayment on a pro rata basis among the exchange capital
securities and the common securities. If a court of competent jurisdiction
enters an order to dissolve the Trust, the exchange debentures will be subject
to optional prepayment in whole, but not in part, on or after November 1,
2009.
We will have the right to prepay the exchange debentures:
. in whole or in part, on or after November 1, 2009; and
. in whole but not in part, prior to November 1, 2009, if there are
changes in the bank regulatory, investment company or tax laws that
would adversely affect the status of the Trust, the exchange capital
securities or the exchange debentures.
45
<PAGE>
We may have to obtain regulatory approval, including the approval of the
OTS, before we redeem any exchange debentures. Please refer to "Description of
Exchange Debentures -- Optional Prepayment" and "-- Special Event Prepayment"
for information on prepayment of the exchange debentures.
The redemption prices applicable to the exchange capital securities will
correspond to the maturity and prepayment prices applicable to the exchange
debentures.
Liquidation of the Trust and Distribution of Exchange Debentures
We will have the right at any time to dissolve the Trust and, after
satisfying the liabilities owed to the Trust's creditors, as required by
applicable law, we will have the right to distribute the exchange debentures to
the holders of the exchange capital securities and to us as holder of the
common securities. Our right to dissolve the Trust is subject to our receiving:
. an opinion of counsel to the effect that if we distribute the exchange
debentures, the holders of the exchange capital securities will not
experience a taxable event; and
. all required regulatory approvals.
The Trust will automatically dissolve if:
. certain bankruptcy events occur, or we dissolve or liquidate;
. we distribute exchange debentures having a principal amount equal to the
liquidation amount of the exchange capital securities and the common
securities to holders of such securities and we, as sponsor, have given
written directions to the property trustee to dissolve the Trust (which
direction is at our option and, except as described above, wholly within
our discretion, as sponsor);
. the Trust redeems all of the exchange capital securities and common
securities in accordance with their terms;
. the Trust's term expires; or
. a court of competent jurisdiction enters an order for the dissolution of
the Trust.
If the Trust is dissolved for any of the above reasons, except for a
redemption of all exchange capital securities and the common securities, it
will be liquidated by the administrative trustees as quickly as they determine
to be possible by distributing to holders of the exchange capital securities
and the common securities, after satisfying the liabilities owed to the Trust's
creditors, as provided by applicable law, exchange debentures having a
principal amount equal to the liquidation amount of the exchange capital
securities and the common securities, unless the property trustee determines
that this distribution is not practicable. If the property trustee determines
that this distribution is not practicable, the holders of the exchange capital
securities will be entitled to receive an amount equal to the aggregate of the
liquidation amount plus accumulated and unpaid distributions on the exchange
capital securities to the date of payment (such amount being the "liquidation
distribution") out of the assets of the Trust legally available for
distribution to holders, after satisfying the liabilities owed to the Trust's
creditors as provided by applicable law. If the liquidation distribution can be
paid only in part because the Trust has insufficient assets legally available
to pay the full amount of the liquidation distribution, or if an event of
default under the exchange debentures exists, the exchange capital securities
will have a priority over the common securities. For more information, please
refer to "-- Subordination of Common Securities."
After the liquidation date is fixed for any distribution of exchange
debentures to holders of the exchange capital securities:
. the exchange capital securities will no longer be deemed to be
outstanding;
46
<PAGE>
. DTC or its nominee will receive in respect of each registered global
certificate representing exchange capital securities a registered global
certificate representing the exchange debentures to be delivered upon
this distribution; and
. any certificates representing exchange capital securities not held by
DTC or its nominee will be deemed to represent exchange debentures
having a principal amount equal to the liquidation amount of those
exchange capital securities, and bearing accrued and unpaid interest in
an amount equal to the accumulated and unpaid distributions on those
exchange capital securities until such certificates are presented to the
administrative trustees or their agent for cancellation, in which case
we will issue to those holders, and the debenture trustee will
authenticate, a certificate representing the exchange debentures.
We cannot assure you of the market prices for the exchange capital
securities or the exchange debentures that may be distributed to you in
exchange for the exchange capital securities if a dissolution and liquidation
of the Trust were to occur. Accordingly, the exchange capital securities that
you purchase, or the exchange debentures that you may receive upon a
dissolution and liquidation of the Trust, may trade at a discount to the price
that you paid to purchase the exchange capital securities.
If we elect not to prepay the exchange debentures prior to maturity and
either elect not to or we are unable to liquidate the Trust and distribute the
exchange debentures to holders of the exchange capital securities, the exchange
capital securities will remain outstanding until the repayment of the exchange
debentures on November 1, 2029.
Redemption Procedures
If we pay the exchange debentures at maturity or earlier prepayment, the
Trust will redeem exchange capital securities at the applicable redemption
price with the proceeds that it receives from our payment or prepayment of the
exchange debentures. Any redemption of exchange capital securities will be made
and the applicable redemption price will be payable on the redemption date only
to the extent that the Trust has funds legally available to pay the applicable
redemption price. For more information, you should refer to "-- Subordination
of Common Securities."
If the Trust gives a notice of redemption for the exchange capital
securities, then, by 12:00 noon, New York City time, on the redemption date, to
the extent funds legally are available, with respect to:
. the exchange capital securities held by DTC or its nominees, the
property trustee will deposit, or cause the paying agent to deposit,
irrevocably with DTC funds sufficient to pay the applicable redemption
price. For more information, you should refer to "-- Form, Denomination,
Book-Entry Procedures and Transfer."
. the exchange capital securities held in certificated form, the property
trustee will irrevocably deposit with the paying agent funds sufficient
to pay the applicable redemption price and will give the paying agent
irrevocable instructions and authority to pay the applicable redemption
price to the holders upon surrender of their certificates evidencing the
exchange capital securities. For more information, you should refer to
"-- Payment and Paying Agency."
The paying agent will initially be the property trustee and any co-paying
agent chosen by the property trustee and acceptable to the administrative
trustees and us.
Notwithstanding the foregoing, distributions payable on or before the
redemption date will be payable to the holders of the exchange capital
securities on the relevant record dates for the related distribution dates. If
the Trust gives a notice of redemption and funds are deposited as required,
then upon the date of the deposit, all rights of the holders of the exchange
capital securities called for redemption will cease, except the right of the
holders of the exchange capital securities to receive the applicable redemption
price, without interest, and the exchange capital securities called to be
redeemed will cease to be outstanding.
47
<PAGE>
If any redemption date for the exchange capital securities is not a business
day, then the applicable redemption price, without interest or any other
payment in respect of the delay, will be paid on the next business day, except
that, if the next business day falls in the next calendar year, the payment
shall be made on the last business day of the calendar year.
If payment of the applicable redemption price is improperly withheld or
refused and not paid either by the Trust or by us pursuant to the guarantee:
. distributions on the exchange capital securities will continue to
accumulate from the redemption date originally established by the Trust
to the date such applicable redemption price is actually paid; and
. the actual payment date will be the redemption date for purposes of
calculating the applicable redemption price.
Notice of any redemption will be mailed between 30 and 60 days before the
redemption date to each holder of exchange capital securities at its registered
address.
Subject to applicable law, including, without limitation, federal securities
laws, we or our subsidiaries may at any time, and from time to time, purchase
outstanding exchange capital securities in the open market or by private
agreement.
Subordination of Common Securities
Payment of distributions on, the redemption price of, and the liquidation
distribution for, the exchange capital securities and the common securities, as
applicable, will generally be made on a pro rata basis. However, if an event of
default under the exchange debentures exists on any distribution, redemption or
liquidation date, no payment of any distribution on, or applicable redemption
price of, or liquidation distribution for, any of the common securities, and no
other payment on account of the redemption, liquidation or other acquisition of
the common securities, will be made unless payment in full in cash of all
accumulated and unpaid distributions on all of the outstanding exchange capital
securities for all distribution periods terminating on or before the
distribution, redemption or liquidation date, or payment of the applicable
redemption price or liquidation distribution is made in full. All funds
available to the property trustee will first be applied to the payment in full
in cash of all distributions on, or redemption price of, or liquidation
distribution for, the exchange capital securities then due and payable.
In the case of any event of default under the trust agreement, we, as holder
of all of the common securities, will be deemed to have waived any right to act
with respect to the event of default until the effect of the event of default
has been cured or waived. Until any event of default has been cured or waived,
the property trustee will act solely on behalf of the holders of the exchange
capital securities and not on our behalf, and only the holders of the exchange
capital securities will have the right to direct the property trustee to act on
their behalf.
Events of Default; Notice
An event of default under the exchange debentures constitutes an event of
default under the trust agreement. See "Description of Exchange Debentures --
Events of Default Under the Exchange Debentures."
The trust agreement provides that within ten (10) business days after a
responsible officer, as defined in the trust agreement, of the property trustee
has actual knowledge of the occurrence of any event of default, the property
trustee will give notice of the event of default to the holders of the exchange
capital securities, the administrative trustees and, to us, as sponsor, unless
the event of default has been cured or waived. We, as sponsor, and the
administrative trustees are required to file annually with the property trustee
a certificate as to whether we and the administrative trustees have complied
with the applicable conditions and covenants of the trust agreement.
48
<PAGE>
If an event of default under the exchange debentures exists, the exchange
capital securities will have a preference over the common securities as
described under "-- Liquidation of the Trust and Distribution of Exchange
Debentures" and "-- Subordination of Common Securities." An event of default
does not entitle the holders of exchange capital securities to require the
redemption of the exchange capital securities.
Removal of Issuer Trustees
Unless an event of default under the exchange debentures exists, we may
remove the property trustee and the Delaware trustee at any time. If an event
of default under the exchange debentures exists, the property trustee and the
Delaware trustee may be removed only by the holders of a majority in
liquidation amount of the outstanding exchange capital securities. In no event
will the holders of the exchange capital securities have the right to vote to
appoint, remove or replace the administrative trustees, because these voting
rights are vested exclusively in us as the holder of all of the common
securities. No resignation or removal of the property trustee or the Delaware
trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the trust
agreement.
Co-trustees and Separate Property Trustee
Unless an event of default under the exchange debentures 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's property may at any time be located, the administrative
trustees shall have power to appoint one or more persons either to act as a co-
trustee, jointly with the property trustee, of all or any part of such Trust's
property, or to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such person or persons in such capacity any property, title, right or
power deemed necessary or desirable, subject to the provisions of the trust
agreement. In case an event of default has occurred and is continuing, the
property trustee alone shall have the power to make any such appointment of a
co-trustee.
Merger or Consolidation of Issuer Trustees
If the property trustee, the Delaware trustee or any administrative trustee
that is not a natural person is merged, converted or consolidated into another
entity, or such trustee is a party to a merger, conversion or consolidation
which results in a new entity, or an entity succeeds to all or substantially
all of the corporate trust business of such trustee, the new entity shall be
the successor of the such trustee under the trust agreement, provided that the
entity is otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be replaced
by, or convey, transfer or lease all or substantially all of its properties and
assets to any corporation or other entity, except as described below or as
otherwise described under "-- Liquidation of the Trust and Distribution of
Exchange Debentures." The Trust may, at our request, as sponsor, and with the
consent of the administrative trustees but without the consent of the holders
of the exchange capital securities, merge with or into, consolidate, amalgamate
or be replaced by or convey, transfer or lease all or substantially all of its
properties and assets to a trust organized as such under the laws of any state;
provided, that:
. the successor either:
. expressly assumes all of the obligations of the Trust with respect
to the exchange capital securities; or
. substitutes securities for the exchange capital securities that have
substantially the same terms as the exchange capital securities so
long as the substitute securities rank equal to the exchange
49
<PAGE>
capital securities in priority with respect to distributions and
payments upon liquidation, redemption and otherwise;
. we appoint a trustee of the successor possessing the same powers and
duties as the property trustee with respect to the exchange debentures;
. the substitute securities are listed, or any substitute securities will
be listed upon notification of issuance, on any national securities
exchange or other organization on which the exchange capital securities
are then listed or quoted, if any;
. if the exchange capital securities, substitute securities or exchange
debentures are rated by any nationally recognized statistical rating
organization prior to such transaction, the transaction does not cause
any of those securities to be downgraded by any such rating
organization;
. the transaction does not adversely affect the rights, preferences and
privileges of the holders of the exchange capital securities (including
any successor securities) in any material respect;
. the successor has a purpose substantially identical to that of the Trust;
. prior to the transaction, we received an opinion from independent
counsel to the Trust experienced in such matters to the effect that:
. the transaction does not adversely affect the rights, preferences
and privileges of the holders of the exchange capital securities
(including any successor securities) in any material respect (other
than any dilution of such holders' interests in the new entity);
. following the transaction, neither the Trust nor the successor will
be required to register as an investment company under the
Investment Company Act; and
. the Trust continues to be, and any successor will be, classified as
a grantor trust for U. S. federal income tax purpose; and
. we, or any permitted successor or assignee, own all of the common
securities of the successor and guarantee the obligations of the
successor under the substitute securities at least to the extent
provided by our guarantee and the common securities guarantee.
Notwithstanding the foregoing, the Trust may not, except with the consent of
holders of 100% in liquidation amount of the exchange capital securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease all or substantially all of its properties and assets to, any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if the transaction would cause the Trust or the
successor not to be classified as a grantor trust for federal income tax
purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "-- Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of Exchange
Guarantee -- Amendments and Assignment" and as otherwise required by law and
the trust agreement, the holders of the exchange capital securities will have
no voting rights.
We, together with the property trustee and the administrative trustees, may
amend the trust agreement from time to time, without the consent of the holders
of the exchange capital securities, to:
. cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the trust agreement, which are not inconsistent with the other
provisions of the trust agreement;
50
<PAGE>
. modify, eliminate or add to any provisions of the trust agreement as is
necessary to ensure that at all times that any exchange capital
securities are outstanding, the Trust will not be classified as an
association taxable as a corporation or to enable the Trust to qualify
as a grantor trust, in each case for federal income tax purposes, or to
ensure that the Trust will not be required to register as an investment
company under the Investment Company Act; or
. modify, eliminate or add any provisions of the trust agreement as is
necessary to enable us or the Trust to conduct an exchange offer in the
manner contemplated by the registration rights agreement;
provided, however, that the amendment would not adversely affect in any
material respect the interests of the holders of the exchange capital
securities. Any amendments of the trust agreement pursuant to the foregoing
shall become effective when notice of the amendment is given to the holders of
the exchange capital securities.
We, together with the property trustee and the administrative trustees, may
amend the trust agreement:
. with the consent of holders of a majority in liquidation amount of the
outstanding exchange capital securities; and
. upon receipt by the property trustee and the administrative trustees of
an opinion of counsel experienced in such matters to the effect that the
amendment or the exercise of any power granted to the property trustee
and the administrative trustees in accordance with the amendment will
not affect the Trust's classification as an entity that is not taxable
as a corporation or as being a grantor trust for federal income tax
purposes or the Trust's exemption from status as an investment company
under the Investment Company Act.
provided, that, without the consent of each holder of exchange capital
securities, no amendment may change the amount or timing of any distribution
on the exchange capital securities or otherwise adversely affect the amount of
any distribution required to be made in respect of the exchange capital
securities as of a specified date, change any of the prepayment provisions, or
restrict the right of a holder of exchange capital securities to sue for the
enforcement of any payment on or after the specified date.
So long as the property trustee holds any exchange debentures, the issuer
trustees may not:
. direct the time, method and place of conducting any proceeding for any
remedy available to the debenture trustee, or execute any trust or power
conferred on the debenture trustee with respect to the exchange
debentures;
. waive certain past defaults under the indenture;
. exercise any right to rescind or annul a declaration accelerating the
maturity of the principal of the exchange debentures; or
. consent to any amendment, modification or termination of the indenture
or the exchange debentures, where such consent shall be required,
without, in each case, obtaining the prior consent of the holders of a
majority in liquidation amount of all outstanding capital securities;
provided, however, that where a consent under the indenture would require the
consent of each holder of exchange debentures affected by the amendment,
modification or termination, the property trustee will not give its consent
without the prior approval of each holder of the exchange capital securities.
The issuer trustees will not revoke any action previously authorized or
approved by a vote of the holders of the exchange capital securities, except
by subsequent vote of such holders. The property trustee shall notify each
holder of exchange capital securities of any notice or knowledge of default it
receives with respect to the exchange debentures. In addition to obtaining the
approvals of the holders of the exchange capital securities, prior to taking
any of the foregoing actions, the issuer trustees shall obtain an opinion of
counsel experienced in
51
<PAGE>
such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for federal income tax purposes on account
of such action.
Any required approval of holders of exchange capital securities may be given
at a meeting of the holders convened for the purpose of approving the matter or
pursuant to written consent. The property trustee will cause a notice to be
given of any meeting at which holders of exchange capital securities are
entitled to vote or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of exchange capital
securities in accordance with the trust agreement.
No vote or consent of the holders of exchange capital securities will be
required for the Trust to redeem and cancel the exchange capital securities in
accordance with the trust agreement.
Notwithstanding that holders of the exchange capital securities are entitled
to vote or consent under any of the circumstances described above, any of the
exchange capital securities that are owned by us, the Trust, the issuer
trustees or any affiliates thereof shall, for purposes of such vote or consent,
be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
The exchange capital securities initially will be represented by one or more
exchange capital securities in registered, global form (collectively, the
global capital securities). The global capital securities will be deposited
upon issuance with the property trustee as custodian for DTC, in Wilmington,
Delaware, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described in
this prospectus.
In the event that exchange capital securities are issued in certificated
form, the exchange capital securities will be in blocks having a liquidation
amount of not less than $100,000 (100 exchange capital securities) and may be
transferred or exchanged only in such blocks in the manner described in this
prospectus.
Except as set forth in this prospectus, the global capital securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 exchange capital securities. Beneficial interests
in the global capital securities may not be exchanged for exchange capital
securities in certificated form except in the limited circumstances described
in this prospectus. See "-- Exchange of Book-Entry Capital Securities for
Certificated Capital Securities."
Depositary Procedures
DTC has advised the Trust and us that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, "participants") and to facilitate
the clearance and settlement of transactions in those securities between
participants through electronic book-entry changes in accounts of its
participants, to eliminate the need for physical movement of certificates.
Participants include securities brokers and dealers (including the initial
purchaser), banks, trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (collectively,
indirect participants). Persons who are not participants may beneficially own
securities held by or on behalf of DTC only through participants or indirect
participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of participants and indirect participants.
52
<PAGE>
DTC also has advised the Trust and us that, under procedures established by
it, (1) upon deposit of the global capital securities, DTC will credit the
accounts of participants designated by the initial purchaser with the
designated liquidation amount of the global capital securities and (2)
ownership of beneficial interests in the global capital securities will be
shown on, and the transfer of ownership of the global capital securities, will
be effected only through, records maintained by DTC (with respect to
participants) or by participants and indirect participants (with respect to
other owners of beneficial interests in the global capital securities).
You may hold your interests in the global capital security directly through
DTC if you are a participant, or indirectly through organizations that are
participants. All interests in a global capital security will be subject to the
procedures and requirements of DTC. The laws of some states require that
certain persons take physical delivery in certificated form of securities that
they own. Consequently, the ability to transfer beneficial interests in a
global capital security to those persons will be limited to that extent.
Because DTC can act only on behalf of participants, which in turn act on behalf
of indirect participants and certain banks, the ability of a person having
beneficial interests in a global capital security to pledge its interests to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of its interests, may be affected by the lack of a
physical certificate evidencing its interests. For certain other restrictions
on the transferability of the exchange capital securities, see "-- Exchange of
Book-Entry Capital Securities for Certificated Capital Securities."
Except as described below, owners of beneficial interests in the global
capital securities will not have exchange capital securities registered in
their name, will not receive physical delivery of exchange capital securities
in certificated form and will not be considered the registered owners or
holders thereof under the trust agreement for any purpose.
Payments on the global capital security registered in the name of DTC, or
its nominee, will be payable by the property trustee to DTC in its capacity as
the holder under the trust agreement. Under the terms of the trust agreement,
the property trustee will treat the persons in whose names the exchange capital
securities, including the global capital securities, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Neither the property trustee nor any agent thereof
has or will have any responsibility or liability for:
. any aspect of DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of,
beneficial ownership interests in the global exchange capital
securities, or for maintaining, supervising or reviewing any of DTC's
records or any participant's or indirect participant's records relating
to the beneficial ownership interests in the global capital securities;
or
. any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
DTC has advised the Trust and us that its current practice, upon receipt of
any payment on the exchange capital securities, is to credit the accounts of
the relevant participants with the payment on the payment date, in amounts
proportionate to their respective holdings in liquidation amount of the
exchange capital securities as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on the payment date. Payments by
participants and indirect participants to the beneficial owners of exchange
capital securities will be governed by standing instructions and customary
practices and will be the responsibility of participants or indirect
participants and will not be the responsibility of DTC, the property trustee,
the Trust or us. None of us, the Trust or the property trustee will be liable
for any delay by DTC or any of its participants or indirect participants in
identifying the beneficial owners of the exchange capital securities, and we,
the Trust and the property trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee for all purposes.
Any secondary market trading activity in interests in the global capital
securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
53
<PAGE>
DTC has advised the Trust and us that it will take any action permitted to
be taken by a holder of exchange capital securities including, without
limitation, presenting the exchange capital securities for exchange as
described below, only at the direction of one or more participants who have an
interest in DTC's global capital securities in respect of the portion of the
liquidation amount of the exchange capital securities as to which the
participant or participants has or have given direction. However, if an event
of default exists under the trust agreement, DTC reserves the right to
exchange the global capital securities for legended exchange capital
securities in certificated form and to distribute the certificated exchange
capital securities to its participants.
We believe that the information in this section concerning DTC and its
book-entry system has been obtained from reliable sources, but we do not take
responsibility for the accuracy of this information.
Although DTC has agreed to the procedures described in this section to
facilitate transfers of interests in the global capital securities among
participants in DTC, DTC is not obligated to perform or to continue to perform
these procedures, and these procedures may be discontinued at any time. None
of us, the Trust, or the property trustee will have any responsibility or
liability for any aspect of the performance by DTC or its participants or
indirect participants of any of their respective obligations under the rules
and procedures governing their operations or for maintaining, supervising or
reviewing any records relating to the global capital securities that are
maintained by DTC or any of its participants or indirect participants.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A global capital security is exchangeable for exchange capital securities
in registered certificated form if:
. DTC:
. notifies the Trust that it is unwilling or unable to continue as
depository for the global capital security; or
. has ceased to be a clearing agency registered under the Exchange
Act, and the Trust thereupon fails to appoint a successor
depository within 90 days;
. the Trust in its sole discretion elects to cause the issuance of the
exchange capital securities in certificated form; or
. there shall have occurred and be continuing an event of default or
any event which after notice or lapse of time or both would be an
event of default under the trust agreement.
In addition, beneficial interests in a global capital security may be
exchanged by or on behalf of DTC for certificated exchange capital securities
upon request by DTC, but only upon at least 20 days' prior written notice
given to the property trustee in accordance with DTC's customary procedures.
In all cases, certificated exchange capital securities delivered in exchange
for any global capital security or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested
by or on behalf of the depository in accordance with its customary procedures.
Payment and Paying Agency
The Trust will make payments on any global capital security to DTC, which
will credit the relevant accounts at DTC on the applicable distribution dates.
The Trust will make payments on the exchange capital securities that are not
held by DTC by mailing a check to the address of the holder entitled to the
payment as the holder's address appears on the register. The paying agent will
initially be the property trustee and any co-paying agent chosen by the
property trustee and acceptable to the administrative trustees and us. The
paying agent will be permitted to resign as paying agent upon 30 days' notice
to the property trustee, the administrative trustees and us. In the event that
the property trustee is no longer the paying agent, the administrative
trustees will appoint a successor (which must be a bank or trust company
acceptable to the administrative trustees and us) to act as paying agent.
54
<PAGE>
Restrictions on Transfer
The exchange capital securities will be issued, and may be transferred, only
in blocks having a liquidation amount of not less than $100,000 (100 exchange
capital securities) and multiples of $1,000 in excess of $100,000. Any
attempted sale, transfer or other disposition of exchange capital securities in
a block having a liquidation amount of less than $100,000 will be deemed to be
void and of no legal effect whatsoever. Any such purported transferee will be
deemed not to be the holder of such exchange capital securities for any
purpose, including but not limited to the receipt of distributions on such
exchange capital securities, and such purported transferee will be deemed to
have no interest whatsoever in such exchange capital securities.
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the
exchange capital securities.
The Trust will register transfers of the exchange capital securities without
charge, except for any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. The Trust will not be required to
have the transfer of the exchange capital securities registered after they have
been called for redemption.
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the Trust so that:
. the Trust will not be deemed to be an investment company required to be
registered under the Investment Company Act;
. the Trust will be classified as a grantor trust for federal income tax
purposes; and
. the exchange debentures will be treated as our indebtedness for federal
income tax purposes.
We, together with the administrative trustees, are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the trust agreement, that we and the administrative trustees determine
in our discretion is necessary or desirable, as long as it does not materially
adversely affect the interests of the holders of the trust securities.
The trust agreement provides that holders of the trust securities have no
preemptive or similar rights to subscribe for any additional exchange capital
securities and the issuance of exchange capital securities and the common
securities is not subject to preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
Governing Law
The trust agreement and exchange capital securities will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of law principles.
Information Concerning the Property Trustee
Except if an event of default exists under the trust agreement, the property
trustee will undertake to perform only the duties specifically set forth in the
trust agreement. While such an event of default exists, the property trustee
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the property trustee is not obligated to exercise any of the powers
vested in it by the trust agreement at the request of any holder of trust
securities, unless it is offered reasonable indemnity against the costs,
expenses and liabilities that it might incur. If no event of default
55
<PAGE>
exists and the property trustee is required to decide between alternative
causes of action or to construe ambiguous provisions in the trust agreement or
is unsure of the application of any provision of the trust agreement, and the
matter is not one on which holders of the exchange capital securities or the
common securities are entitled under the trust agreement to vote, then the
property trustee shall take such action as directed by us and, if not directed,
shall take such action as it deems advisable and in the best interests of the
holders of the trust securities and will have no liability, except for its own
bad faith, negligence or willful misconduct.
DESCRIPTION OF EXCHANGE DEBENTURES
This summary describes the material provisions of the exchange debentures.
It is not complete and is subject to, and qualified in its entirety by, the
indenture. The indenture will not be qualified under the Trust Indenture Act,
except upon effectiveness of the exchange offer registration statement or the
shelf registration statement. However, by its terms, the indenture will
incorporate by reference certain provisions of the Trust Indenture Act and,
upon consummation of the exchange offer or effectiveness of the shelf
registration statement, the indenture will be governed by and subject to the
Trust Indenture Act. We have incorporated the definitions used in the indenture
in this prospectus. You can obtain a copy of the indenture by requesting it
from us. Wilmington Trust Company will act as debenture trustee under the
indenture.
General
The Trust invested the proceeds from the sale of the capital securities and
the common securities in the original junior subordinated debentures issued by
us. The original junior subordinated debentures bear interest at the annual
rate of 9.75% of the principal amount of the original junior subordinated
debentures, payable semi-annually in arrears on interest payment dates of May
1st and November 1st of each year to the person in whose name each original
junior subordinated debenture is registered at the close of business on the
relevant record date. The exchange debentures will have terms identical in all
material respects to the original junior subordinated debentures, except that
the exchange debentures will not contain terms with respect to transfer
restrictions under the Securities Act and will not provide for any liquidated
damages. The first interest payment date for the exchange debentures will be
May 1, 2000. The period beginning on and including the date the exchange
debentures are first issued and ending on but excluding May 1, 2000 and each
period beginning on and including an interest payment date and ending on but
excluding the next interest payment date is an interest period.
We anticipate that, until the liquidation, if any, of the Trust, each
exchange debenture will be held by the property trustee in trust for the
benefit of the holders of the exchange capital securities. The amount of
interest payable for any interest period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any interest payment
date would otherwise fall on a day that is not a business day, the required
payment will be made on the next business day (without any interest or other
payment due to the delay), unless it would fall in the next calendar year, in
which case the interest payment date shall be the last business day of the
calendar year.
Accrued interest that is not paid on the applicable interest payment date
will bear additional interest (to the extent permitted by law) at the rate of
9.75% per year, compounded semi-annually, from the last interest payment date
for which interest was paid. The term "interest" as used in this prospectus
includes semi-annual interest payments and interest on semi-annual interest
payments not paid on the applicable interest payment date.
Notwithstanding anything to the contrary above, if the stated maturity date
or date of earlier redemption falls on a day that is not a business day, the
payment of principal, premium, if any, and interest will be paid on
56
<PAGE>
the next business day, with the same force and effect as if made on such date,
and no interest on such payments will accrue from and after such date.
The exchange debentures will be issued as a series of junior subordinated
deferrable interest debentures under the indenture.
The exchange debentures will mature on November 1, 2029, unless redeemed
prior to such date in accordance with the terms discussed below.
The exchange debentures will rank equal to all of our other subordinated
debentures which have been or may be issued to other trusts established by us,
in each case similar to the Trust, and will be unsecured and rank subordinate
and junior to all of our senior indebtedness to the extent and in the manner
set forth in the indenture. See "-- Subordination."
We are a unitary savings and loan association holding company regulated by
the OTS, and almost all of our operating assets are owned by Astoria Federal.
We are a legal entity separate and distinct from our subsidiaries. Holders of
exchange debentures should look only to us for payments on the exchange
debentures. The principal sources of our income are dividends, interest and
fees from Astoria Federal. We rely primarily on dividends from Astoria Federal
to meet our obligations for payment of principal and interest on our
outstanding debt obligations and corporate expenses. Dividend payments from
Astoria Federal are subject to regulatory limitations, generally based on
current and retained earnings, imposed by the OTS. See "Regulation and
Supervision." Currently, approximately $191.6 million is available for the
payment of dividends to us without further approval from the OTS.
We cannot assure you that Astoria Federal will be able to pay dividends at
past levels, or at all, in the future. See the section entitled "Regulation and
Supervision" in our Annual Report on Form 10-K for the year ended December 31,
1998, which is incorporated in this prospectus by reference.
In addition to restrictions on the payment of dividends, Astoria Federal is
subject to certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, us and certain other
affiliates, and on investments in stock or other securities thereof. See
"Regulation and Supervision." As of September 30, 1999, approximately $135.2
million of credit was available to us under these limitations, if adequate
collateral would have been available to secure such borrowings.
Also, as a holding company, our right to receive any distribution of assets
of any subsidiary, upon such subsidiary's liquidation or reorganization or
otherwise (and thus your right to benefit indirectly from such distribution),
is subject to the prior claims of creditors of that subsidiary (including
depositors, in the case of Astoria Federal), except to the extent that we may
be recognized as a creditor of that subsidiary. At September 30, 1999, Astoria
Federal, our only direct subsidiary, had total liabilities, including deposits,
of $21.54 billion. Accordingly, the exchange debentures will be effectively
subordinated to all existing and future liabilities of our subsidiaries
(including Astoria Federal's deposit liabilities) and all liabilities of any of
our future subsidiaries. The indenture does not limit the incurrence or
issuance of other secured or unsecured debt by us or any subsidiary, including
senior indebtedness. See "-- Subordination."
Form, Registration and Transfer
If the exchange debentures are distributed to the holders of the exchange
capital securities, the exchange debentures may be represented by one or more
global certificates registered in the name of Cede & Co., as the nominee of
DTC. The depositary arrangements for such exchange debentures are expected to
be substantially similar to those in effect for the exchange capital
securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, you should read "Description of Exchange
Capital Securities -- Form, Denomination, Book-Entry Procedures and Transfer."
57
<PAGE>
Payment and Paying Agents
Payment of principal of (and premium, if any) and interest on the exchange
debentures will be made at the office of the debenture trustee in Wilmington,
Delaware or at the office of such paying agent or paying agents as we may
designate from time to time, except that, at our option, payment of any
interest may be made, except in the case of exchange debentures in global form:
. by check mailed to the address of the person or entity entitled to the
interest payment as such address shall appear in the register for the
exchange debentures; or
. by transfer to an account maintained by the person or entity entitled to
the interest payment as specified in the register, provided that proper
transfer instructions have been received by the relevant record date.
Payment of any interest on any exchange debenture will be made to the person
or entity in whose name the exchange debenture is registered at the close of
business on the record date for the interest payment date, except in the case
of defaulted interest.
We may at any time designate additional paying agents or rescind the
designation of any paying agent; however we will always be required to maintain
a paying agent in each place of payment for the exchange debentures.
Any moneys deposited with the debenture trustee or any paying agent, or then
held by us, in trust for the payment of the principal of (or premium, if any)
or interest on any exchange debenture and remaining unclaimed for two years
after such principal (or premium, if any) or interest has become due and
payable shall, at our request, be repaid to us and the holder of the exchange
debenture shall thereafter look, as a general unsecured creditor, only to us
for payment.
Option to Extend Interest Payment Date
So long as no event of default under the exchange debentures exists, we will
have the right under the indenture to defer the payment of interest on the
exchange debentures, at any time and from time to time, for no more than 10
consecutive semi-annual periods, provided that no deferral period shall end on
a date other than an interest payment date or extend beyond November 1, 2029.
At the end of a deferral period, we must pay all interest then accrued and
unpaid (together with interest thereon at the rate of 9.75% per year,
compounded semi-annually from the last interest payment date to which interest
was paid, to the extent permitted by applicable law). During a deferral period,
interest will continue to accrue, and holders of the exchange capital
securities or, if the exchange debentures have been distributed to holders of
the exchange capital securities, holders of exchange debentures, will be
required to include that deferred interest in gross income for federal income
tax purposes on an accrual method of accounting prescribed by the Code and
Treasury regulation provisions on original issue discount prior to the receipt
of cash attributable to that income. See "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
During any such deferral period, we may not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock;
. make any payment of principal of, or interest or premium, if any, on, or
repay, repurchase or redeem any of our debt securities that rank equal
to or junior to the exchange debentures; or
. make any guarantee payments with respect to any guarantee by us of the
debt securities of any of our subsidiaries (including our exchange
guarantee of the exchange capital securities of the Trust and any other
guarantees) if such guarantee ranks equal or junior to the exchange
debentures other than:
58
<PAGE>
. dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, our common stock;
. any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any
rights pursuant thereto;
. payments under the exchange guarantee;
. as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock
for another class or series of our capital stock;
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and
. purchases of our common stock related to the issuance of common stock
or rights under any of our benefit plans for our directors, officers
or employees or any of our dividend reinvestment plans.
Before the end of any deferral period, we may extend the deferral period,
as long as no event of default exists and the extension does not cause the
deferral period to exceed 10 consecutive semi-annual periods, to end on a date
other than an interest payment date or to extend beyond November 1, 2029. At
the end of any deferral period and upon the payment of all then accrued and
unpaid interest (together with interest thereon at the rate of 9.75% per year,
compounded semi-annually, to the extent permitted by applicable law), we may
elect to begin a new deferral period, subject to the requirements set forth in
this prospectus. No interest will be due and payable during a deferral period
until the deferral period ends.
We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election at least five business days before
the earlier of:
. the date the distributions on the exchange capital securities would have
been payable, except for the election to begin or extend such deferral
period; or
. the date the administrative trustees are required to give notice to any
securities exchange or automated quotation system on which the exchange
capital securities are listed or quoted or to holders of exchange
capital securities of the record date for such distributions or the date
such distributions are payable, but in any event not less than five
business days prior to such record date.
The debenture trustee will notify holders of the exchange capital
securities of our election to begin or extend a new deferral period.
There is no limit on the number of times that we may elect to begin a
deferral period.
We do not currently intend to exercise our right to defer payments of
interest on the exchange debentures.
59
<PAGE>
Optional Prepayment
The exchange debentures will be prepayable, in whole or in part, at our
option on or after November 1, 2009, subject to our receipt of any required
regulatory approval, at an optional prepayment price equal to the percentage of
the outstanding principal amount of the exchange debentures specified below,
plus, in each case, accrued and unpaid interest on the exchange debentures, if
any, to the date of prepayment if redeemed during the 12-month period beginning
November 1st of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2009.......................................................... 104.875%
2010.......................................................... 104.388%
2011.......................................................... 103.900%
2012.......................................................... 103.413%
2013.......................................................... 102.925%
2014.......................................................... 102.438%
2015.......................................................... 101.950%
2016.......................................................... 101.463%
2017.......................................................... 100.975%
2018.......................................................... 100.488%
2019 and thereafter........................................... 100.000%
</TABLE>
Special Event Prepayment
If there are changes in the bank regulatory, investment company or tax laws
that adversely affect the status of the Trust, the exchange capital securities
or the exchange debentures, we may, at our option and at any time, subject to
our receipt of any required regulatory approval, prepay the exchange
debentures, in whole but not in part, at any time within 90 days of the change
in the law, at the special event prepayment price. The special event prepayment
price will be an amount equal to the greater of:
. 100% of the principal amount of the exchange debentures, or
. the sum, as determined by a quotation agent referred to below, of the
present values of the remaining scheduled payments of principal and
interest on the exchange debentures from the prepayment date to the
stated maturity date, discounted to the prepayment date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at
the adjusted treasury rate,
plus, in the case of each of the above scenarios, accrued and unpaid interest
and liquidated damages, if any, to the date of prepayment.
A change in the bank regulatory law means our receipt of an opinion of
independent bank regulatory counsel experienced in such matters to the effect
that, as a result of:
. any amendment to, or change (including any announced prospective change)
in, any laws or regulations of the United States or any rules,
guidelines or policies of an applicable regulatory agency or authority;
or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the exchange capital securities are first
issued, the exchange capital securities do not constitute, or within 90 days of
the opinion will not constitute, Tier 1 Capital (or its then equivalent if we
were subject to such capital requirement).
60
<PAGE>
A change in the investment company law means the receipt by us and the Trust
of an opinion of independent securities counsel experienced in such matters to
the effect that, as a result of:
. any amendment to, or change (including any announced prospective change)
in, any laws or regulations of the United States or any rules,
guidelines or policies of any applicable regulatory agency or authority;
or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the exchange capital securities are first
issued, the Trust is, or within 90 days of the date of the opinion will be,
considered an investment company that is required to be registered under the
Investment Company Act.
A change in tax law means the receipt by us and the Trust of an opinion of
independent tax counsel experienced in such matters to the effect that, as a
result of:
. any amendment to, or change (including any announced prospective change)
in, any laws or regulations of the United States or any political
subdivision or taxing authority thereof or therein; or
. any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations,
which amendment or change is effective or which pronouncement or decision is
announced on or after the date the exchange capital securities are first
issued, there is more than an insubstantial risk that:
. the Trust is, or will be within 90 days of the date of such opinion,
subject to federal income tax with respect to any income received or
accrued on the exchange debentures;
. interest payable by us on the exchange debentures is not, or within 90
days of the date of such opinion will not be, deductible by us, in whole
or in part, for federal income tax purposes; or
. the Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
Adjusted treasury rate means, with respect to a prepayment date, the rate
per annum equal to:
. the yield, under the heading which represents the average for the
immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication
which is published weekly by the Federal Reserve Board and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the remaining life,
defined below (if no maturity is within three months before or three
months after the maturity corresponding to the remaining life, yields
for the two published maturities most closely corresponding to the
remaining life shall be determined, and the adjusted treasury rate shall
be interpolated or extrapolated from such yields on a straight-line
basis, rounding to the nearest month); or
. if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the
rate per annum equal to the semi-annual equivalent yield to maturity of
the comparable treasury issue, calculated using a price for the
comparable treasury issue (expressed as a percentage of its principal
amount) equal to the comparable treasury price for such prepayment date,
plus: 270 basis points.
Comparable treasury issue means the United States Treasury security selected
by the quotation agent (defined below) having a maturity comparable to the
remaining life of the exchange debentures that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the remaining
life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after the remaining life, the
two
61
<PAGE>
most closely corresponding United States Treasury securities, as selected by
the quotation agent, shall be used as the comparable treasury issue, and the
adjusted treasury rate shall be interpolated or extrapolated on a straight-line
basis, rounding to the nearest month, using such securities.
Comparable treasury price means, with respect to a prepayment date:
. the average of three reference treasury dealer quotations for such
prepayment date, after excluding the highest and lowest such reference
treasury dealer quotations; or
. if the quotation agent obtains fewer than five such reference treasury
dealer quotations, the average of all such reference treasury dealer
quotations.
Quotation agent means the reference treasury dealer appointed by us.
Reference treasury dealer means a nationally recognized U.S. Government
securities dealer in New York, New York selected by us.
Reference treasury dealer quotations means, with respect to each reference
treasury dealer and the prepayment date, the average, as determined by the
debenture trustee, of the bid and asked prices for the comparable treasury
issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the debenture trustee by such reference treasury dealer at 5:00
p.m., New York time, on the third business day preceding such prepayment date.
Remaining life means the term of the exchange debentures from the prepayment
date to the stated maturity date.
We will mail any notice of prepayment between 30 and 60 days before the
prepayment date to each holder of exchange debentures to be prepaid at its
registered address. Unless we default in payment of the prepayment price, on
the prepayment date interest shall cease to accrue on the exchange debentures
called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a change in the tax law, we will pay as
additional amounts on the exchange debentures any amounts as may be necessary
in order that the amount of distributions then due and payable by the Trust on
the outstanding exchange capital securities shall not be reduced as a result of
any additional sums, including taxes, duties or other governmental charges to
which the Trust has become subject as a result of a change in the tax law.
Certain Covenants of Astoria Financial
We will covenant that we will not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our
capital stock;
. make any payment of principal of, or interest or premium, if any, on, or
repay, repurchase or redeem any of our debt securities that rank equal
or junior to the exchange debentures; or
. make any guarantee payments with respect to any of our guarantees of the
debt securities of any of our subsidiaries if such guarantee ranks equal
or junior to the exchange debentures, other than:
. dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, our common stock;
. any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto;
. payments under the exchange guarantee;
. as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock
for another class or series of our capital stock;
62
<PAGE>
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and
. purchases of our common stock related to the issuance of common
stock or rights under any of our benefit plans for its directors,
officers or employees or any of our dividend reinvestment plans,
if at such time:
. we have actual knowledge that there is any event that is, or with the
giving of notice or the lapse of time, or both, would be, an event of
default under the exchange debentures and that we have not taken
reasonable steps to cure;
. we are in default with respect to our payment obligations under the
exchange guarantee; or
. we have given notice of our election to exercise our right to defer
interest payments on the exchange debentures as provided in the
indenture and the deferral period, or any extension of the deferral
period, is continuing.
So long as the trust capital securities remain outstanding, we also will
covenant:
. to directly or indirectly maintain 100% direct or indirect ownership of
the common securities; provided, however, that any of our permitted
successors under the indenture may succeed to our ownership of the
common securities;
. to use commercially reasonable efforts to cause the Trust to remain a
business trust, except in connection with the distribution of exchange
debentures to the holders of trust securities in liquidation of the
Trust, the redemption of all of the trust securities, or certain
mergers, consolidations or amalgamations, each as permitted by the trust
agreement;
. to use commercially reasonable efforts to cause the Trust to otherwise
continue not to be classified as an association taxable as a corporation
and to be classified as a grantor trust for federal income tax purposes;
. to use commercially reasonable efforts to cause each holder of trust
securities to be treated as owning an undivided beneficial interest in
the junior subordinated debentures; and
. to not cause, as sponsor of the Trust, or permit, as holder of the
common securities, the dissolution, winding-up or liquidation of the
Trust, except as provided in the trust agreement.
Modification of Indenture
From time to time, we, together with the debenture trustee, may, without the
consent of the holders of exchange debentures, amend the indenture for
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies or enabling us and the Trust to conduct an exchange offer as
contemplated by the registration rights agreement, provided that any amendment
to the indenture does not materially adversely affect the interest of the
holders of exchange debentures, and qualifying, or maintaining the
qualification of, the indenture under the Trust Indenture Act.
The indenture permits us and the debenture trustee, with the consent of the
holders of a majority in aggregate principal amount of exchange debentures, to
modify the indenture in a manner affecting the rights of the holders of the
exchange debentures; provided that no modification may, without the consent of
the holders of each outstanding subordinated debenture affected:
. change the stated maturity date, or reduce the principal amount, of the
exchange debentures;
. reduce the amount payable on prepayment or reduce the rate or extend the
time of payment of interest except pursuant to our right under the
indenture to defer the payment of interest (see "-- Option to Extend
Interest Payment Date");
63
<PAGE>
. change any of the prepayment provisions;
. make the principal of, (or premium, if any) or interest on, the exchange
debentures payable in any coin or currency other than that provided in
the exchange debentures;
. impair or affect the right of any holder of exchange debentures to
institute suit for the payment thereof; or
. reduce the percentage of the principal amount of the exchange
debentures, the holders of which are required to consent to any such
modification.
Events of Default Under the Exchange Debentures
An event of default under the exchange debentures means:
. our failure for 30 days to pay any interest (including compounded
interest and additional sums, if any) or liquidated damages, if any, on
the exchange debentures or any other similar debentures when due
(subject to the deferral of any interest due date in the case of a
deferral period with respect to the exchange debentures or other similar
debentures, as the case may be);
. our failure to pay any principal or premium, if any, on the exchange
debentures or any other similar debentures when due, whether at
maturity, upon prepayment, by accelerating the maturity or otherwise;
. our failure to observe or perform any other covenant contained in the
indenture for 90 days after written notice to us from the debenture
trustee or to us and the debenture trustee from the holders of at least
25% in aggregate outstanding principal amount of exchange debentures; or
. certain events related to our bankruptcy, insolvency or reorganization.
The holders of a majority in aggregate outstanding principal amount of the
exchange debentures have, subject to certain exceptions, the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the debenture trustee. The debenture trustee or the holders of not
less than 25% in aggregate outstanding principal amount of the exchange
debentures may declare the principal due and payable immediately upon an event
of default under the exchange debentures. The holders of a majority in
aggregate outstanding principal amount of the exchange debentures may annul
this declaration and waive the default if the default (other than the non-
payment of the principal of the exchange debentures which has become due solely
by such acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the debenture trustee.
The holders of a majority in aggregate outstanding principal amount of the
exchange debentures affected may, on behalf of the holders of all the exchange
debentures, waive any past default, except a default in the payment of
principal (or premium, if any) or interest (including compounded interest and
additional sums, if any) or liquidated damages, if any (unless such default has
been cured and a sum sufficient to pay all matured installments of interest and
principal (and premium, if any) due otherwise than by acceleration has been
deposited with the debenture trustee) or a default in respect of a covenant or
provision which under the indenture cannot be modified or amended without the
consent of the holder of each outstanding exchange debenture.
The indenture requires that we file with the debenture trustee a certificate
annually as to the absence of defaults specified under the indenture.
The indenture provides that the debenture trustee may withhold notice of a
debenture event of default from the holders of the exchange debentures if the
debenture trustee considers it in the interest of the holders to do so.
64
<PAGE>
Enforcement of Certain Rights by Holders of Exchange Capital Securities
If an event of default under the exchange debentures exists that is
attributable to our failure to pay the principal of (or premium, if any) or
interest (including compounded interest and additional sums, if any) or
liquidated damages, if any, on the exchange debentures on the due date, a
holder of exchange capital securities may institute a direct action against us.
We may not amend the indenture to remove this right to bring a direct action
without the prior written consent of the holders of all of the exchange capital
securities.
Notwithstanding any payments that we make to a holder of exchange capital
securities in connection with a direct action, we shall remain obligated to pay
the principal of (and premium, if any) and interest on the exchange debentures,
and we shall be subrogated to the rights of the holder of the exchange capital
securities with respect to payments on the exchange capital securities to the
extent that we make any payments to a holder in any direct action.
The holders of the exchange capital securities will not be able to exercise
directly any remedies, other than those described in the above paragraph,
available to the holders of the exchange debentures, unless an event of default
exists under the trust agreement. See "Description of Exchange Capital
Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The indenture provides that we will not consolidate with or merge into any
other person or convey, transfer or lease all or substantially all of our
properties to any person, and no person shall consolidate with or merge into us
or convey, transfer or lease all or substantially all of its properties to us,
unless:
. in case we consolidate with or merge into another person or convey or
transfer all or substantially all of our properties to any person, the
successor is organized under the laws of the United States or any state
or the District of Columbia, and the successor expressly assumes our
obligations under the indenture with respect to the exchange debentures;
. immediately after giving effect to the transaction, no event of default
under the exchange debentures, and no event which, after notice or lapse
of time or both, would become an event of default under the exchange
debentures, exists; and
. certain other conditions as prescribed in the indenture are met.
The general provisions of the indenture do not afford holders of the
exchange debentures protection in the event of a highly leveraged or other
transaction that we may become involved in that may adversely affect holders of
the exchange debentures.
Satisfaction and Discharge
The indenture provides that when, among other things,
. all exchange debentures not previously delivered to the debenture
trustee for cancellation have become due and payable or will become due
and payable at maturity or called for prepayment within one year; and
. we deposit or cause to be deposited with the debenture trustee funds, in
trust, for the purpose and in an amount sufficient to pay and discharge
the entire indebtedness on the exchange debentures not previously
delivered to the debenture trustee for cancellation, for the principal
(and premium, if any) and interest (including compounded interest and
additional sums, if any) to the date of the deposit or to November 1,
2029, as the case may be,
then the indenture will cease to be of further effect (except as to our
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel), and we will be deemed to
have satisfied and discharged the indenture.
65
<PAGE>
Subordination
We have promised that any of our exchange debentures issued under the
indenture will rank junior to all of our senior indebtedness to the extent
provided in the indenture. Upon any payment or distribution of our assets to
creditors upon our liquidation, dissolution, winding up, reorganization,
assignment for the benefit of our creditors, marshaling of our assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in connection
with any insolvency or bankruptcy proceeding involving us, the allocable
amounts in respect of the senior indebtedness must be paid in full before the
holders of the exchange debentures will be entitled to receive or retain any
payment in respect thereof.
If the maturity of exchange debentures is accelerated, the holders of all
senior indebtedness outstanding at such time will first be entitled to receive
payment in full of the allocable amounts in respect of such senior indebtedness
before the holders of exchange debentures will be entitled to receive or retain
any payment in respect of the principal of (or premium, if any) or interest, if
any, on the exchange debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the exchange debentures may be made if there is a default in
any payment with respect to senior indebtedness, or an event of default exists
with respect to any senior indebtedness that accelerates the maturity of the
senior indebtedness, or if any judicial proceeding shall be pending with
respect to the default.
Allocable amounts, when used with respect to any senior indebtedness, means
all amounts due or to become due on such senior indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such senior indebtedness (whether as a result of the receipt of
payments by the holders of such senior indebtedness from us or any other
obligor thereon or from any holders of, or trustee in respect of, other
indebtedness that is subordinate and junior in right of payment to such senior
indebtedness pursuant to any provision of such indebtedness for the payment
over of amounts received on account of such indebtedness to the holders of such
senior indebtedness or otherwise) but for the fact that such senior
indebtedness is subordinate or junior in right of payment to (or subject to a
requirement that amounts received on such senior indebtedness be paid over to
obligees on) trade accounts payable or accrued liabilities arising in the
ordinary course of business.
Indebtedness for money borrowed means any of our obligations, or any
obligation guaranteed by us, to repay borrowed money, whether or not evidenced
by bonds, debentures, notes or other written instruments, except that
indebtedness for money borrowed does not include trade accounts payable or
accrued liabilities arising in the ordinary course of business.
Indebtedness ranking on a parity with the exchange debentures means:
. indebtedness for money borrowed, whether outstanding on the date the
indenture is executed or created, assumed or incurred after the date
that the indenture is executed, to the extent the indebtedness for money
borrowed by its terms ranks equal to and not prior to the exchange
debentures in the right of payment upon the happening of our
dissolution, winding-up, liquidation or reorganization;
. all other debt securities, and guarantees in respect of those debt
securities, issued to any trust other than the Trust, or a trustee of
such trust, partnership or other entity affiliated with us, that is our
financing vehicle (a "financing entity"), in connection with the
issuance by the financing entity of equity securities or other
securities guaranteed by us pursuant to an instrument that ranks equal
with or junior to the exchange guarantee; and
. the securing of any indebtedness otherwise constituting indebtedness
ranking on a parity with the exchange debentures shall not be deemed to
prevent such indebtedness from constituting indebtedness ranking on a
parity with the exchange debentures.
66
<PAGE>
Indebtedness ranking junior to the exchange debentures means any
indebtedness for money borrowed, whether outstanding on the date the indenture
is executed or created, assumed or incurred after the date the indenture is
executed, to the extent the indebtedness for money borrowed by its terms ranks
junior to and not equal with or prior to the exchange debentures (and any other
indebtedness ranking on a parity with the exchange debentures) in right of
payment upon the happening of our dissolution or winding-up or liquidation or
reorganization. The securing of any indebtedness otherwise constituting
indebtedness ranking junior to the exchange debentures shall not be deemed to
prevent such indebtedness for money borrowed from constituting indebtedness
ranking junior to the exchange debentures.
Senior indebtedness means all indebtedness for money borrowed, whether
outstanding on the date the indenture is executed or created, assumed or
incurred after the date the indenture is executed, except indebtedness ranking
on a parity with the exchange debentures or indebtedness ranking junior to the
exchange debentures, and any deferrals, renewals or extensions of the senior
indebtedness.
We are a unitary savings and loan association holding company regulated by
the OTS, and almost all of our operating assets are owned by Astoria Federal.
We rely primarily on dividends from Astoria Federal to meet our obligations for
payment of principal and interest on our outstanding debt obligations and
corporate expenses. We are a legal entity separate and distinct from its
subsidiaries. Holders of exchange debentures should look only to us for
payments on the exchange debentures. There are regulatory limitations on the
payment of dividends directly or indirectly to us from Astoria Federal. In
addition, Astoria Federal is subject to certain restrictions imposed by federal
law on any extensions of credit to, and certain other transactions with, us and
certain other affiliates, and on investments in stock or other securities
thereof. See "Regulation and Supervision" for a discussion of these dividend
and borrowing restrictions. Accordingly, the exchange debentures will be
effectively subordinated to all existing and future liabilities of our
subsidiaries.
Also, as a holding company, our right to receive any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise (and thus your right to benefit indirectly from such distribution),
is subject to the prior claims of creditors of that subsidiary (including
depositors, in the case of Astoria Federal), except to the extent we may be
recognized as a creditor of that subsidiary. At December 31, 1999, Astoria
Federal, our only direct subsidiary, had total liabilities, including deposits,
of $21.50 billion. Accordingly, the exchange debentures will be effectively
subordinated to all existing and future liabilities of our subsidiaries
(including Astoria Federal's deposit liabilities) and all liabilities of any of
our future subsidiaries. The indenture does not limit the incurrence or
issuance of other secured or unsecured debt of us or any subsidiary, including
senior indebtedness.
Restrictions on Transfer
The exchange debentures will be issued and may be transferred only in blocks
having an aggregate principal amount of not less than $100,000 and multiples of
$1,000 in excess thereof. Any attempted transfer of exchange debentures in a
block having an aggregate principal amount of less than $100,000 will be deemed
to be void and of no legal effect whatsoever. Any such purported transferee
shall be deemed not to be the holder of such exchange debentures for any
purpose, including but not limited to the receipt of payments on such exchange
debentures, and such purported transferee shall be deemed to have no interest
whatsoever in such exchange debentures.
Governing Law
The indenture and the exchange debentures will be governed by and construed
in accordance with the laws of the State of New York, without regard to
conflict of law principles.
Information Concerning the Debenture Trustee
Following the exchange offer and the qualification of the indenture under
the Trust Indenture Act, the debenture trustee will have and be subject to all
the duties and responsibilities specified with respect to an
67
<PAGE>
indenture trustee under the Trust Indenture Act. Subject to such provisions,
the debenture trustee is not obligated to exercise any of the powers vested in
it by the indenture at the request of any holder of exchange debentures, unless
offered reasonable indemnity by the holder against the costs, expenses and
liabilities which might be incurred thereby. The debenture trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties under the indenture.
DESCRIPTION OF EXCHANGE GUARANTEE
We will execute and deliver the exchange guarantee at the same time the
exchange capital securities are issued. The exchange guarantee will be
qualified as an indenture under the Trust Indenture Act upon effectiveness of
the exchange offer registration statement. The terms of the exchange guarantee
are identical in all material respects to the terms of the original guarantee.
This summary of the material provisions of the exchange guarantee is not
complete and is subject to, and qualified in its entirety by, the exchange
guarantee and the Trust Indenture Act. The guarantee trustee will hold the
exchange guarantee for the benefit of the holders of the exchange capital
securities. You can obtain a copy of the exchange guarantee by requesting it
from Astoria Financial. Wilmington Trust Company will act as guarantee trustee
under the exchange guarantee.
General
We will irrevocably agree to pay in full on a subordinated basis, to the
extent set forth in this prospectus, the following payments with respect to the
exchange capital securities to the extent not paid by the Trust:
. any accumulated and unpaid distributions required to be paid on the
exchange capital securities, to the extent that the Trust has funds
legally available at that time;
. the applicable redemption price with respect to the exchange capital
securities called for redemption, to the extent that the Trust has funds
legally available at that time; and
. upon a voluntary or involuntary dissolution, winding-up or liquidation
of the Trust (other than in connection with the distribution of the
exchange debentures to holders of the exchange capital securities or the
redemption of all exchange capital securities), the lesser of (a) the
liquidation distribution, to the extent the Trust has funds legally
available at that time, and (b) the amount of assets of the Trust
remaining available for distribution to holders of exchange capital
securities after satisfying the liabilities owed to the Trust's
creditors as required by applicable law.
The exchange guarantee will rank subordinate and junior to all senior
indebtedness to the extent provided in the exchange guarantee. See "-- Status
of the Exchange Guarantee." Our obligation to make a guarantee payment may be
satisfied by our direct payment of the required amounts to the holders of the
exchange capital securities or by causing the Trust to pay these amounts to the
holders of the exchange capital securities.
The exchange guarantee will be an irrevocable guarantee on a subordinated
basis of the Trust's obligations under the exchange capital securities, but
will apply only to the extent that the Trust has funds sufficient to make these
payments. If we do not make payments on the exchange debentures held by the
Trust, then it will not be able to make the related payments to you on the
exchange capital securities and will not have funds legally available. Please
refer to the "Relationship among the Exchange Capital Securities, the
Subordinated Debentures and the Exchange Guarantee" section of this prospectus.
The holders of a majority in aggregate liquidation amount of the exchange
capital securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of our guarantee or to direct the exercise of any trust power conferred
upon the guarantee trustee under our guarantee. If the guarantee trustee fails
to enforce the exchange guarantee, any holder of the exchange capital
securities may institute a legal proceeding directly against us to enforce
their rights under the exchange guarantee without first instituting a legal
proceeding against the Trust, the guarantee trustee or any other person or
entity.
68
<PAGE>
If we default on our obligation to pay amounts payable under the exchange
debentures, the Trust will lack funds for the payment of distributions or
amounts payable on redemption of the exchange capital securities or otherwise,
and the holders of the exchange capital securities will not be able to rely
upon the exchange guarantee for payment of such amounts. Instead, if an event
of default under the exchange debentures exists that is attributable to our
failure to pay principal of (or premium, if any) or interest on the exchange
debentures on a payment date, then any holder of exchange capital securities
may institute a direct action against us pursuant to the terms of the indenture
for enforcement of payment to that holder of the principal of (or premium, if
any) or interest on such exchange debentures having a principal amount equal to
the aggregate liquidation amount of the exchange capital securities of that
holder. In connection with a direct action, we will have a right of set-off
under the indenture to the extent that we made any payment to the holder of
exchange capital securities in the direct action. Except as described in this
prospectus, holders of exchange capital securities will not be able to exercise
directly any other remedy available to the holders of the exchange debentures
or assert directly any other rights in respect of the exchange debentures. The
trust agreement provides that each holder of exchange capital securities by
accepting the exchange capital securities agrees to the provisions of the
exchange guarantee and the indenture.
We will, through our guarantee, the trust agreement, the exchange debentures
and the indenture, taken together, fully, irrevocably and unconditionally
guarantee all of the Trust's obligations under the exchange capital securities.
No single document standing alone, or operating in conjunction with fewer than
all of the other documents, constitutes that guarantee. Only the combined
operation of these documents provides a full, irrevocable and unconditional
guarantee of the Trust's obligations under the exchange capital securities. You
should refer to "Relationship among the Exchange Capital Securities, the
Exchange Debentures and the Exchange Guarantee" for more information about our
guarantee.
Status of the Exchange Guarantee
Our exchange guarantee will constitute an unsecured obligation and will rank
subordinate and junior to all senior indebtedness in the same manner as the
exchange debentures. See "Description of Exchange Debentures -- Subordination."
In addition, because we are a holding company, our right to participate in any
distribution of the assets of our subsidiaries, including Astoria Federal, upon
their liquidation or reorganization or otherwise is subject to the prior claims
of their creditors (including Astoria Federal's depositors), except to the
extent we may be recognized as their creditor. Accordingly, our obligations
under the exchange guarantee effectively will be subordinated to all existing
and future liabilities of our present and future subsidiaries (including
depositors of Astoria Federal). As a result, claimants should look only to our
assets for payments under the exchange guarantee. See "Description of Exchange
Debentures -- General."
Our guarantee will rank equal to all of our other guarantees with respect to
preferred beneficial interests issued by other trusts. Our guarantee of the
Trust's exchange capital securities does not limit the amount of secured or
unsecured debt, including senior indebtedness, that we or any of our
subsidiaries may incur. We expect from time to time that we will incur
additional indebtedness and that our subsidiaries will also incur additional
liabilities.
Our guarantee will constitute a guarantee of payment and not of collection,
enabling the guaranteed party to institute a legal proceeding directly against
us to enforce their rights under the exchange guarantee without first
instituting a legal proceeding against any other person or entity. Our
guarantee will not be discharged, except by payment of the exchange guarantee
payments in full to the extent that the Trust has not paid, or upon
distribution of the exchange debentures to, the holders of the exchange capital
securities.
Events of Default
There will be an event of default under the exchange guarantee if we fail to
perform any of our payment or other obligations under the exchange guarantee;
except that with respect to a default in payment of any
69
<PAGE>
guarantee payment, we shall have received notice of default and shall not have
cured the default within 60 days after receipt of the notice. We, as guarantor,
will be required to file annually with the guarantee trustee a certificate
regarding our compliance with the applicable conditions and covenants under our
guarantee.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the exchange capital securities (in which case no
approval will be required), the exchange guarantee may not be amended without
the prior approval of the holders of a majority of the liquidation amount of
such outstanding capital securities. You should read "Description of Exchange
Capital Securities -- Voting Rights; Amendment of the Trust Agreement" for more
information about the manner of obtaining the holders' approval. All guarantees
and agreements contained in the exchange guarantee shall bind our successors,
assigns, receivers, trustees and representatives and shall inure to the benefit
of the holders of the exchange capital securities then outstanding.
Termination of the Exchange Guarantee
Our guarantee will terminate and be of no further force and effect upon:
. full payment of the applicable redemption price of all outstanding
exchange capital securities;
. full payment of the liquidation amount payable upon liquidation of the
Trust; or
. distribution of exchange debentures to the holders of the exchange
capital securities.
Our guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of the exchange capital securities must
restore payment of any sums paid under the exchange capital securities or the
exchange guarantee.
Governing Law
The exchange guarantee will be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of law
principles.
Information Concerning the Guarantee Trustee
The guarantee trustee, except if we default under the exchange guarantee,
will undertake to perform only such duties as are specifically set forth in the
exchange guarantee and, in case a default with respect to the exchange
guarantee has occurred, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the guarantee trustee will not be obligated to
exercise any of the powers vested in it by the exchange guarantee at the
request of any holder of the exchange capital securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that it might
incur.
70
<PAGE>
DESCRIPTION OF ORIGINAL SECURITIES
We refer to the original capital securities, the original guarantee and the
original junior subordinated debentures collectively as the original securities
and refer to the exchange capital securities, the exchange guarantee and the
exchange debentures collectively as the exchange securities.
The terms of the original securities are identical in all materials respects
to the exchange securities, except that:
. original securities have not been registered under the Securities Act,
are subject to certain restrictions on transfer and are entitled to
certain rights under the applicable registration rights agreement, which
rights will terminate upon consummation of the exchange offer, except
under limited circumstances;
. the exchange capital securities will not provide for any increase in the
distribution rate; and
. the exchange debentures will not provide for any liquidated damages.
The original securities provide that, if a registration statement relating
to the exchange offer is not declared effective by the Commission on or prior
to the 180th day after the issue date, liquidated damages shall accrue on the
principal amount of the original junior subordinated debentures, and additional
distributions shall accumulate on the liquidation amount of the original
capital securities, each at a rate of 25 basis points per annum. In addition,
the original capital securities provide that, if the Trust has not exchanged
exchange capital securities for all original capital securities validly
tendered by the 45th day after the date on which the registration statement is
declared effective, the distribution rate borne by the original capital
securities will increase by 25 basis points per annum for the period from the
occurrence of such event until such time as the exchange offer has been
consummated. The exchange securities are not, and upon consummation of the
exchange offer, the original securities will not be, entitled to any such
additional interest or distributions. Accordingly, holders of original capital
securities should review the information set forth under "Risk Factors -- Your
failure to exchange original capital securities may adversely affect your
ability to sell such securities" and "Description of Exchange Capital
Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE
EXCHANGE DEBENTURES AND THE EXCHANGE GUARANTEE
Full and Unconditional Guarantee
We will irrevocably guarantee payments of distributions and other amounts
due on the exchange capital securities to the extent the Trust has funds
legally available to pay such amounts as and to the extent set forth under
"Description of Exchange Guarantee." Taken together, our obligations under the
exchange debentures, the indenture, the trust agreement and the exchange
guarantee will provide a full, irrevocable and unconditional guarantee of the
Trust's payments of distributions and other amounts due on the exchange capital
securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes this guarantee. Only the
combined operation of these documents effectively provides a full, irrevocable
and unconditional guarantee of the Trust's obligations under the exchange
capital securities.
If and to the extent that we do not make the required payments on the
exchange debentures, the Trust will not have sufficient funds to make its
related payments, including distributions on the exchange capital securities.
Our guarantee will not cover any payments when the Trust does not have
sufficient funds legally available to make those payments. Your remedy, as a
holder of exchange capital securities, is to institute a direct action against
us. Our obligations under the exchange guarantee will be subordinate and junior
to all senior indebtedness.
71
<PAGE>
Sufficiency of Payments
As long as we pay the interest and other payments when due on the exchange
debentures, the Trust will have sufficient funds to cover distributions and
other payments due on the exchange capital securities, primarily because:
. the aggregate principal amount or prepayment price of the exchange
debentures will equal the aggregate liquidation amount or redemption
price, as applicable, of the trust securities;
. the interest rate and interest payment dates and other payment dates on
the exchange debentures will match the distribution rate and
distribution dates and other payment dates for the trust securities;
. as sponsor, we will pay for all and any costs, expenses and liabilities
of the Trust, except for the Trust's obligations to holders of trust
securities; and
. the trust agreement also provides that the Trust is not authorized to
engage in any activity that is not consistent with its limited purposes.
Enforcement Rights of Holders of Exchange Capital Securities
You, as holder of exchange capital securities, may institute a legal
proceeding directly against us to enforce your rights under our guarantee
without first instituting a legal proceeding against the guarantee trustee, the
Trust or any other person or entity.
A default or event of default under any senior indebtedness would not
constitute a default or event of default under the trust agreement. However, if
there are payment defaults under, or accelerations of, senior indebtedness, the
subordination provisions of the indenture provide that we cannot make payments
in respect of the exchange debentures until we have paid the senior
indebtedness in full or we have cured any payment default or a payment default
has been waived. Our failure to make required payments on exchange debentures
would constitute an event of default under the trust agreement.
Limited Purpose of the Trust
The exchange capital securities will represent beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
trust securities and the common securities, using the proceeds from the sale of
the trust securities to acquire the original junior subordinated debentures,
exchanging the original capital securities and original junior subordinated
debentures in the exchange offer, and engaging in only those other activities
necessary, advisable or incidental thereto. A principal difference between the
rights of a holder of an exchange capital security and a holder of an exchange
debenture is that a holder of an exchange debenture will be entitled to receive
from us the principal of (and premium, if any) and interest on exchange
debentures held, while a holder of exchange capital securities is entitled to
receive distributions from the Trust (or, in certain circumstances, from us
under our guarantee) if and to the extent the Trust has funds legally available
to pay the distributions.
Rights Upon Dissolution
Unless the exchange debentures are distributed to holders of the exchange
capital securities, if the Trust is voluntarily or involuntarily dissolved,
wound-up or liquidated, after satisfying the liabilities owed to the Trust's
creditors as required by applicable law, the holders of the exchange capital
securities will be entitled to receive, out of assets held by the Trust, the
liquidation distribution in cash. See "Description of Exchange Capital
Securities -- Liquidation of the Trust and Distribution of Exchange
Debentures."
72
<PAGE>
If we are voluntarily or involuntarily liquidated or bankrupted, the
property trustee, as holder of the exchange debentures, would be one of our
subordinated creditors, subordinated in right of payment to all senior
indebtedness, but entitled to receive payment in full of principal (and
premium, if any) and interest, before any of our stockholders receive payments
or distributions. Since we will be the guarantor under the exchange guarantee
and will agree to pay all costs, expenses and liabilities of the Trust (other
than the Trust's obligations to the holders of its exchange capital
securities), the positions of a holder of exchange capital securities and a
holder of exchange debentures relative to other creditors and to our
stockholders in the event of our liquidation or bankruptcy are expected to be
substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
In the opinion of Thacher Proffitt & Wood, special federal income tax
counsel to us and the Trust, the following describes the material federal
income tax consequences of the purchase, ownership and disposition of a capital
security.
This summary addresses the tax consequences only to a person that acquires a
capital security on its original issuance at its original price and that holds
the security as a capital asset. This summary does not address all tax
consequences that may be applicable to a beneficial owner of a capital security
and does not address the tax consequences to holders subject to special tax
regimes (like banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors or persons that will hold a capital security as a position
in a "straddle," as part of a "synthetic security" or "hedge" or as part of a
"conversion transaction" or other integrated investment). This summary does not
include any description of any alternative minimum tax consequences or the tax
laws of any state or local government or of any foreign government that may
apply to a capital security. Except as noted below in the discussion of Non-
U.S. Holders, this discussion is addressed to a U.S. Holder, which is defined
as a beneficial owner of a capital security that, for federal income tax
purposes, is (or is treated as):
. a citizen or individual resident of the United States;
. a corporation or partnership (or entity treated for federal income tax
purposes as a corporation or partnership) created or organized in or
under the laws of the United States or any state (including the District
of Columbia) or other political subdivision thereof;
. an estate the income of which is includible in gross income for federal
income tax purposes without regarding to its source; or
. a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the ability to control all substantial decisions of the
trust.
This summary does not address the tax consequences to any stockholder,
partner or beneficiary of a holder of a capital security. This summary is based
on the Code, Treasury regulations thereunder and the administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis. An opinion of Thacher
Proffitt & Wood is not binding on the IRS or the courts. No rulings have been
or are expected to be sought from the IRS with respect to any of the matters
described in this prospectus. We can give no assurance that the opinions
expressed will not be challenged by the IRS or, if challenged, that the
challenge will not be successful.
Prospective investors are advised to consult with their own tax advisors
with respect to the tax consequences to them of the purchase, ownership and
disposition of the capital securities, including the tax consequences under
state, local, foreign, and other tax laws and possible effects of changes in
United States federal or other tax laws.
Exchange of Capital Securities
The exchange of the original capital securities for exchange capital
securities pursuant to the exchange offer should not be treated as an exchange
for federal income tax purposes and, therefore, should not be a
73
<PAGE>
taxable event to holders for federal income tax purposes, because the exchange
capital securities should not be considered to differ materially in kind or
extent from the original capital securities and because the exchange will occur
by operation of the terms of the capital securities. If the exchange were
treated as an exchange for federal income tax purposes, such exchange should
constitute a recapitalization for federal income tax purposes. Accordingly, the
exchange capital securities should have the same issue price as the original
capital securities, and a holder should have the same adjusted tax basis and
holding period in the exchange capital securities as the holder had in the
original capital securities immediately before the exchange.
Classification of the Junior Subordinated Debentures
We intend to take the position that the junior subordinated debentures will
be classified for federal income tax purposes as our indebtedness. We, together
with the Trust and the holders of the capital securities (by acceptance of a
beneficial interest in a capital security) will agree to treat the junior
subordinated debentures as our indebtedness for all federal income tax
purposes. We cannot be sure that this position will not be challenged by the
IRS or, if challenged, that the challenge will not be successful. The remainder
of this discussion assumes that the junior subordinated debentures will be
classified as our indebtedness for federal income tax purposes.
Classification of the Trust
In connection with the issuance of the original capital securities, Thacher
Proffitt & Wood rendered its opinion that, under then current law and assuming
full compliance with the terms of the trust agreement and the indenture (and
certain other documents), and based on certain facts and assumptions contained
in that opinion, the Trust is classified for federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for federal income tax purposes, the Trust is not subject to federal income
tax, and each holder of capital securities will be considered the owner of an
undivided interest in the junior subordinated debentures, and each holder will
be required to include in its gross income any interest (or accrued original
issue discount), with respect to its allocable share of the junior subordinated
debentures.
Interest Income and Original Issue Discount
Under the indenture, we have the right to defer the payment of interest on
the junior subordinated debentures at any time or from time to time for one or
more deferral periods not exceeding 10 consecutive semi-annual periods each,
provided that no deferral period shall end on a date other than an interest
payment date or extend beyond November 1, 2029. By reason of that right, the
Treasury regulations will subject the junior subordinated debentures to the
rules in the Code and Treasury regulations on debt instruments issued with
original issue discount, unless the indenture or junior subordinated debentures
contain terms or conditions that make the likelihood of exercise of the
deferral option remote. Under the Treasury regulations, a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with original issue discount. Although the
answer is not clear, we believe that the likelihood that we would exercise our
option to defer payments of interest is remote since exercising that option
would, among other things, prevent us from declaring dividends on any class of
our equity securities. Accordingly, we intend to take the position that the
junior subordinated debentures will not be considered to be issued with
original issue discount and, accordingly, stated interest on the junior
subordinated debentures generally will be taxable to a holder as ordinary
income at the time it is paid or accrued in accordance with such holder's
method of accounting.
Under the Treasury regulations, if we were to exercise our option to defer
payments of interest, the junior subordinated debentures would at that time be
treated as issued with original issue discount, and all stated interest on the
junior subordinated debentures would thereafter be treated as original issue
discount as long as the junior subordinated debentures remain outstanding. If
this occurred, all of a holder's interest income with respect to the junior
subordinated debentures would thereafter be accounted for on an economic
accrual basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be
74
<PAGE>
reported as taxable income. Consequently, a holder of a capital security would
be required to include in gross income original issue discount even though we
would not make actual cash payments during a deferral period. The amount of
such includible original issue discount could be significant. Also, under the
Treasury regulations, if the option to defer the payment of interest were
determined not to be remote, the junior subordinated debentures would be
treated as having been originally issued with original issue discount. In such
event, a holder would be required to include in gross income an amount of
original issue discount each taxable year that approximates the amount of
interest that accrues on the junior subordinated debentures at the stated
interest rate, regardless of such holder's method of tax accounting, and actual
cash payments of interest on the junior subordinated debenture would not be
separately includible in gross income. These Treasury regulations have not yet
been addressed in any rulings or other interpretations by the IRS, and it is
possible that the IRS could take a position contrary to the interpretation
described in this prospectus.
Because income on the capital securities will constitute interest or
original issue discount, corporate holders of the capital securities will not
be entitled to a dividends-received deduction with respect to any income
recognized with respect to the capital securities.
Receipt of Junior Subordinated Debenture or Cash upon Liquidation of the Trust
We will have the right at any time to liquidate the Trust and cause the
junior subordinated debentures to be distributed to the holders of the trust
securities. Under current law, the liquidation of the Trust and the
distribution of the junior subordinated debentures to trust security holders,
for federal income tax purposes, would be treated as a nontaxable event to each
holder, and the aggregate tax basis in the junior subordinated debentures
received by such holder would be equal to the holder's aggregate tax basis in
its capital securities surrendered. A holder's holding period in the junior
subordinated debentures received in liquidation of the Trust would be the same
as the holding period that the holder had in the capital securities
surrendered.
The junior subordinated debentures may be prepaid in cash, and the proceeds
of that prepayment would be distributed to holders in redemption of their
capital securities. Under current law, that redemption would constitute, for
federal income tax purposes, a taxable disposition of the redeemed capital
securities, the tax consequences of which are described below under "-- Sales
or Redemptions of Capital Securities."
Sales or Redemptions of Capital Securities
On a sale or redemption of capital securities for cash, a holder will
recognize gain or loss equal to the difference between its adjusted tax basis
in the capital security and the amount realized on the sale or redemption of
that capital security. If the rules regarding original issue discount do not
apply, a holder's adjusted basis in a capital security generally will be its
initial purchase price, and if the holder uses an accrual method of accounting,
the holder's basis will be increased by any accrued but unpaid interest. If the
rules regarding original issue discount apply, a holder's adjusted basis in a
capital security generally will be its initial purchase price increased by any
original issue discount previously included in the holder's gross income to the
date of disposition and decreased by any payments received with respect to
original issue discount on the capital security. Gain or loss recognized on a
sale or redemption of a capital security will be capital gain or loss. Capital
gain recognized by an individual in respect of a capital security held for more
than one year as of the date of sale or redemption is subject to a maximum
federal income tax rate of 20 percent.
The capital securities may trade at a price that discounts any accrued but
unpaid interest on the junior subordinated debentures. Therefore, the amount
realized by a holder who disposes of a capital security between distribution
payment dates and whose adjusted basis in the capital security has been
increased by the amount of any accrued but unpaid original issue discount (or
interest) may be less than the holder's adjusted basis in the capital security.
A holder's basis in a capital security could be increased either under the
rules regarding original issue discount or, if those rules do not apply, in the
case of a holder that uses an accrual method of
75
<PAGE>
accounting, under the accrual accounting rules (as discussed above). In that
case, the holder will recognize a capital loss. Subject to a limited exception
in the case of individual taxpayers, capital losses cannot be applied to offset
ordinary income for federal income tax purposes.
Non-U.S. Holders
For purposes of this discussion, a "Non-U.S. Holder" generally is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for federal income tax purposes.
Under current federal income tax laws, subject to the discussion below of
backup withholding, payments by the Trust or any of its paying agents to a Non-
U.S. Holder will not be subject to federal withholding tax, provided that (a)
the Non-U.S. Holder does not own, actually or constructively, ten percent or
more of the total combined voting power of all classes of our stock entitled to
vote, (b) the Non-U.S. Holder is not a controlled foreign corporation that is
related to us through stock ownership, (c) the Non-U.S. Holder is not a bank
whose receipt of interest on the junior subordinated debentures is described in
Section 881(c)(3)(A) of the Code, and (d) either (A) the Non-U.S. Holder
certifies to the Trust or its agent, under penalties of perjury, that it is not
a U.S. Holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of business (a "financial institution") and
holds the capital security in that capacity certifies to the Trust or its
agent, under penalties of perjury, that the statement has been received from
the Non-U.S. Holder by it or by a financial institution between it and the Non-
U.S. Holder and furnishes the Trust or its agent with a copy thereof. New
Treasury regulations provides alternative methods for satisfying the
certification requirements described in clause (d), effective for certain
payments made after December 31, 2000.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the capital securities (or the junior subordinated debentures)
is effectively connected with the conduct of that trade or business, the Non-
U.S. Holder, although exempt from the withholding tax discussed above, will be
subject to federal income tax on that interest on a net income basis in
generally the same manner as if it were a U.S. Holder. In addition, if such
Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% of its effectively connected earnings and profits that are
repatriated or treated as repatriated. For this purpose, the interest income
would be included in the foreign corporation's earnings and profits. In the
case of a Non-U.S. Holder entitled to the benefits of a tax treaty with the
United States, the foregoing discussion generally applies only if the Non-U.S.
Holder is engaged in business in the United States through a U.S. permanent
establishment and the income on the junior subordinated debentures is
attributable to that permanent establishment within the meaning of the treaty,
and the rate of the branch profits tax may be limited to a rate prescribed by
the treaty for the withholding of tax on dividends. New final Treasury
regulations generally prescribe new methods for certifying that a Non-U.S.
Holder is exempt from the withholding of federal income tax by reason of being
engaged in trade or business or the United States.
Any gain recognized upon a sale or other disposition of capital securities
(or junior subordinated debentures) generally will not be subject to federal
income tax unless (1) the gain is, or is treated as, effectively connected with
a U.S. trade or business of the Non-U.S. Holder or (2) in the case of a Non-
U.S. Holder who is an individual, that individual is present in the United
States for 183 days or more in the taxable year of the sale or other
disposition, and certain other conditions are met.
Backup Withholding Tax and Information Reporting
The amount of interest, including original issue discount, accrued on
capital securities held of record by U.S. persons (other than corporations and
other exempt holders) will be reported to the IRS. "Backup" withholding at a
rate of 31% will apply to payments of interest to non-exempt U.S. persons
unless the holder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury regulations, certifies that the number is
correct, certifies as to no loss of exemption from backup withholding and meets
certain other conditions.
76
<PAGE>
Payment of the proceeds from the disposition of capital securities to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Non-U.S. Holders are generally exempt from the information reporting and
backup withholding rules but may be required to comply with certain
certification and identification requirements to prove their exemption.
Any amount withheld from a holder under the backup withholding rules will be
allowed as a refund or credit against such holder's federal income tax
liability, provided the required information is furnished to the IRS.
It is anticipated that income on capital securities will be reported to
holders on Form 1099 (or any successor form) and mailed to holders of capital
securities by January 31 following each calendar year.
The federal income tax discussion set forth above is included for general
information only and may not be applicable depending upon a holder's particular
situation. You should consult your tax adviser with respect to the tax
consequences to you of the purchase, ownership and disposition of a capital
security, including the tax consequences under state, local, foreign and other
tax laws and the possible effects of changes in federal or other tax laws.
ERISA CONSIDERATIONS
General
In evaluating the purchase of capital securities, a fiduciary of a qualified
profit-sharing, pension or stock bonus plan, including a plan for self-employed
individuals and their employees or any other employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), a
collective investment fund or separate account in which such plans invest and
any other investor using assets that are treated as assets of an employee
benefit plan subject to ERISA (each, a "Plan" and collectively, "Plans") should
consider:
. whether the ownership of capital securities is in accordance with the
documents and instruments governing such Plan;
. whether the ownership of capital securities is solely in the interest of
Plan participants and beneficiaries and otherwise consistent with the
fiduciary's responsibilities and in compliance with the requirements of
Part 4 of Title I of ERISA, including, in particular, the
diversification, prudence and liquidity requirements of Section 404 of
ERISA and the prohibited transaction provisions of Section 406 of ERISA
and Section 4975 of the Code;
. whether the assets of the Trust are treated as assets of the Plan; and
. the need to value the assets of the Plan annually.
In addition, the fiduciary of an individual retirement arrangement under 408
of the Code (an "IRA") considering the purchase of capital securities should
consider whether the ownership of the capital securities would result in a non-
exempt prohibited transaction under Section 4975 of the Code.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the prohibited transaction rules. Such plans may, however,
be subject to federal, state or local laws or regulations which may affect
their investment in the capital securities. Any fiduciary of such a
governmental or church plan considering an investment in the capital securities
should determine the need for, and the availability, if necessary, of any
exemptive relief under such laws or regulations.
77
<PAGE>
The fiduciary investment considerations summarized below provide a general
discussion that does not include all of the fiduciary investment considerations
relevant to Plans and, where indicated, IRAs. This summary is based on the
current provisions of ERISA and the Code and regulations and rulings
thereunder, and may be changed (perhaps adversely and with retroactive effect)
by future legislative, administrative or judicial action.
Plans and IRAs that are prospective purchasers of capital securities should
consult with and rely upon their own advisors in evaluating these matters in
light of their own particular circumstances.
Plan Asset Regulation
Under Department of Labor regulations governing what constitutes the assets
of a Plan or IRA ("Plan Assets") for purposes of ERISA and the related
prohibited transaction provisions of the Code (the "Plan Asset Regulation," 29
C.F.R. Sec. 2510.3-101), when a Plan or IRA acquires an equity interest in
another entity, and such interest does not represent a "publicly offered
security" nor a security issued by an investment company registered under the
1940 Act, the Plan's assets include both the equity interest and an undivided
interest in each of the underlying assets of the entity, unless it is
established either that the entity is an operating company or that equity
participation in the entity by "benefit plan investors," as defined in the Plan
Assets Regulation, is not "significant." For purposes of the Plan Asset
Regulation, the Trust will be neither an investment company nor an operating
company.
Under the Plan Asset Regulation, equity participation by benefit plan
investors will not be considered "significant" on any date only if immediately
after the most recent acquisition of the capital securities, the aggregate
interest in the capital securities held by benefit plan investors will be less
than 25% of the aggregate outstanding principal amount of the capital
securities. Although it is possible that the equity participation by benefit
plan investors on any date will not be "significant" for purposes of the Plan
Asset Regulation, such a result cannot be assured. Consequently, if Plans, IRAs
or investors using assets of Plans purchase the capital securities, the Trust's
assets could be deemed to be "plan assets" of such Plans and/or IRAs for
purposes of the fiduciary responsibility provisions of ERISA and the prohibited
transactions rules of ERISA and the Code. Under ERISA and the Code, any person
who exercises any authority or control respecting the management or disposition
of the assets of a Plan or IRA is considered to be a fiduciary of such Plan or
IRA. The property trustee of the Trust could therefore become a fiduciary of
the Plans and IRAs that invest in the capital securities and be subject to the
general fiduciary requirements of ERISA in exercising its authority with
respect to the management of the assets of the Trust. However, the property
trustee will have only limited discretionary authority with respect to the
Trust assets and the remaining functions and responsibilities performed by the
property trustee will be for the most part custodial and ministerial in nature.
Prohibited Transactions
The Trust, Astoria Financial (the obligor with respect to the junior
subordinated debentures held by the Trust) and their affiliates or the property
trustee may be a party in interest or a disqualified person with respect to a
Plan or IRA investing in the capital securities. Therefore, such investment by
a Plan or IRA may give rise to a prohibited transaction. Consequently, before
investing in the capital securities or acquiring junior subordinated
debentures, any person who is, or who is acquiring such securities for, or on
behalf of, a Plan or IRA should determine that either a statutory or an
administrative exemption from the prohibited transaction rules discussed below
or otherwise available is applicable to such investment in the capital
securities, or that such investment in, or acquisition of, such securities will
not result in a non-exempt prohibited transaction.
The statutory or administrative exemptions from the prohibited transaction
rules under ERISA and the Code which may be available to a Plan or IRA, which
is investing in the capital securities include the following (collectively
referred to as the "ERISA Investor Exemptions"):
. Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
78
<PAGE>
. PTCE 91-38, regarding investments by bank collective investment funds;
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
. PTCE 96-23, regarding transactions effected by in-house asset managers;
and
. PTCE 95-60, regarding investments by insurance company general accounts.
No person who is, or who in acquiring capital securities is using the assets
of, a Plan or IRA may acquire capital securities unless one of the ERISA
Investor Exemptions or another applicable exemption is available to the Plan or
IRA, or such acquisition or holding of the capital securities will not result
in a non-exempt Prohibited Transaction. The acquisition of the capital
securities by any person who is, or who in acquiring such capital securities is
using the assets of, a Plan or IRA shall be deemed to constitute a
representation by such person to the property trustee of the Trust, Astoria
Financial and the initial purchaser either that:
. it is not a Plan, IRA, trustee or other person acting on behalf of a
Plan or IRA or other person or entity using the assets of any Plan or
IRA to finance such purchase; or
. such acquisition will not result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code for which there is no
applicable statutory or administrative exemption.
In the case of capital securities delivered in certificated form, the
purchaser will be required to make such representation, in writing, to the
trustee of the Trust, Astoria Financial and the initial purchaser.
The discussion of ERISA in this prospectus is general in nature and is not
intended to be all inclusive. Any fiduciary of a plan, IRA, governmental plan
or church plan considering an investment in the capital securities should
consult with its legal advisors regarding the consequences of such investment
and consider whether the Plan or IRA can make the representations noted above.
Further, the sale of investments to Plans and IRAs is in no respect a
representation by the Trust, Astoria Financial, the property trustee, the
initial purchaser or any other person associated with the sale of the capital
securities that such securities meet all relevant legal requirements with
respect to investments by Plans and IRAs generally or any particular Plan, or
that such securities are otherwise appropriate for Plans and IRAs generally or
any particular Plan.
Any purchaser proposing to acquire capital securities with assets of any
Plan or IRA should consult with its counsel.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange capital securities for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange capital securities.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of exchange capital
securities received in exchange for original capital securities where such
original capital securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and us have
agreed that, starting on the expiration date and ending on the close of
business on the 90th day following the expiration date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, for a period of 90 days after
the expiration date, all dealers effecting transactions in the exchange
securities may be required to deliver a prospectus.
The Trust and us will not receive any proceeds from any sale of exchange
capital securities by broker-dealers. Exchange capital securities received by
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions, in the over-the-counter market,
in negotiated
79
<PAGE>
transactions, through the writing of options on the exchange capital securities
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker- dealer and/or the purchasers
of any such exchange capital securities. Any broker-dealer that resells
exchange capital securities that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange capital securities may be deemed to be an
underwriter within the meaning of the Securities Act and any profit of any such
resale of exchange capital securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an underwriter within the meaning
of the Securities Act.
For a period of 90 days after the expiration date, the Trust and us will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. The Trust and us have agreed to pay all expenses
incident to the exchange offer, including the expenses of one counsel for the
holders of the capital securities, other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the exchange capital
securities, including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange capital securities, the exchange guarantee and
the exchange debentures will be passed upon for us by Thacher Proffitt and
Wood. Certain matters of Delaware law relating to the validity of the exchange
capital securities will be passed upon on behalf of us and the Trust by Morris,
James, Hitchens & Williams LLP, special Delaware counsel to the Trust and us.
RATINGS
The exchange capital securities have been rated "BB" by Standard & Poor's,
"BBB-" by Duff & Phelps Credit Rating Co., "BBB-" by Thomson Financial
BankWatch and "ba2" by Moody's Investors Service. The ratings of Standard &
Poor's, Duff & Phelps, Thomson Financial and Moody's assigned to the exchange
capital securities address the likelihood of your receipt of all payments to
which such securities are entitled. The rating process addresses the structural
and legal aspects associated with the exchange capital securities. In the event
that the ratings initially assigned to the exchange capital securities are
subsequently lowered for any reason, no person or entity is obligated to
provide any additional credit support or credit enhancement with respect to the
exchange capital securities.
If another rating agency were to rate the exchange capital securities, such
rating agency may assign a rating different from the ratings described above.
Each security rating should be evaluated independently of any other security
rating. A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization.
EXPERTS
The consolidated financial statements of Astoria Financial Corporation as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG LLP, our independent
certified public accountants, incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing.
80
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus or
that to which we have referred you. We have not authorized anyone to provide
you with any additional or different information. This prospectus does not
constitute an offer to sell, or the solicitation of an offer to buy, any of
the securities offered hereby to any person in any jurisdiction in which such
offer or solicitation would be unlawful. The affairs of Astoria Financial or
the Trust may change after the date of this prospectus. Delivery of this
prospectus and the sales of securities made hereunder does not mean otherwise.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Forward Looking Statements............................................... 3
Summary.................................................................. 4
Selected Financial Data.................................................. 13
Recent Developments...................................................... 17
Risk Factors............................................................. 21
Use of Proceeds.......................................................... 28
Accounting Treatment..................................................... 28
Capitalization........................................................... 29
Astoria Financial Corporation............................................ 30
Regulation and Supervision............................................... 31
Astoria Capital Trust I.................................................. 32
The Exchange Offer....................................................... 33
Description of Exchange Capital Securities............................... 43
Description of Exchange Debentures....................................... 56
Description of Exchange Guarantee........................................ 68
Description of Original Securities....................................... 71
Relationship among the Exchange Capital Securities, the Exchange
Debentures and the Exchange Guarantee................................... 71
Certain Federal Income Tax Consequences.................................. 73
Erisa Considerations..................................................... 77
Plan of Distribution..................................................... 79
Legal Matters............................................................ 80
Ratings.................................................................. 80
Experts.................................................................. 80
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$125,000,000
Astoria Capital Trust I
Offer to Exchange its
9.75% Capital Securities, Series B (liquidation amount $1,000
per exchange capital security)
which have been registered under the Securities Act of 1933
for any and
all of its outstanding
9.75% Capital Securities, Series A (liquidation amount $1,000
per original capital security)
Fully and unconditionally
guaranteed, as described
herein this offering
memorandum, by
[Astoria Financial Corporation Logo]
------------------------
PROSPECTUS
------------------------
March 10, 2000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
