PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 2, 1997)
$1,000,000,000
AMERICAN GENERAL FINANCE CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
American General Finance Corporation (the "Company") may offer from time
to time its medium-term notes which are issuable in one or more series. The
Medium-Term Notes, Series E (the "Notes") offered by this Prospectus
Supplement will be senior debt securities which bear interest at fixed or
variable rates and will mature on any day nine months or more from the date of
issue, as selected by the initial purchaser and agreed to by the Company. Unless
otherwise provided in an accompanying pricing supplement to this Prospectus
Supplement (a "Pricing Supplement"), the Notes will not be subject to any
sinking fund and will not be redeemable at the option of the Company, or
repayable at the option of the holders thereof, prior to their stated maturity.
The Notes will be issued only in fully registered form in denominations of
$1,000 and integral multiples thereof.
Each Note will be represented either by a global security registered in the
name of a nominee of The Depository Trust Company, as Depository (a "Book-Entry
Note"), or by a certificate issued in definitive form (a "Certificated
Note"), as set forth in the applicable Pricing Supplement. Beneficial interests
in Book-Entry Notes will be shown on, and transfers thereof will be effected
only through, records maintained by the Depository and its participants. Owners
of beneficial interests in Book-Entry Notes will be entitled to physical
delivery of Certificated Notes only under the limited circumstances described
herein.
The interest rate on or the method of determining the interest rate on each
Note, the issue price and maturity date of each Note and certain other terms
will be established by the Company from time to time and will be set forth in
such Note and described in the applicable Pricing Supplement. Interest rates,
the method of determining interest rates, issue prices and certain other terms
of the Notes are subject to change by the Company, but no such change will
affect any Notes already issued or as to which an offer to purchase has been
accepted by the Company. As specified in the applicable Pricing Supplement, the
Notes will bear interest at a fixed rate (the "Fixed Rate Notes") or at a
floating rate determined by reference to the CD Rate, the Commercial Paper Rate,
the CMT Rate, the Prime Rate, LIBOR, the Treasury Rate, the Federal Funds Rate,
or such other interest rate basis or formula as is set forth in the Pricing
Supplement and may be adjusted by a Spread and/or Spread Multiplier (as such
terms are hereafter defined) and subject to a maximum and/or minimum interest
rate limitation (the "Floating Rate Notes"). See "Description of Notes" in
this Prospectus Supplement.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable each February 1 and August 1 and at maturity
(or, if applicable, upon redemption or repayment). The dates for payment of
interest on Floating Rate Notes will be established by the Company at the time
of offering and will be set forth in the applicable Pricing Supplement. See
"Description of Notes" in this Prospectus Supplement.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1)(2) AND COMMISSIONS(2) COMPANY(1)(2)(3)
- ------------------------------------------------------------------------------------------------------------------------------
Per Note............................. 100% Not to exceed .875% Not less than 99.125%
- ------------------------------------------------------------------------------------------------------------------------------
Total................................ $1,000,000,000 Not to exceed $8,750,000 Not less than $991,250,000
==============================================================================================================================
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(1) Unless otherwise specified in a Pricing Supplement, Notes will be issued at
100% of their principal amount.
(2) The Company will pay commissions to Lehman Brothers, Lehman Brothers Inc.,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.
P. Morgan Securities Inc. and Smith Barney Inc. (the "Unaffiliated Agents"),
in the form of a discount, not to exceed .875% of the principal amount of
any Note sold through them, depending upon the maturity of such Note. The
Company may also sell Notes to an Unaffiliated Agent as principal for resale
to investors and other purchasers at varying prices relating to prevailing
market prices at the time or times of resale, to be determined by such
Unaffiliated Agent, or, if so agreed, at a fixed public offering price.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Unaffiliated Agent acting as principal will be purchased by such
Unaffiliated Agent at a price equal to 100% of the principal amount thereof
less a percentage equal to the commission applicable to an agency sale of a
Note of identical maturity. No commissions are payable to American General
Securities Incorporated ("AGSI"). See "Plan of Distribution of Notes" in
this Prospectus Supplement.
(3) Before deducting other expenses payable by the Company, estimated at
$750,000.
------------------------
The Notes are being offered on a continuing basis by the Company through
AGSI and the Unaffiliated Agents, as agents (the "Agents"), each of which has
agreed to use its reasonable best efforts to solicit offers to purchase the
Notes. AGSI, an affiliate of the Company, will solicit offers to purchase the
Notes in those jurisdictions where it is authorized to do so. Notes may also be
sold to one or more of the Unaffiliated Agents, as principal, for resale to
investors and other purchasers. The Company may also sell Notes directly to
investors in those jurisdictions in which it is authorized to do so. The Notes
will not be listed on any securities exchange, and there can be no assurance
that any or all of the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. The Company reserves the right to withdraw,
cancel or modify the offer made hereby without notice. The Company or the
soliciting Agent may reject any offer to purchase Notes in whole or in part. See
"Plan of Distribution of Notes" in this Prospectus Supplement.
------------------------
AMERICAN GENERAL SECURITIES INCORPORATED
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J. P. MORGAN & CO.
SMITH BARNEY INC.
------------------------
The date of this Prospectus Supplement is August 5, 1997.
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In connection with an offering of Notes purchased by one or more
Unaffiliated Agent(s) as principal on a fixed offering price basis, such
Unaffiliated Agent(s) may engage in transactions that stabilize, maintain or
otherwise affect the price of the Notes. Such transactions may include
stabilizing and the purchase of Notes to cover short positions of such
Unaffiliated Agent(s). For a description of these activities, see "Plan of
Distribution of Notes."
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will have the terms
described below. Capitalized terms not defined herein have the meanings assigned
to such terms in the Prospectus.
The Notes constitute a single series of Debt Securities of the Company and
will be issued pursuant to the Indenture. The Notes will rank PARI PASSU with
all other unsecured and unsubordinated indebtedness of the Company. The Company
may issue Notes in an aggregate principal amount of up to $1,000,000,000. The
foregoing limit, however, may be increased or decreased by the Company.
The Notes are being issued as the fifth series of the Company's medium-term
notes. The Company reserves the right to offer and sell other series of its
medium-term notes either concurrently with or subsequent to the offering made
hereby.
Reference is made to the applicable Pricing Supplement for the following
terms and other information with respect to a Note being offered thereby: (1)
the public offering price, if other than 100% of the principal amount; (2)
whether interest on such Note will accrue at a fixed rate (Fixed Rate Note) or
be determined by reference to an interest rate basis or formula (Floating Rate
Note); (3) whether such Note will be issued with original issue discount and, if
so, whether such Note shall bear any interest; (4) for Fixed Rate Notes, the
rate per annum at which such Note will bear interest; (5) for Floating Rate
Notes, the interest rate basis or formula, the Initial Interest Rate (hereafter
defined), the Spread and/or Spread Multiplier, if any, the maximum and/or
minimum interest rate, if any, the Interest Reset Dates (hereafter defined), the
Interest Payment Dates (hereafter defined) and any other terms relating to the
particular method of calculating the interest rate on such Floating Rate Note;
(6) the date of maturity of such Note; (7) any provisions of such Note relating
to redemption at the option of the Company, repayment at the option of the
Holder or sinking fund payments prior to the date on which such Note will
mature; (8) whether such Note will be issued initially as a Book-Entry Note or a
Certificated Note; and (9) any other terms of such Note not inconsistent with
the provisions of the Indenture.
The Notes will be offered on a continuing basis and will mature on any day
nine months or more from the date of issue, as selected by the initial purchaser
and agreed to by the Company. Floating Rate Notes will mature on an Interest
Payment Date.
Each Note will be issued initially as either a Book-Entry Note registered
in the name of DTC, or such other Depository (or their nominees) as is specified
in the applicable Pricing Supplement, or as a Certificated Note. Notes will be
issued only in fully registered form without coupons. Except as set forth below
under "Book-Entry Notes," owners of beneficial interests in Book-Entry Notes
will not be entitled to physical delivery of Certificated Notes. The authorized
denominations of the Notes will be $1,000 or any integral multiple thereof. No
service charge will be made for any registration of transfer or exchange of
Certificated Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
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INTEREST AND PAYMENTS
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest at either (a) a fixed rate or (b) a
rate determined by reference to an interest rate basis or formula, which may be
adjusted by adding or subtracting a Spread ("Spread" is the number of basis
points specified in the applicable Pricing Supplement as being applicable to the
interest rate for such Floating Rate Note) and/or multiplying by a Spread
Multiplier ("Spread Multiplier" is the percentage specified in the applicable
Pricing Supplement of the interest rate basis applicable to such Floating Rate
Note). A Floating Rate Note may also have either or both of the following: (i) a
maximum limitation, or ceiling, on the rate of interest which may accrue during
any interest period; and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period. The applicable Pricing
Supplement relating to an interest-bearing Note will designate either a fixed
rate of interest per annum payable on the Note or an interest rate basis or
formula applicable to the Note, which basis or formula may be, without
limitation, one of the following: (a) the CD Rate (a "CD Rate Note"), (b) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Prime Rate (a
"Prime Rate Note"), (d) the CMT Rate (a "CMT Rate Note"), (e) LIBOR (a
"LIBOR Note"), (f) the Treasury Rate (a "Treasury Rate Note") or (g) the
Federal Funds Rate (a "Federal Funds Rate Note").
Each interest-bearing Note will bear interest from the date of issue at the
rate per annum, or at a rate calculated pursuant to the interest rate basis or
formula, stated therein and in the applicable Pricing Supplement, until the
principal thereof is paid or made available for payment.
Interest rates, interest payment periods, Interest Reset Periods (hereafter
defined), Interest Payment Dates, Interest Reset Dates and all other aspects of
interest rate bases or formulas are subject to change by the Company from time
to time, as specified in the applicable Pricing Supplement, but no such change
will affect any Note already issued or as to which an offer to purchase has been
accepted by the Company.
Principal, premium, if any, and interest payable at Maturity on each Note
will be paid at Maturity against surrender of the Note at the office of The
First National Bank of Chicago (the "Trustee") designated for that purpose in
Chicago or New York City. If the Maturity of any Note would fall on a day that
is not a Business Day, the payment of principal, premium, if any, and interest
due at Maturity will be made on the next succeeding Business Day, and no
interest on such payment will accrue for the period from and after Maturity.
Unless otherwise specified in the applicable Pricing Supplement, "Business
Day" shall mean any day, other than a Saturday or a Sunday, on which banking
institutions in Chicago or New York City are not required or authorized by law
or executive order to close and, with respect to LIBOR Notes, is also a London
Banking Day. "London Banking Day" shall mean any day on which dealings in
deposits in U.S. dollars are transacted in the London interbank market.
FIXED RATE NOTES: Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year consisting of twelve 30-day months and will be payable
semi-annually on February 1 and August 1 of each year (each, an "Interest
Payment Date" with respect to Fixed Rate Notes) and upon Maturity; PROVIDED,
HOWEVER, that if an Interest Payment Date with respect to any Fixed Rate Note
would otherwise fall on a day that is not a Business Day, such Interest Payment
Date will be the following Business Day, and no interest on such payment will
accrue for the period from and after such Interest Payment Date. Interest
payments will be made in an amount equal to the interest accrued from and
including the next preceding Interest Payment Date in respect of which interest
has been paid or duly provided for (or from and including the date of issue, if
no interest has been paid or duly provided for with respect to the applicable
Note) to but excluding the applicable Interest Payment Date or Maturity, as the
case may be. In the case of Certificated Notes, principal, premium, if any, and
interest due at Maturity will be payable in immediately available funds and
interest due other than at Maturity will be payable by check, or at the option
of the Company, in immediately available funds. In the case of Book-Entry Notes,
all payments of principal, premium, if any, and interest due at Maturity and
other than at Maturity will be payable in immediately available funds to DTC or
its nominee. See "Book-Entry Notes". Interest will be payable to the person in
whose name the Fixed Rate Note is registered at the close of
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business on the January 15 or July 15 record date next preceding the applicable
February 1 or August 1 Interest Payment Date (each a "Fixed Rate Note Record
Date"); PROVIDED, HOWEVER, that interest payable at Maturity will be payable to
the person to whom principal shall be payable. The first payment of interest on
any Fixed Rate Note originally issued after a Fixed Rate Note Record Date and on
or before the immediately following Interest Payment Date will be made on the
next succeeding Interest Payment Date to the registered owner at the close of
business on the Fixed Rate Note Record Date next preceding such date of payment.
FLOATING RATE NOTES: The interest rate on each Floating Rate Note from the
date of issue to but excluding the first Interest Reset Date will be the
"Initial Interest Rate" specified therein and in the applicable Pricing
Supplement (the "Initial Interest Rate"). Thereafter, from and after each
Interest Reset Date to but excluding the following Interest Reset Date, the
interest rate on a Floating Rate Note will be determined by reference to an
interest rate basis or formula plus or minus the Spread, if any, and/or
multiplied by the Spread Multiplier, if any, and subject to the maximum and/or
minimum interest rate limitations, if any, applicable to such Floating Rate
Note. In addition to any maximum interest rate limitation that may apply to any
Floating Rate Note, the interest rate on Floating Rate Notes will in no event be
higher than the maximum rate permitted by Indiana law, as the same may be
modified by United States law of general application. The Pricing Supplement
will also set forth with respect to each Floating Rate Note the Interest Payment
Dates, the Interest Reset Dates and, if applicable, the Index Maturity. "Index
Maturity" means, with respect to a Floating Rate Note, the period to maturity
of the instrument or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded if necessary to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point being rounded upward
(e.g., 5.876545% (or .05876545) rounded upward to 5.87655% (or .0587655)); and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will have daily, weekly, monthly, quarterly, semi-annual or annual
resets of the rate of interest (each an "Interest Reset Period"), which will
be specified in the applicable Pricing Supplement and in the applicable Note.
Unless otherwise specified in the applicable Pricing Supplement, the "Interest
Reset Date" will be, in the case of Floating Rate Notes which reset daily, each
Business Day; in the case of Floating Rate Notes which reset weekly, the
Wednesday of each week (with the exception of weekly reset Treasury Rate Notes,
which will reset the Tuesday of each week, except as specified below); in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December of each year; in the case of
Floating Rate Notes which reset semi-annually, the third Wednesday of the two
months of each year specified in the applicable Pricing Supplement and in the
applicable Floating Rate Note; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of the month specified in the applicable
Pricing Supplement and in the applicable Floating Rate Note. If any Interest
Reset Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Reset Date will be postponed to the next succeeding
Business Day, except that in the case of a LIBOR Note, if such Business Day is
in the next succeeding calendar month, such Interest Reset Date will be the next
preceding Business Day.
Except as provided above or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year as specified in the applicable
Pricing Supplement and in the applicable Floating Rate Note; in the case of
Floating Rate Notes which reset quarterly, on the third Wednesday of March,
June, September and December of each year; in the case of Floating Rate Notes
which reset semi-annually, on the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement and in the applicable Floating
Rate Note; and in the case of Floating Rate Notes which reset annually, on the
third Wednesday of the month of each year specified in the applicable Pricing
Supplement and in the applicable Floating Rate Note (each, an "Interest Payment
Date"
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with respect to Floating Rate Notes), and, in each case, at Maturity. If an
Interest Payment Date with respect to any Floating Rate Note would otherwise
fall on a day that is not a Business Day with respect to such Note, such
Interest Payment Date will be the following Business Day with respect to such
Note, except that in the case of a LIBOR Note, if such day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day with respect to such LIBOR Note.
Interest on a Floating Rate Note will be payable to the person in whose
name the Floating Rate Note is registered at the close of business on the
fifteenth calendar day prior to the Interest Payment Date (the "Floating Rate
Note Record Date"); PROVIDED, HOWEVER, that interest payable at Maturity will
be payable to the person to whom principal shall be payable. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any Floating Rate Note issued after a Floating Rate Note Record Date and on or
before the immediately following Interest Payment Date will be made on the
Interest Payment Date following the next succeeding Floating Rate Note Record
Date to the registered owner at the close of business on such next succeeding
Floating Rate Note Record Date.
Unless otherwise indicated in the applicable Pricing Supplement, interest
payments will be made in an amount equal to the interest accrued from and
including the next preceding Interest Payment Date in respect of which interest
has been paid or duly provided for (or from and including the date of issue, if
no interest has been paid or duly provided for with respect to the applicable
Note) to but excluding the applicable Interest Payment Date or Maturity, as the
case may be. With respect to a Floating Rate Note, accrued interest for a
specified period is calculated by multiplying the face amount of such Floating
Rate Note by an accrued interest factor. Such accrued interest factor is
computed by adding the interest factors calculated for each day included in such
period. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day will be computed by dividing the interest rate
in effect on such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Prime Rate Notes, LIBOR Notes, and Federal Funds Rate Notes, or by
the actual number of days in the year, in the case of CMT Rate Notes or Treasury
Rate Notes. The interest rate in effect on each day will be (a) if such day is
an Interest Reset Date, the interest rate with respect to the Interest
Determination Date (as defined below) pertaining to such Interest Reset Date, or
(b) if such day is not an Interest Reset Date, the interest rate with respect to
the Interest Determination Date pertaining to the next preceding Interest Reset
Date, subject in either case to any adjustment for a Spread and/or Spread
Multiplier and to any maximum and/or minimum interest rate limitation; PROVIDED,
HOWEVER, that, unless otherwise specified in the applicable Pricing Supplement,
the interest rate in effect for the period from and including the date of issue
to but excluding the first Interest Reset Date with respect to a Floating Rate
Note will be the Initial Interest Rate.
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for CD Rate
Notes, Commercial Paper Rate Notes, Prime Rate Notes, CMT Rate Notes and Federal
Funds Rate Notes will be the second Business Day next preceding such Interest
Reset Date; the "Interest Determination Date" pertaining to an Interest Reset
Date for LIBOR Notes will be the second London Banking Day next preceding such
Interest Reset Date; and the "Interest Determination Date" pertaining to an
Interest Reset Date for Treasury Rate Notes will be the day of the week in which
such Interest Reset Date falls on which Treasury Bills (hereafter defined) are
auctioned, except as hereafter provided. Treasury Bills are normally sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
"Interest Determination Date" pertaining to the Interest Reset Date occurring
in the next succeeding week. If an auction falls on a day that otherwise would
be an Interest Reset Date, such Interest Reset Date will be the next following
Business Day. If no auction is held for a particular week, the "Interest
Determination Date" pertaining to the Interest Reset Date occurring in that
week will be the first Business Day of that week.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after
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such Interest Determination Date, or if any such day is not a Business Day, the
next succeeding Business Day or (ii) the Business Day prior to the applicable
Interest Payment Date or Maturity, as the case may be.
Unless otherwise provided in the applicable Pricing Supplement, The First
National Bank of Chicago will be the calculation agent (the "Calculation
Agent") with respect to the Floating Rate Notes. Upon the request of the Holder
of any Floating Rate Note, the Calculation Agent will provide the interest rate
then in effect and, if determined, the interest rate which will become effective
as a result of a determination made for the next Interest Reset Date with
respect to such Floating Rate Note.
As mentioned above, the interest rate in effect with respect to a Floating
Rate Note from and including the date of issue to but excluding the first
Interest Reset Date will be the Initial Interest Rate. The interest rate that
will become effective on each subsequent Interest Reset Date will be determined
by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at rates to be calculated with reference
to the CD Rate and the Spread and/or Spread Multiplier, if any, in accordance
with the following provisions and the additional or different terms specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD
Rate" means, with respect to any Interest Determination Date relating to a CD
Rate Note (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement as such rate shall be
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publication ("H.15(519)"), under the heading "CDs (Secondary Market)," or,
if not so published by 3:00 p.m. New York City time on the Calculation Date
pertaining to such CD Rate Interest Determination Date, then the CD Rate will be
the rate on such CD Rate Interest Determination Date for negotiable United
States dollar certificates of deposit of the Index Maturity designated in the
applicable Pricing Supplement as published by the Federal Reserve Bank of New
York in its daily statistical release "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or any successor publication ("Composite Quotations")
under the heading "Certificates of Deposit." If such rate is not published by
3:00 p.m. New York City time on such Calculation Date in either H.15(519) or
Composite Quotations, then the CD Rate for that CD Rate Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the secondary market offered rates as of 10:00 a.m. New York City time on
such CD Rate Interest Determination Date of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in The City of New York
(which may include one or more of the Unaffiliated Agents or one or more of
their affiliates) selected by the Calculation Agent for negotiable United States
dollar certificates of deposit of major United States money center banks of the
highest credit standing (in the market for negotiable United States dollar
certificates of deposit) with a remaining maturity closest to the Index Maturity
specified in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time; PROVIDED,
HOWEVER, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting rates as mentioned in this sentence, the CD Rate with respect to
such CD Rate Interest Determination Date will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at rates to be calculated
with reference to the Commercial Paper Rate and the Spread and/or Spread
Multiplier, if any, in accordance with the following provisions and the
additional or different terms specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note (a "Commercial Paper Rate Interest
Determination Date"), the Money Market Yield (as defined below) on such date of
the rate for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as such rate shall be published in H.15(519) under
the heading "Commercial Paper" or, if such heading is no
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longer available, such other heading representing commercial paper issued by
non-financial entities whose bond rating is "Aa", or the equivalent, from a
nationally recognized statistical rating organization. In the event such rate is
not so published by 3:00 p.m. New York City time on the Calculation Date
pertaining to such Commercial Paper Rate Interest Determination Date, then the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper of the
specified Index Maturity as published in Composite Quotations under the heading
"Commercial Paper" (with an Index Maturity of one month or three months being
deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If such rate is not published by 3:00 p.m. New York City time on
such Calculation Date in either H.15(519) or Composite Quotations, then the
Commercial Paper Rate for such Commercial Paper Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the Money Market Yield
of the arithmetic mean of the offered rates at approximately 11:00 a.m. New York
City time on such Commercial Paper Rate Interest Determination Date of three
leading dealers in commercial paper in The City of New York (which may include
one or more of the Unaffiliated Agents or one or more of their affiliates)
selected by the Calculation Agent for commercial paper of the specified Index
Maturity placed for a non-financial entity whose bond rating is "Aa", or the
equivalent, from a nationally recognized statistical rating organization;
PROVIDED, HOWEVER, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting rates as mentioned in this sentence, the Commercial Paper
Rate with respect to such Commercial Paper Rate Interest Determination Date will
be the same as the Commercial Paper Rate in effect for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate). "Money Market Yield" means a yield (expressed as a
percentage rounded as aforesaid) calculated in accordance with the following
formula:
D x 360
Money Market Yield = ------------ x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal; and "M" refers to the
actual number of days in the applicable Interest Reset Period.
CMT RATE NOTES
CMT Rate Notes will bear interest at rates to be calculated with reference
to the CMT Rate and the Spread and/or Spread Multiplier, if any, in accordance
with the following provisions and the additional or different terms specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any Interest Determination Date relating to a CMT
Rate Note (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page (as defined below) under the caption
"--Treasury Constant Maturities -- Federal Reserve Board Release H.15 --Mondays
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity
Index (as defined below) for (i) if the Designated CMT Telerate Page is 7055,
such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the weekly or monthly average, as specified in the
applicable Pricing Supplement, for the week or the month, as applicable, ended
immediately preceding the week or the month, as applicable, in which the related
CMT Rate Interest Determination Date occurs. If such rate is no longer displayed
on the relevant page, or is not displayed by 3:00 P.M. New York City time on the
related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or is not published by 3:00 P.M. New York City time
on the related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for such CMT Rate Interest Determination Date as
may then be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in the relevant H.15(519). If such
information is not provided
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by 3:00 P.M. New York City time on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market offered rates as of approximately 3:30 P.M. New York
City time on the CMT Rate Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers in The City of New York (which may include one or more of the
Unaffiliated Agents or one or more of their affiliates) (each, a "Reference
Dealer") selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes")
with an original maturity of approximately the Designated CMT Maturity Index and
a remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on the
arithmetic mean of the secondary market offered rates as of approximately 3:30
P.M. New York City time on the CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100 million. If three or four (and
not five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offered rates obtained and
neither the highest nor the lowest of such quotes will be eliminated; PROVIDED,
HOWEVER, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate with respect to such CMT
Rate Interest Determination Date will be the same as the CMT Rate in effect for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the Initial Interest Rate). If two Treasury Notes with an
original maturity as described in the second preceding sentence have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the quotes
for the Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service (or any successor service) on the page specified in the
applicable Pricing Supplement (or any other page as may replace such page on
such service) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519) or if no such page is specified in the applicable Pricing
Supplement, page 7052 or such other page as may replace such page.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated or, if no such maturity is specified in the applicable
Pricing Supplement, 2 years.
PRIME RATE NOTES
Prime Rate Notes will bear interest at rates to be calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, in
accordance with the following provisions and the additional or different terms
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a
Prime Rate Note (a "Prime Rate Interest Determination Date"), the rate on that
day published in H.15(519) under the heading "Bank Prime Loan," or if not so
published by 3:00 p.m. New York City time on the Calculation Date pertaining to
such Prime Rate Interest Determination Date, then the Prime Rate shall be
determined by the Calculation Agent and will be the arithmetic mean of the rates
of interest publicly announced by each bank that appears on the Reuters Screen
USPRIME1 Page (as hereinafter defined) as such bank's prime rate or base lending
rate as in effect for that Prime Rate Interest Determination Date. If fewer than
four such rates appear on Reuters Screen USPRIME1
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Page for that Prime Rate Interest Determination Date, then the Prime Rate will
be determined by the Calculation Agent and will be the arithmetic mean of the
prime rates (or base lending rates) quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on that Prime Rate
Interest Determination Date by four major money center banks (which may include
one or more affiliates of the Unaffiliated Agents) in The City of New York
selected by the Calculation Agent. If fewer than four such quotations are so
provided, then the Prime Rate shall be determined by the Calculation Agent and
will be the arithmetic mean of four prime rates (or base lending rates) so
quoted in The City of New York on such date by the major money center banks, if
any, that have provided such quotations and by a reasonable number of substitute
banks or trust companies (which may include one or more affiliates of the
Unaffiliated Agents) necessary in order to obtain four such prime rate
quotations, provided such substitute banks or trust companies are organized and
doing business under the laws of the United States or any State thereof, each
having total equity capital of at least $500,000,000 and being subject to
supervision or examination by a Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; PROVIDED, HOWEVER, that if the
banks or trust companies selected as aforesaid by the Calculation Agent are not
quoting rates as mentioned in this sentence, the Prime Rate with respect to such
Prime Rate Interest Determination Date will be the same as the Prime Rate in
effect for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the Initial Interest Rate).
"Reuters Screen USPRIME1 Page" means the display on the Reuters Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
LIBOR NOTES
LIBOR Notes will bear interest at rates to be calculated with reference to
LIBOR and the Spread and/or Spread Multiplier, if any, in accordance with the
following provisions and the additional or different terms specified in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note (a "LIBOR Interest Determination Date"), LIBOR will be, as specified
in the applicable Pricing Supplement, either (a) the arithmetic mean (as
determined by the Calculation Agent) of the offered rates, as appearing on
the Reuters Screen LIBO Page, or such other page as may replace such page,
at approximately 11:00 a.m. London time on such LIBOR Interest
Determination Date, for deposits in U.S. dollars for the period of the
Index Maturity specified in the applicable Pricing Supplement commencing on
the second London Banking Day immediately following such LIBOR Interest
Determination Date, if at least two such offered rates appear on the
Reuters Screen LIBO Page ("LIBOR-Reuters"), or (b) the rate for deposits
in U.S. dollars for the period of the Index Maturity specified in the
applicable Pricing Supplement commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date that appears
as of 11:00 a.m. London time on such LIBOR Interest Determination Date on
the display screen designated "Page 3750" by Dow Jones Telerate Service
("Telerate"), or such other page as may replace such page on that service
or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits ("LIBOR-Telerate"). If neither
LIBOR-Reuters nor LIBOR-Telerate is specified in the applicable Pricing
Supplement, then LIBOR will be determined as if LIBOR-Telerate had been
specified. If fewer than two offered rates appear on the Reuters Screen
LIBO Page, or if no rate appears on Telerate Page 3750, as applicable, then
LIBOR for such LIBOR Interest Determination Date will be determined as if
the parties had specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page as
described in (i)(a) above, or on which no rate appears on Telerate Page
3750 as specified in (i)(b) above, as applicable, LIBOR will be determined
on the basis
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of the rates at approximately 11:00 a.m. London time on such LIBOR Interest
Determination Date at which deposits in U.S. dollars are offered to prime
banks in the London interbank market by four major banks in the London
interbank market selected by the Calculation Agent for the period of the
Index Maturity specified in the applicable Pricing Supplement commencing on
the second London Banking Day immediately following such LIBOR Interest
Determination Date, and in a principal amount of not less than $1,000,000
that is representative for a single transaction in such market at such
time. The Calculation Agent will request the principal London office of
each of such banks to provide a quotation of its rate. If at least two such
quotations are provided, then LIBOR for such LIBOR Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two such
quotations are provided, then LIBOR for such LIBOR Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m. New York City time on such LIBOR Interest Determination Date by three
major banks (which may include one or more affiliates of the Unaffiliated
Agents) in The City of New York selected by the Calculation Agent for loans
in U.S. dollars to leading European banks having the Index Maturity
specified in the applicable Pricing Supplement commencing on the second
London Banking Day immediately following such LIBOR Interest Determination
Date, and in a principal amount of not less than $1,000,000 that is
representative for a single transaction in such market at such time;
PROVIDED, HOWEVER, that if the banks selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence, then
LIBOR with respect to such LIBOR Interest Determination Date will be the
same as LIBOR in effect for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the Initial Interest
Rate).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at rates to be calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
in accordance with the following provisions and the additional or different
terms specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note (a "Treasury Rate Interest Determination Date"), the rate
from the auction held on such Treasury Rate Interest Determination Date (the
"Auction") of direct obligations of the United States ("Treasury Bills")
having the Index Maturity specified in the applicable Pricing Supplement as such
rate shall be published in H.15(519) under the heading "Treasury
Bills -- Auction Average (Investment)," or if not so published by 3:00 p.m. New
York City time on the Calculation Date pertaining to such Treasury Rate Interest
Determination Date, then the Treasury Rate will be the auction average rate of
such Treasury Bills (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the Auction of Treasury Bills having the Index Maturity specified in
the applicable Pricing Supplement are not published or announced as provided
above by 3:00 p.m. New York City time on such Calculation Date, or if no such
Auction is held, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates as of approximately
3:30 p.m. New York City time on such Treasury Rate Interest Determination Date
of three leading primary United States government securities dealers (which may
include one or more of the Unaffiliated Agents or one or more of their
affiliates) selected by the Calculation Agent for the issue of Treasury Bills
with a remaining maturity closest to the specified Index Maturity; PROVIDED,
HOWEVER, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting rates as mentioned in this sentence, the Treasury Rate with respect
to such Treasury Rate Interest Determination Date will be the same as the
Treasury Rate in effect for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the Initial Interest Rate).
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FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at rates to be calculated with
reference to the Federal Funds Rate and the Spread and/or Spread Multiplier, if
any, in accordance with the following provisions and the additional or different
terms specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note (a "Federal Funds Rate Interest Determination
Date"), the rate on that day for Federal Funds as such rate shall be published
in H.15(519) under the heading "Federal Funds (Effective)" or, if not so
published by 3:00 p.m. New York City time on the Calculation Date pertaining to
such Federal Funds Rate Interest Determination Date, then the Federal Funds Rate
shall be the rate on such Federal Funds Rate Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not published by 3:00 p.m. New York City time on such
Calculation Date, in either H.15(519) or Composite Quotations, then the Federal
Funds Rate for such Federal Funds Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
offered rates for the last transaction in overnight Federal Funds prior to 9:00
a.m. New York City time on such Federal Funds Rate Interest Determination Date
arranged by each of three leading brokers of Federal Funds transactions in The
City of New York (which may include one or more of the Unaffiliated Agents or
one or more of their affiliates) selected by the Calculation Agent; PROVIDED,
HOWEVER, that if the brokers selected as aforesaid by the Calculation Agent are
not quoting rates as mentioned in this sentence, the Federal Funds Rate with
respect to such Federal Funds Rate Interest Determination Date will be the same
as the Federal Funds Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial Interest
Rate).
REDEMPTION AT THE OPTION OF THE COMPANY
The Notes will be subject to redemption by the Company on and after the
initial redemption date, if any, fixed at the time of sale and set forth in the
applicable Pricing Supplement and in the applicable Note (the "Initial
Redemption Date"). If no Initial Redemption Date is indicated with respect to a
Note, such Note will not be redeemable prior to Stated Maturity. On and after
the Initial Redemption Date with respect to any Note, such Note will be
redeemable in whole or from time to time in part in increments of $1,000 at the
option of the Company at a redemption price (the "Redemption Price")
determined in accordance with the following paragraph, together with interest
accrued thereon to the date of redemption, on written notice given to the Holder
thereof no more than 60 days nor less than 30 days prior to the date of
redemption.
The Redemption Price for each Note subject to redemption initially shall be
equal to a percentage (the "Initial Redemption Percentage") of the principal
amount of such Note to be redeemed and shall decline at each anniversary of the
Initial Redemption Date with respect to such Note by a percentage (the "Annual
Redemption Percentage Reduction") of the principal amount to be redeemed until
the Redemption Price is 100% of such principal amount. The Initial Redemption
Percentage and any Annual Redemption Percentage Reduction with respect to each
Note subject to redemption prior to Stated Maturity will be fixed at the time of
sale and set forth in the applicable Pricing Supplement and in the applicable
Note.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be subject to repayment at the option of each Holder thereof
in accordance with the terms of the Notes on their respective optional repayment
dates, if any, fixed at the time of sale and set forth in the applicable Pricing
Supplement and in the applicable Note (the "Optional Repayment Dates"). If no
Optional Repayment Date is indicated with respect to a Note, such Note will not
be repayable at the option of the Holder prior to Stated Maturity. On any
Optional Repayment Date with respect to any Note, such Note will be repayable in
whole, or in part in increments of $1,000, at the option of the Holder thereof
at a price equal to 100% of the principal amount to be repaid, together with
interest accrued thereon to the Optional Repayment Date, on notice given by such
Holder and received by the Company not more than 60 days nor less than 20 days
prior to the Optional Repayment Date. Any such notice shall be delivered to the
office or agency of the Company maintained with respect to the Notes in Chicago
or New York City and
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shall be duly executed by the Holder of the Note or by his attorney duly
authorized in writing. Such notice shall consist of the Note itself with the
form on such Note entitled "Option to Elect Repayment" duly completed. Such
notice duly received by the Company shall be irrevocable. All questions as to
the validity, form, eligibility (including time of receipt) and acceptance of
any Note for repayment will be determined by the Company, whose determination
will be final and binding.
Only the Depository may exercise the repayment option in respect of global
Debt Securities representing Book-Entry Notes. Accordingly, owners of beneficial
interests in global Debt Securities ("Beneficial Owners") that desire to have
all or any portion of the Book-Entry Notes represented by such global Debt
Securities repaid must instruct the Participant through which they own their
interest to direct the Depository to exercise the repayment option on their
behalf by delivering the related global Debt Security and duly completed
election form to the Trustee as aforesaid. In order to ensure that such global
Debt Security and election form are received by the Trustee on a particular day,
the applicable Beneficial Owner must so instruct the Participant through which
it owns its interest before such Participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, Beneficial Owners
should consult the Participants through which they own their interests for the
respective deadlines for such Participants. At the time repayment instructions
are given, each such Beneficial Owner shall cause the Participant through which
it owns its interest to transfer such Beneficial Owner's interest in the global
Debt Security or Securities representing the related Book-Entry Notes, on the
Depository's records, to the Trustee. See "-- Book-Entry Notes" in this
Prospectus Supplement and "Description of Debt Securities -- Global Debt
Securities" in the accompanying Prospectus.
If applicable, the Company will comply with the requirements of Section
14(e) of the Exchange Act, and the rules promulgated thereunder, and any other
securities laws or regulations in connection with any such repayment.
The Company, acting directly or indirectly, may at any time purchase Notes
at any price or prices in the open market or otherwise. Notes so purchased by
the Company may, at the discretion of the Company, be held, resold or
surrendered to the Trustee for cancellation.
BOOK-ENTRY NOTES
The Notes may be issued in whole or in part as Book-Entry Notes represented
by one or more global Debt Securities. Upon issuance, all Fixed Rate Notes in
book-entry form having the same date of issue, interest rate, maturity and other
terms will be represented by a single Book-Entry Note and all Floating Rate
Notes in book-entry form having the same interest rate basis or formula, date of
issue, Initial Interest Rate, Interest Payment Dates, Index Maturity, Interest
Reset Dates, Spread and/or Spread Multiplier, if any, maximum and/or minimum
interest rate limitations, if any, maturity and other terms will be represented
by a single Book-Entry Note. Each global Debt Security representing Book-Entry
Notes will be deposited with, or on behalf of, DTC or such other Depository as
is specified in the applicable Pricing Supplement and registered in the name of
DTC or such other Depository (or their nominees). Book-Entry Notes will not be
exchangeable for Certificated Notes and, except under limited circumstances,
will not otherwise be issuable as Certificated Notes. See "Description of Debt
Securities -- Global Debt Securities" in the accompanying Prospectus. If at any
time individual Certificated Notes are issued, they will be issued in
denominations of $1,000 and integral multiples thereof.
UNITED STATES TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes is based on
laws, regulations, rulings and decisions now in effect, all of which are subject
to change. It deals only with Notes held as capital assets and does not deal
with persons in special tax situations, such as financial institutions,
insurance companies, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional
currency is not the United States
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dollar. Except in certain limited respects, it does not deal with holders other
than original purchasers. Persons considering the purchase of the Notes should
consult their own tax advisors concerning the application of United States
federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, (iv) 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 United States fiduciaries have the
authority to control all substantial decisions of the trust, or (v) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a holder of a Note that is not a U.S. Holder.
U.S. HOLDERS
INTEREST. Payments of interest on a Note generally will be taxable to a
U.S. Holder as ordinary interest income at the time such payments are accrued or
are received (in accordance with the U.S. Holder's method of accounting for tax
purposes).
ORIGINAL ISSUE DISCOUNT. Notes with a term greater than one year may be
issued with original issue discount for federal income tax purposes. Generally,
original issue discount will arise if the stated redemption price at maturity
(normally the principal amount) of a Note exceeds its issue price by more than a
DE MINIMIS amount or if a Note has certain interest payment characteristics. If
a Note is issued with original issue discount, a U.S. Holder of the Note will be
required to include amounts in gross income for federal income tax purposes in
advance of receipt of the cash payments to which such amounts are attributable.
The amount of original issue discount to be included in income in any tax period
will be determined using a constant yield to maturity method. Any amounts
included in income as original issue discount will increase a U.S. Holder's tax
basis in the Note.
A U.S. Holder who purchases a Note with original issue discount for an
amount greater than its adjusted issue price, as of the purchase date, may be
considered to have purchased such Note at an "acquisition premium." The
adjusted issue price of a Note generally equals the issue price of the Note
increased by any accrued original issue discount. Under the acquisition premium
rules, the amount of original issue discount which such U.S. Holder must include
in its gross income with respect to the Note for any taxable year (or portion
thereof in which such U.S. Holder holds the Note) will be reduced (but not below
zero) by the portion of the acquisition premium properly allocable to the
period.
Floating Rate Notes are subject to special rules whereby a Floating Rate
Note will qualify as a "variable rate debt instrument" if (a) its issue price
does not exceed the total noncontingent principal payments due under the
Floating Rate Note by more than a specified DE MINIMIS amount and (b) it
provides for stated interest, paid or compounded at least annually, at current
values of (i) one or more qualified floating rates, (ii) a single fixed rate and
one or more qualified floating rates, (iii) a single objective rate, or (iv) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Floating Rate
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Note (E.G., two or more qualified floating rates with values within 25 basis
points of each other as determined on the Floating Rate Note's issue date) will
be treated as a single qualified floating rate. Notwithstanding the foregoing, a
variable rate that would otherwise constitute a qualified floating rate but
which is subject to one or more restrictions such as a maximum numerical
limitation (I.E., a cap) or a minimum numerical limitation (I.E., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate
under the OID Regulations unless such cap or floor is fixed throughout the term
of the Note. An "objective rate" is a rate that is not itself a qualified
floating rate but which is determined using a single fixed formula and that is
based on objective financial or economic information. A rate will not qualify as
an objective rate if it is based on information that is within the control of
the issuer (or a related party) or that is unique to the circumstances of the
issuer (or a related party), such as dividends, profits, or the value of the
issuer's stock (although a rate does not fail to be an objective rate merely
because it is based on the credit quality of the issuer). A "qualified inverse
floating rate" is any objective rate where such rate is equal to a fixed rate
minus a qualified floating rate, as long as variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
qualified floating rate. The OID Regulations also provide that if a Floating
Rate Note provides for stated interest at a fixed rate for an initial period of
one year or less followed by a variable rate that is either a qualified floating
rate or an objective rate and if the variable rate on the Floating Rate Note's
issue date is intended to approximate the fixed rate (E.G., the value of the
variable rate on the issue date does not differ from the value of the fixed rate
by more than 25 basis points), then the fixed rate and the variable rate
together will constitute either a single qualified floating rate or objective
rate, as the case may be.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument" under the OID
Regulations and if the interest on such Note is unconditionally payable in cash
or property (other than debt instruments of the issuer) at least annually, then
all stated interest on the Note will constitute qualified stated interest and
will be taxed accordingly. Thus, a Floating Rate Note that provides for stated
interest at either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable rate debt
instrument" under the OID Regulations will generally not be treated as having
been issued with original issue discount unless the Floating Rate Note is issued
at a "true" discount (I.E., at a price below the Note's stated principal
amount) in excess of a specified DE MINIMIS amount.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Floating Rate Note would be
treated as a contingent payment debt obligation. U.S. Holders should be aware
that on June 11, 1996, the Treasury Department issued final regulations (the
"CPDI Regulations") concerning the proper United States Federal income tax
treatment of contingent payment debt instruments. In general, the CPDI
Regulations would cause the timing and character of income, gain or loss
reported on a contingent payment debt instrument to substantially differ from
the timing and character of income, gain or loss reported on a contingent
payment debt instrument under general principles of current United States
Federal income tax law. Specifically, the CPDI Regulations generally require a
U.S. Holder of such an instrument to include future contingent and noncontingent
interest payments in income as such interest accrues based upon a projected
payment schedule. In general, under the CPDI Regulations, any gain recognized by
a U.S. Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss (depending
upon the circumstances). The CPDI Regulations apply to debt instruments issued
on or after August 13, 1996. The proper United States Federal income tax
treatment of Floating Rate Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
Furthermore, any other special United States Federal income tax considerations,
not otherwise discussed herein, which are applicable to any particular issue of
Notes will be discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax
S-14
<PAGE>
advisors, since the original issue discount consequences will depend, in part,
on the particular terms and features of the purchased Notes.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note for an amount that is
less than (a) its adjusted issue price, in the case of a Note having original
issue discount, or (b) its stated redemption price at maturity, in the case of a
Note not having original issue discount, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified DE MINIMIS amount. Under the market discount
rules, a U.S Holder will be required to treat any gain on the sale, exchange,
retirement or other disposition of a Note as ordinary income to the extent of
the market discount which is treated as having accrued on the Note at the time
of such payment or disposition and which has not previously been included in
income (pursuant to an election by the U.S. Holder to include such market
discount in income as it accrues). Market discount is accrued on a straight-line
basis unless the U.S. Holder elects to accrue market discount under a constant
yield method. If a Note is disposed of by gift or in certain nonrecognition
transactions, accrued market discount will be recognized as if the Note had been
sold for a price equal to its fair market value. In addition, the U.S. Holder
may be required to defer, until the maturity of the Note or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or maintained to purchase or carry
such Note.
AMORTIZABLE BOND PREMIUM. If a U.S. Holder purchases a Note for an amount
that is greater than the amount payable at maturity, the U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess and may elect (in accordance with applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") ) to amortize such
premium (as an offset to interest income), using a constant yield method, over
the remaining term of the Note (where such Note is not optionally redeemable
prior to its maturity date).
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be long-term capital gain or loss if the Note is held for
more than the requisite holding period. Legislation (the "Taxpayer Relief Act of
1997") enacted on August 5, 1997 reduces long-term capital gains tax rates for
individuals, trusts and estates and modifies the holding period requirement for
preferential capital gains tax rates. The taxation of corporate capital gains
was not changed by the Taxpayer Relief Act of 1997. U.S. Holders should consult
their tax advisors in this regard.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal or interest (including original issue discount, if any)
on a Note, unless such non-U.S. Holder is a direct or indirect 10% or greater
shareholder of the Company, a controlled foreign corporation related to the
Company or a bank receiving interest described in section 881(c)(3)(A) of the
Code. To qualify for the exemption from taxation, the last United States payor
in the chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (i) is signed by the
S-15
<PAGE>
beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an Internal Revenue Service
("IRS") Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. However, a non-U.S.
Holder who is a nonresident alien individual present in the United States for a
period or periods aggregating 183 days or more during the tax year will be
subject to a 30% tax on capital gains. Certain other exceptions may be
applicable, and a non-U.S. Holder should consult its tax advisor in this regard.
The Notes will not be includable in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax liability provided the
required information is furnished to the IRS.
PLAN OF DISTRIBUTION OF NOTES
Under the terms of Distribution Agreements, the Notes are being offered on
a continuing basis by the Company through the Agents, each of which has agreed
to use its reasonable best efforts to solicit offers to purchase the Notes. The
Company will pay to each of the Unaffiliated Agents a commission not to exceed
.875% of the principal amount of each Note, depending on its maturity, sold
through such Unaffiliated Agent. The Company may also sell Notes to an
Unaffiliated Agent as principal at a discount from the principal amount thereof
for resale to investors and other purchasers. No commissions will be paid to
AGSI, which is an affiliate of the Company acting as an Agent. The Company will
have the sole right to accept offers to purchase Notes and may reject any such
offer, in whole or in part. Each Agent shall have the right, in its discretion
reasonably exercised, without notice to the Company, to reject any offer to
purchase Notes
S-16
<PAGE>
received by it, in whole or in part. The Notes will be issued only in fully
registered form at 100% of the principal amount thereof, unless otherwise
specified in the applicable Pricing Supplement.
In addition, the Unaffiliated Agents may offer the Notes they have
purchased as principal to other dealers. The Unaffiliated Agents may sell Notes
to any dealer at a discount and, unless otherwise specified in the applicable
Pricing Supplement, such discount allowed to any dealer will not be in excess of
the discount to be received by such Unaffiliated Agent from the Company. Unless
otherwise indicated in the applicable Pricing Supplement, any Note sold to an
Unaffiliated Agent as principal will be purchased by such Unaffiliated Agent at
a price equal to 100% of the principal amount thereof less a percentage equal to
the commission applicable to an agency sale of a Note of identical maturity, and
may be resold by the Unaffiliated Agent to investors and other purchasers from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices relating to prevailing market
prices at the time of resale or may be resold to certain dealers as described
above. After the initial public offering of Notes to be resold to investors and
other purchasers, the public offering price (in the case of Notes to be resold
at a fixed public offering price), concession and discount may be changed.
The Company has reserved the right to sell the Notes through one or more
other agents or to other persons as principal. In any such events, the names of
the other agents or principals will be set forth in the applicable Pricing
Supplements. The Company also has reserved the right to sell Notes directly to
investors on its own behalf.
The Agents and any other agents or principals may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 (the "1933
Act"). The Company has agreed to indemnify the Agents and may agree to
indemnify such other agents or principals against and contribute toward certain
liabilities, including liabilities under the 1933 Act. The Company has agreed to
reimburse the Agents for certain expenses.
Each of the Unaffiliated Agents may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. Each of the Unaffiliated
Agents may from time to time purchase and sell Notes in the secondary market,
but is not obligated to do so, and there can be no assurance that there will be
a secondary market for the Notes or liquidity in the secondary market if one
develops. From time to time, one or more of the Unaffiliated Agents may make a
market in the Notes, but the Unaffiliated Agents are not obligated to do so and
may discontinue any market-making activity at any time.
In connection with an offering of Notes purchased by one or more
Unaffiliated Agent(s) as principal on a fixed price basis, such Unaffiliated
Agent(s) will be permitted to engage in certain transactions that stabilize the
price of such Notes. Such transactions may consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of such Notes. If the
Unaffiliated Agent or Unaffiliated Agents creates or create, as the case may be,
a short position in such Notes, i.e., if it sells or they sell Notes in an
aggregate principal amount exceeding that set forth in the applicable Pricing
Supplement, such Unaffiliated Agent(s) may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither the Company nor any of the Unaffiliated Agents makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Notes. In
addition, neither the Company nor any of the Unaffiliated Agents makes any
representation that the Unaffiliated Agents will engage in any such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds in The City of New York on the date of settlement.
The Company reserves the right to withdraw, cancel or modify the offer
without notice.
S-17
<PAGE>
$3,050,000,000
AMERICAN GENERAL FINANCE CORPORATION
DEBT SECURITIES AND WARRANTS TO PURCHASE DEBT SECURITIES
------------------------
American General Finance Corporation (the "Company") may offer from time
to time, either jointly or separately, (i) up to $3,050,000,000 aggregate
principal amount of its debt securities (the "Debt Securities") and (ii)
warrants (without limitation as to number or offering price) to purchase such
Debt Securities (the "Warrants") (the Debt Securities and the Warrants being
herein referred to collectively as the "Securities"). The Debt Securities will
be direct, unsecured obligations of the Company and will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. See
"Description of Debt Securities."
The Securities may be offered as separate series in amounts, at prices and
on terms to be determined at the time of sale. The title, aggregate principal
amount, initial public offering price, denominations, maturity, rate (which may
be fixed or variable) or amount and time of payment of any interest, any terms
for redemption at the option of the Company or repayment at the option of the
holder, any terms for sinking fund payments, any listing on a securities
exchange, any exercise provisions and any other terms in connection with the
offering and sale of the Securities in respect of which this Prospectus is being
delivered will be set forth in one or more supplements to this Prospectus (each,
a "Prospectus Supplement").
The Company may sell the Securities directly, through agents, underwriters
or dealers as designated from time to time, or through a combination of such
methods. If any such agents, underwriters or dealers are involved in the sale of
the Securities in respect of which this Prospectus is being delivered, the names
of such agents, underwriters or dealers and any applicable agent's commission,
underwriter's discount or dealer's purchase price and the net proceeds to the
Company from such sale will be set forth in, or may be calculated on the basis
set forth in, the applicable Prospectus Supplement. See "Plan of Distribution"
for possible indemnification arrangements for any such agents, underwriters and
dealers.
This Prospectus may not be used to consummate sales of the Securities
without delivery of one or more Prospectus Supplements.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 2, 1997.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER
OF INSURANCE OF THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF
INSURANCE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, New York, New York 10048. Copies of
such materials may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates, or from the Commission's Web site at "http://www.gov". In addition,
such material may also be inspected and copied at the offices of The New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits thereto, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-6155), are incorporated by
reference into this Prospectus and shall be deemed to be a part hereof:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
(c) the Company's Current Reports on Form 8-K dated February 4, 1997,
April 23, 1997, June 18, 1997 and June 27, 1997.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities made hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such document.
Any statement contained herein, in a Prospectus Supplement or in a document
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein, in a Prospectus
Supplement or in any subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Registration Statement or
this Prospectus.
The Company files with the Commission Annual Reports on Form 10-K
containing financial information that has been audited and reported upon, with
an opinion expressed, by independent auditors. Such Annual Reports are available
from the Company upon request.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
which are incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). Requests should be directed to the Company, 2929 Allen Parkway,
Houston, Texas 77019, Attention: Treasury Department, telephone (713) 522-1111.
2
<PAGE>
THE COMPANY
American General Finance Corporation is a financial services holding
company, the subsidiaries of which are engaged primarily in the consumer finance
and credit insurance business.
The Company was incorporated under the laws of the State of Indiana in 1927
as successor to a business started in 1920. All of the common stock of the
Company is owned by American General Finance, Inc. ("AGFI"), which was
incorporated under the laws of the State of Indiana in 1974. Since 1982, AGFI
has been a direct or indirect wholly-owned subsidiary of American General
Corporation ("AGC"), the parent company of one of the nation's largest
diversified financial services organizations. Headquartered in Houston, Texas,
AGC's operating subsidiaries are leading providers of retirement services,
consumer loans and life insurance. AGC, a Texas corporation, is the successor to
American General Insurance Company, an insurance company incorporated in Texas
in 1926.
At March 31, 1997, the Company and its subsidiaries had 1,335 offices in 39
states, Puerto Rico and the U.S. Virgin Islands. Total finance receivables, net
of unearned finance charges, at March 31, 1997 were $7.3 billion.
The principal executive offices of the Company are located at 601 N.W.
Second Street, Evansville, Indiana 47708, and its telephone number is (812)
424-8031.
USE OF PROCEEDS
Except as may otherwise be provided in an applicable Prospectus Supplement,
the net proceeds to be received by the Company from the sale of the Securities
being offered hereby will be used to repay borrowings incurred in, or to finance
the growth of receivables arising in connection with, the Company's consumer
finance operations or will be available for the purchase of receivables or for
other general corporate purposes. Pending the uses described above, such net
proceeds may be temporarily invested in short-term marketable securities.
3
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information is derived from consolidated
financial statements of the Company and its subsidiaries which have been audited
by Ernst & Young LLP, independent auditors. The information should be read in
conjunction with the consolidated financial statements and related notes,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other financial information contained in the documents
incorporated or deemed to be incorporated herein by reference. See
"Incorporation by Reference."
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
SELECTED FINANCIAL INFORMATION
Revenues:
Finance charges............ $ 1,414,590 $ 1,489,466 $ 1,070,770
Insurance.................. 206,170 222,282 179,927
Other...................... 87,913 77,436 137,378
------------ ------------ ------------
Total revenues........ 1,708,673 1,789,184 1,388,075
------------ ------------ ------------
Expenses:
Interest expense........... 482,343 506,618 411,875
Operating expenses......... 497,204 466,399 334,467
Provision for finance
receivable losses........ 409,646 573,698 154,914
Loss on assets held for
sale..................... 137,036 -- --
Insurance losses and loss
adjustment expenses...... 102,811 116,829 97,893
------------ ------------ ------------
Total expenses........ 1,629,040 1,663,544 999,149
------------ ------------ ------------
Income before provision for
income taxes.................. 79,633 125,640 388,926
Provision for income taxes...... 28,674 33,347 145,626
------------ ------------ ------------
Net income............ $ 50,959 $ 92,293 $ 243,300
============ ============ ============
DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
Finance receivables, net of unearned
finance charges.................... $ 7,443,321 $ 8,201,208 $ 7,906,677
Assets held for sale................. 668,707 -- --
Total assets......................... 9,502,589 9,485,477 8,918,698
Short-term debt...................... 3,015,920 2,330,471 2,630,463
Long-term debt....................... 4,416,637 4,935,894 4,265,226
Total shareholder's equity........... 1,334,923 1,448,496 1,328,017
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical consolidated ratios of
earnings to fixed charges of the Company and its subsidiaries for the periods
indicated:
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ----------------------------------------
1997 1996 1995 1994 1993 1992
------------ ---- ---- ---- ---- ----
1.53 1.16 1.24 1.92 1.86 1.67
For purposes of computing the ratio of earnings to fixed charges, earnings
represent the aggregate of net income, provision for income taxes, cumulative
effect of accounting changes and fixed charges. Fixed charges represent interest
expense and implicit interest in rents.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture dated as of May 1,
1997 (the "Indenture") between the Company and The First National Bank of
Chicago, as trustee (the "Trustee").
The form of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The statements and descriptions in
this Prospectus or in any Prospectus Supplement regarding provisions of the Debt
Securities and the Indenture are summaries thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indenture and the Debt Securities, including
the definitions therein of certain terms. Certain capitalized terms used herein
are defined in the Indenture. Wherever particular sections of the Indenture or
terms that are defined in the Indenture are referred to herein or in a
Prospectus Supplement, it is intended that such sections or defined terms shall
be incorporated by reference herein or therein, as the case may be.
The Indenture allows for the issuance of Debt Securities denominated in
foreign currencies and/or in bearer form. The Company does not intend to issue
any such Debt Securities pursuant to this Prospectus. Accordingly, certain
provisions of the Indenture relating to such Debt Securities are not described
herein.
GENERAL
The Debt Securities will be direct, unsecured and unsubordinated
obligations of the Company, and may be issued in one or more series. The
particular terms of each series of Debt Securities, as well as any modifications
or additions to the general terms of the Debt Securities as described herein
which may be applicable in the case of a particular series of Debt Securities,
are described in the Prospectus Supplement relating to such series of Debt
Securities. Accordingly, for a description of the terms of a particular series
of Debt Securities, reference must be made to both the Prospectus Supplement
relating thereto and to the description of Debt Securities set forth in this
Prospectus.
Reference is made to the Prospectus Supplement for the terms of the
particular series of Debt Securities being offered thereby, including, but not
limited to, the following: (1) the title of such Debt Securities and the series
in which such Debt Securities shall be included; (2) any limit on the aggregate
principal amount of such Debt Securities; (3) the percentage of their principal
amount at which such Debt Securities will be issued and, in the case of Original
Issue Discount Securities, the principal amount thereof payable upon
acceleration of the maturity thereof; (4) the date or dates on which the
principal of such Debt Securities is payable or the manner in which such dates
are determined; (5) the rate or rates (which may be fixed or variable) or amount
or amounts per annum at which such Debt Securities will bear interest, if any,
or the method of determining such rates or amounts; (6) the date from which such
interest, if any, on such Debt Securities will accrue, the dates on which such
interest, if any, will be payable, the date on which payment of such interest,
if any, will commence and the record dates for such interest payment dates, if
any; (7) the places of payment (if other than Chicago and New York City) and the
places where such Debt Securities may be surrendered for registration of
transfer or exchange; (8) the terms of any mandatory or optional redemption
(including any sinking fund provisions or any provisions for repayment at the
option of a Holder or upon the occurrence of a specified event); (9) whether
such Debt Securities are to be issued initially or permanently in the form of a
global Debt Security and, if so, the identity of the Depository (hereinafter
defined) for such global Debt Security; (10) any deletions from, modifications
of or additions to the Events of Default or covenants of the Company with
respect to such Debt Securities; and (11) any other terms of such Debt
Securities. Debt Securities may also be issued under the Indenture upon the
exercise of Warrants. See "Description of Warrants."
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder or of any particular series of such
Debt Securities and provides that the Debt Securities may be issued thereunder
from time to time in one or more series up to the aggregate principal amount
which may be authorized from time to time by the Company. (Section 301 of the
Indenture) All Debt Securities issued under the Indenture will rank equally and
ratably with any other Debt Securities issued thereunder. Because the Company is
a holding company, the right of the Company, and hence the right of creditors of
the Company (including the Holders of the Debt Securities), to participate in
any distribution of the assets of
5
<PAGE>
any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of the Company itself as a creditor of the subsidiary
may be recognized.
Unless the Prospectus Supplement relating to a particular series of Debt
Securities specifies otherwise, Debt Securities will be issued in denominations
of $1,000 and integral multiples thereof. No service charge will be made for any
transfer or exchange of Debt Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Sections 302 and 305 of the Indenture)
Some of the Debt Securities may be issued under the Indenture as Original
Issue Discount Securities (bearing no interest or interest at a rate which at
the time of issuance is below market rates) to be sold at a discount below their
stated principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities will be
described in the Prospectus Supplement relating thereto.
Unless otherwise indicated in the Prospectus Supplement relating to a
particular series of Debt Securities, the principal of and any premium or
interest on Debt Securities issued in certificated form will be payable, and,
subject to certain limitations, the transfer of Debt Securities will be
registrable, at the offices of the Trustee designated for that purpose in
Chicago and New York City, provided that, at the option of the Company, interest
may be paid by check, wire transfer or any other means permitted in the form of
such Debt Securities. Unless otherwise indicated in an applicable Prospectus
Supplement, payment of any installment of interest on a Debt Security will be
made to the person in whose name such Debt Security is registered at the close
of business on the record date for such interest payment. In the case of global
Debt Securities (which will be registered in the name of the Depository or its
nominee), payment will be made to the Depository or its nominee in accordance
with the then-existing arrangements between the paying agent(s) for such global
Debt Securities and the Depository. See "-- Global Debt Securities." (Sections
305, 307 and 1002 of the Indenture)
The Indenture does not contain any provision that limits the ability of the
Company to incur indebtedness (either directly or through merger or
consolidation) or that would afford Holders of Debt Securities protection in the
event of a highly leveraged or similar transaction involving the Company, except
as described herein under "-- Limitations on Liens" and "-- Merger and
Consolidation." Reference is made to the Prospectus Supplement relating to the
series of Debt Securities offered thereby for information with respect to any
deletions from, modifications of, or additions to, the Events of Default or
covenants that may be included in the terms of such series of Debt Securities,
including any addition of a covenant or other provision providing event risk or
similar protection.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue Debt Securities with terms different from those of Debt
Securities previously issued, to "reopen" a previous issue of a series of Debt
Securities and issue additional Debt Securities of such series.
LIMITATIONS ON LIENS
The Indenture provides that neither the Company nor a Subsidiary shall
create, assume or suffer to exist, except in favor of the Company or a
Wholly-owned Subsidiary, any Mortgage upon any of its or their property, without
equally and ratably securing the Debt Securities, but this restriction does not
apply to certain permitted encumbrances described in the Indenture, including,
without limitation, (a) Mortgages existing on May 1, 1997, (b) any Mortgages on
properties or assets, in addition to those otherwise permitted, securing
Indebtedness which at the time incurred does not, together with all other
Indebtedness so secured and not otherwise permitted, exceed in the aggregate 10%
of Consolidated Net Worth, (c) any Mortgages on properties or assets securing
Indebtedness of Subsidiaries, created in the ordinary course of business by such
Subsidiaries, if, as a matter of practice, such Subsidiaries prior to becoming
Subsidiaries had incurred Indebtedness on a secured basis, (d) purchase money
Mortgages on property acquired or constructed by the Company or any of its
Subsidiaries after May 1, 1997 to secure the purchase price thereof (or to
secure Indebtedness incurred for the purpose of financing the acquisition or
construction
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thereof), Mortgages existing on any property at the time of acquisition,
Mortgages existing on any property of any corporation at the time it becomes a
Subsidiary, and any Mortgage with respect to property acquired after May 1,
1997, in any amount (with respect to any Mortgage described in this clause (d))
not exceeding 75% of the cost of any property, including improvements thereon,
so acquired or constructed, (e) refundings or extensions of any permitted
Mortgage, and (f) any Mortgage created by the Company or any Subsidiary in
connection with a transaction intended by the Company or such Subsidiary to be
one or more sales of properties or assets of the Company or such Subsidiary;
provided that such Mortgage shall only apply to the properties or assets
involved in such sale or sales, the income therefrom and/or the proceeds
thereof. (Section 1007 of the Indenture) "Mortgage" means any mortgage,
pledge, lien, security interest, conditional sale or other title retention
agreement or other similar encumbrance. (Section 101 of the Indenture)
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise indicated in the Prospectus Supplement relating to a
particular series of Debt Securities, if an Event of Default with respect to any
Debt Securities of any series Outstanding under the Indenture shall occur and be
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Debt Securities of that series Outstanding may declare, by notice
as provided in the Indenture, the principal amount (or such lesser amount as may
be provided for in the Debt Securities of that series) of all the Debt
Securities of that series Outstanding to be due and payable immediately;
provided, that in the case of an Event of Default involving certain events in
bankruptcy, insolvency or reorganization, acceleration is automatic; and,
provided further, that if all Events of Default with respect to Debt Securities
of that series shall have been cured, or waived as hereinafter provided, and all
amounts due otherwise than on account of such acceleration shall have been paid
or deposited with the Trustee, the Holders of a majority in aggregate principal
amount of the Debt Securities of that series then Outstanding may rescind and
annul such acceleration and its consequences. (Section 502 of the Indenture)
Upon acceleration of the Maturity of Original Issue Discount Securities, an
amount less than the principal amount thereof will become due and payable.
Reference is made to the Prospectus Supplement relating to any Original Issue
Discount Securities for the particular provisions relating to acceleration of
the Maturity thereof. Any past default under the Indenture with respect to Debt
Securities of any series, and any Event of Default arising therefrom, may be
waived by the Holders of a majority in aggregate principal amount of the Debt
Securities of such series Outstanding under the Indenture, except in the case of
(i) default in the payment of the principal of or any premium or interest on any
Debt Securities of such series or (ii) default in respect of a covenant or
provision which may not be amended or modified without the consent of the Holder
of each Outstanding Debt Security of such series affected. (Section 513 of the
Indenture)
Each of the following constitutes an Event of Default with respect to each
series of Debt Securities under the Indenture: (a) default in the payment of any
interest upon any Debt Security of such series when such interest becomes due
and payable, and continuance of such default for a period of 30 days; (b)
default in the payment of the principal of and any premium on any Debt Security
of such series when it becomes due and payable, whether at the Stated Maturity,
upon redemption or repayment, by acceleration or otherwise; (c) default in the
making of any sinking fund payment on any Debt Security of such series; (d)
default in the performance or breach of any covenant or warranty of the Company
contained in the Indenture for the benefit of such series or in the Debt
Securities of such series, and the continuance of such default or breach for 90
days after written notice has been given as provided in the Indenture; (e)
acceleration of the maturity of indebtedness for money borrowed of the Company
in a principal amount in excess of $25,000,000 if such acceleration is not
annulled or such indebtedness is not discharged within 15 days after written
notice as provided in the Indenture; (f) certain events in bankruptcy,
insolvency or reorganization; and (g) any other Event of Default provided with
respect to the Debt Securities of such series. (Section 501 of the Indenture)
The Trustee is required, within 90 days after the occurrence of a default
with respect to the Debt Securities of any series which is known to the Trustee
and is continuing (without regard to any grace period or notice requirements),
to give to the Holders of the Debt Securities of such series notice of such
default; provided, however, that, except in the case of a default in the payment
of the principal of or any premium or
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interest on any Debt Securities of such series or in the payment of any sinking
fund installment with respect to the Debt Securities of such series, the Trustee
shall be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interests of the Holders of the
Debt Securities of such series; and provided further that, in the case of any
default referred to in clause (d) of the preceding paragraph with respect to the
Debt Securities of such series, no such notice to Holders shall be given until
at least 30 days after the occurrence thereof. (Section 602 of the Indenture)
The Trustee, subject to its duties during default to act with the required
standard of care, may require indemnification by the Holders of the Debt
Securities of any series with respect to which a default has occurred before
proceeding to exercise any right or power under the Indenture at the request of
the Holders of the Debt Securities of such series. (Sections 601 and 603 of the
Indenture) Subject to such right of indemnification and to certain other
limitations, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of such series. (Section 512 of the Indenture)
No Holder of a Debt Security of any series may institute any action against
the Company under the Indenture (except actions for payment of overdue principal
of, premium, if any, or interest on such Debt Security) unless the Holders of at
least 25% in aggregate principal amount of the Debt Securities of that series
then Outstanding under the Indenture shall have requested the Trustee to
institute such action and offered to the Trustee reasonable indemnity against
the costs, expenses and liabilities to be incurred in compliance with such
request and the Trustee shall not have instituted such action within 60 days of
such request. (Sections 507 and 508 of the Indenture)
The Company is required to furnish annually to the Trustee statements as to
the Company's compliance with all conditions and covenants under the Indenture.
(Section 1005 of the Indenture)
MERGER AND CONSOLIDATION
The Company may consolidate with, merge with or into, or sell or convey all
or substantially all of its assets to, any other corporation, association,
company or business trust, provided that (a) (i) in the case of a merger, the
Company is the surviving company in the merger, or (ii) the entity surviving the
merger, formed by such consolidation or which acquires such assets shall be a
corporation, association, company or business trust organized and existing under
the laws of The United States of America or a state thereof and shall expressly
assume payment of the principal of and any premium and interest on the Debt
Securities and the performance and observance of all of the covenants of the
Indenture and the Debt Securities to be performed or observed by the Company and
(b) the Company or such successor entity, as the case may be, shall not
immediately thereafter be in default in the performance or observance of any
such covenant under the Indenture and the Debt Securities and shall not
immediately thereafter have outstanding (or otherwise be liable for) any
Indebtedness secured by a Mortgage not permitted by the provisions of the
Indenture relating to limitations on liens or shall have secured the Debt
Securities equally and ratably with (or prior to) any Indebtedness secured by
any Mortgage not so permitted. (Section 801 of the Indenture)
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of each series affected thereby,
provided that no such modification or amendment may, without the consent of the
Holder of each Outstanding Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any Outstanding Debt Security; (b) reduce the principal amount of, or the rate
or amount of interest on, or any premium payable with respect to, any Debt
Security; (c) reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon acceleration of the Maturity thereof
or that would be provable in bankruptcy; (d) adversely affect any right of
repayment at the option of the Holder of any Debt Security; (e) change the
places or currency of payment of the principal of, or any premium or interest
on, any Debt Security; (f) impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity, or any date of
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redemption or repayment, thereof; (g) reduce the above-stated percentage in
aggregate principal amount of Outstanding Debt Securities of any series
necessary to modify or amend the Indenture with respect to such series or reduce
the percentage of Outstanding Debt Securities of any series necessary to waive
any past default or compliance with certain restrictive provisions to less than
a majority in aggregate principal amount of such series, or reduce certain
requirements of the Indenture for quorum or voting; or (h) modify the provisions
of the Indenture described in this paragraph or those regarding waiver of
compliance with certain provisions of, or certain defaults and their
consequences under, the Indenture, except to increase the percentage of
Outstanding Debt Securities necessary to modify and amend the Indenture or to
give any such waiver, and except to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Debt Security affected thereby. The Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of any series may
waive compliance by the Company with certain restrictive provisions applicable
to such series. (Sections 902 and 1008 of the Indenture)
Modification and amendment of the Indenture may be made by the Company and
the Trustee without the consent of any Holder of Outstanding Debt Securities,
for any of the following purposes: (a) to evidence the succession of another
corporation to the Company and the assumption of the covenants of the Company;
(b) to add to the covenants of the Company for the benefit of the Holders of all
or any series of Debt Securities or to surrender any right or power conferred
upon the Company; (c) to add any additional Events of Default with respect to
all or any series of Debt Securities; (d) to change or eliminate any
restrictions on the payment of the principal of or any premium or interest on
Debt Securities, to modify the provisions relating to global Debt Securities, or
to permit the issuance of Debt Securities in uncertificated form, provided any
such action does not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect; (e) to add to, change or
eliminate any provision of the Indenture, provided that such amendment shall
become effective only if there is no Outstanding Debt Security of any series
entitled to the benefit of such provision or such amendment does not apply to
any then Outstanding Debt Security; (f) to secure the Debt Securities pursuant
to the requirements of the Indenture or otherwise; (g) to establish the form or
terms of the Debt Securities of any series; (h) to provide for the acceptance of
appointment by a successor Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions as shall be necessary
to provide for or facilitate the administration of the trusts under the
Indenture by more than one Trustee; (i) to provide for the discharge of the
Indenture with respect to the Debt Securities of any series by the deposit of
monies or Government Obligations in trust; (j) to change the conditions,
limitations and restrictions on the authorized amount, terms or purposes of
issuance of the Debt Securities; or (k) to cure any ambiguity, defect or
inconsistency in the Indenture or to make any other provisions with respect to
matters or questions arising under the Indenture, provided such action does not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect. (Section 901 of the Indenture)
SATISFACTION AND DISCHARGE
Unless the Prospectus Supplement relating to a particular series of Debt
Securities specifies otherwise, the Company and the Trustee, without the consent
of any Holder of Outstanding Debt Securities, may execute a supplemental
indenture to provide that the Company will be discharged from any and all
obligations in respect of the Debt Securities of any series (except for certain
obligations to register the transfer or exchange of Debt Securities, to replace
stolen, lost or mutilated Debt Securities, to maintain paying agencies and hold
moneys for payment in trust) on the 91st day after the irrevocable deposit with
the Trustee, in trust, of money or Government Obligations, or a combination
thereof, which through the payment of interest and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, any premium and interest on, and any mandatory sinking fund
payments in respect of, the Debt Securities of such series on the dates such
payments are due in accordance with the terms of the Indenture and such Debt
Securities. Such a supplemental indenture may only be executed if certain
conditions have been satisfied, including that the Company has received from, or
there has been published by, the United States Internal Revenue Service a
ruling, or if there has been a change in the
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applicable federal income tax law, in either case, to the effect that such a
discharge will not cause the Holders of the Debt Securities of such series to
recognize income, gain or loss for federal income tax purposes; and the
provisions of such a supplemental indenture shall not be applicable to any
series of Debt Securities then listed on the New York Stock Exchange if the
provisions would cause the Outstanding Debt Securities of such series to be
delisted. (Section 901 of the Indenture)
The Indenture provides that, when the conditions set forth in Section 401
thereof have been satisfied with respect to a series of Debt Securities, upon
the request of the Company, the Indenture will cease to be of further effect
with respect to such series (except as to any surviving right of registration of
transfer or exchange of Debt Securities expressly provided for therein). Such
conditions include that (i) all Debt Securities of such series issued under the
Indenture either shall have been delivered to the Trustee for cancellation or
shall be due, or are to be called for redemption, within one year and (ii) with
respect to all Debt Securities of such series issued under the Indenture but not
previously delivered to the Trustee for cancellation, there shall have been
irrevocably deposited with the Trustee, in trust, money or Government
Obligations, or a combination thereof, which through the payment of interest and
principal thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, and any premium and interest on, all such
Debt Securities on the dates such payments are due in accordance with the terms
of the Indenture and such Debt Securities. (Section 401 of the Indenture)
DEFEASANCE OF CERTAIN COVENANTS
Unless otherwise provided in the Prospectus Supplement relating to a series
of Debt Securities, the Company will have the option to omit to comply with the
covenants described under "-- Limitations on Liens" above, if applicable, and
any additional covenants not included in the original Indenture that may be
specified as applicable to such series in the Prospectus Supplement with respect
thereto. The Company, in order to exercise such option, will be required to
irrevocably deposit with the Trustee, in trust, money or Government Obligations,
or a combination thereof, which through the payment of interest and principal
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, any premium and interest on, and any
mandatory sinking fund payments in respect of, the Debt Securities of such
series on the dates such payments are due in accordance with the terms of the
Indenture and such Debt Securities. The Company will also be required to deliver
to the Trustee an Opinion of Counsel to the effect that the deposit and related
covenant defeasance will not cause the Holders of the Debt Securities of such
series to recognize income, gain or loss for federal income tax purposes. Such
covenant defeasance would not be available in certain circumstances, including,
with respect to any series of Debt Securities then listed on the New York Stock
Exchange, if such defeasance would cause the Outstanding Debt Securities of such
series to be delisted. (Section 1009 of the Indenture) The Prospectus Supplement
relating to a particular series of Debt Securities may describe further
provisions, if any, permitting such an omission to comply.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global Debt Securities that will be deposited with, or on
behalf of, a depositary (the "Depository") relating to such series. Unless and
until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a global Debt Security may not be transferred except as a
whole among the Depository, any successor Depository and their respective
nominees.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. Unless otherwise indicated in the applicable Prospectus Supplement,
the following provisions will apply to all depository arrangements.
Upon the issuance of a global Debt Security, the Depository for such global
Debt Security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the individual Debt
Securities represented by such global Debt Security to the accounts of persons
that have accounts with such Depository ("Participants"). Such accounts will
be designated by the underwriters or agents with respect to such Debt Securities
or by the Company if such Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in a global Debt Security will be
limited to
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Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such global Debt Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the applicable Depository or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests of
persons other than Participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limitation and such laws may impair the ability to
transfer beneficial interests in a global Debt Security.
So long as the Depository for a global Debt Security, or its nominee, is
the registered owner of such global Debt Security, such Depository or such
nominee, as the case may be, will be considered the sole owner or Holder of the
Debt Securities represented by such global Debt Security for all purposes under
the Indenture. (Section 308 of the Indenture) Except as provided below, owners
of beneficial interests in a global Debt Security will not be entitled to have
any of the individual Debt Securities of the series represented by such global
Debt Security registered in their names, will not receive or be entitled to
receive physical delivery of such Debt Securities in definitive form, and will
not be considered the owners or Holders thereof under the Indenture.
Payments of principal of, premium, if any, and interest, if any, on
individual Debt Securities represented by a global Debt Security registered in
the name of a Depository or its nominee will be made to the Depository or its
nominee, as the case may be, as the registered owner of the global Debt Security
representing such Debt Securities. Neither the Company, the Trustee, any Paying
Agent, nor the Security Registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the global Debt
Security for such Debt Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. (Section 308 of the
Indenture)
The Company expects that the Depository for a series of Debt Securities, or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a global Debt Security representing any of such Debt Securities, will
immediately credit Participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such global
Debt Security for such Debt Securities as shown on the records of such
Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such global Debt Security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities registered in "street
name." Such payments will be the responsibility of such Participants.
If the Depository for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days or if the Company executes and delivers
to the Trustee a Company Order to the effect that a global Debt Security shall
be exchangeable for certificated Debt Securities or if an Event of Default has
occurred and is continuing with respect to a series of Debt Securities, the
Company will issue individual certificated Debt Securities of such series in
definitive form in exchange for the global Debt Security or Debt Securities
representing such series of Debt Securities. (Section 305 of the Indenture)
Accordingly, the Company may at any time and in its sole discretion, subject to
any limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any Debt Securities of a series represented by
one or more global Debt Securities and, in such event, will issue individual
certificated Debt Securities of such series in definitive form in exchange for
the global Debt Security or Debt Securities representing such series of Debt
Securities. In any such instance, the individual certificated Debt Securities of
such series issued by the Company will be issued to Participants, as directed by
the Depository or its nominee, or to the beneficial owners holding Debt
Securities of such series through such Participants, as directed by such
Participants, all in accordance with standing instructions and customary
practices, as is now the case with securities registered in "street name."
Certificated Debt Securities of such series so issued in definitive form will be
issued in denominations, unless otherwise specified by the Company, of $1,000
and integral multiples thereof.
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Unless otherwise provided in the Prospectus Supplement relating to a series
of Debt Securities, the Depository for each series of Debt Securities
represented by one or more global Debt Securities will be The Depository Trust
Company, New York, New York ("DTC"). DTC has advised the Company that it is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds Securities that its Participants deposit with DTC and facilitates the
settlement among Participants of securities transactions in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (which may include the
underwriters, dealers or agents, if any, involved in the offering of the
Securities), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. ("NASD"). Access to DTC's book-entry
system is also available to others, such as securities brokers and dealers,
banks, and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. The rules
applicable to DTC and its Participants are on file with the Commission.
THE TRUSTEE UNDER THE INDENTURE
The Company and certain of its affiliates maintain banking and borrowing
relations with The First National Bank of Chicago.
The Indenture provides that an alternative Trustee may be appointed by the
Company with respect to any particular series of Debt Securities. Any such
appointment will be described in the Prospectus Supplement relating to such
series of Debt Securities.
The Trustee, prior to default, undertakes to perform only such duties as
are specifically set forth in the Indenture and, after default, is required to
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Trustee is
under no obligation to exercise any of the rights or powers vested in it by the
Indenture at the request of any Holder of Debt Securities, unless offered
reasonable indemnity by such Holder against the costs, expenses and liabilities
which might be incurred thereby. The Trustee is not required to expend or risk
its own funds or otherwise incur financial liability in the performance of its
duties if the Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it. The Indenture contains other provisions
limiting the responsibilities and liabilities of the Trustee. (Sections 601 and
603 of the Indenture)
DESCRIPTION OF WARRANTS
The Company may issue, together with Debt Securities or separately,
Warrants for the purchase of Debt Securities. Each Warrant will entitle the
holder thereof to purchase Debt Securities of a particular series at such
exercise price as shall be set forth in, or be determinable as set forth in, the
Prospectus Supplement relating to the Warrants offered thereby. Warrants may be
issued independently or together with Debt Securities and may be attached to or
separate from such Debt Securities. Each series of Warrants may be issued under
a separate warrant agreement (each a "Warrant Agreement") to be entered into
between the Company and a bank or trust company designated in the applicable
Prospectus Supplement as warrant agent (the "Warrant Agent"). Each Warrant
Agent will act solely as the agent of the Company in connection with the
applicable Warrants and will not assume any obligation or relationship of agency
or trust for or with holders or beneficial owners of such Warrants.
If Warrants are offered, the applicable Prospectus Supplement will describe
the terms of such Warrants, the Warrant Agreement relating to such Warrants and
the certificates, if any, representing such Warrants, including the following,
where applicable: (1) the specific designation and number of such Warrants; (2)
the offering price, if any, of such Warrants; (3) the designation, aggregate
principal amount, denominations and terms of the Debt Securities purchasable
upon exercise of such Warrants and the
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procedures and conditions relating to the exercise of such Warrants; (4) the
designation and terms of any related Debt Securities with which such Warrants
are issued and the number of such Warrants issued with each such Debt Security;
(5) the date, if any, on and after which such Warrants and the related Debt
Securities will be separately transferable; (6) the principal amount of Debt
Securities purchasable upon exercise of each such Warrant and the price at which
such principal amount of Debt Securities may be purchased upon such exercise and
whether such Debt Securities may be purchased for consideration other than cash;
(7) the date on which the right to exercise such Warrants shall commence and the
date on which such right shall expire; (8) any redemption or call provisions
applicable to such Warrants; (9) if the Debt Securities purchasable upon
exercise of such Warrants are Original Issue Discount Securities, a discussion
of certain Federal income tax considerations applicable thereto; (10) the place
or places where the certificates, if any, representing such Warrants may be
transferred and registered; (11) information with respect to book-entry
procedures, if any; and (12) any other material terms of such Warrants.
PLAN OF DISTRIBUTION
GENERAL
The Company may sell Securities to or through underwriters or dealers;
directly to other purchasers; through agents; or through any combination of such
methods of sale. Any such underwriter, dealer or agent involved in the offer and
sale of the Securities being offered will be named in an applicable Prospectus
Supplement or Prospectus Supplements (including any Pricing Supplement or
Pricing Supplements).
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agent. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of Securities by
them may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any compensation paid by the Company to underwriters, dealers or
agents in connection with the offering of the Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be described in an applicable Prospectus Supplement or Pricing Supplement.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company against and/or contribution by the
Company toward certain liabilities, including liabilities under the Securities
Act, and to reimbursement for certain expenses.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in transactions with and perform services for the Company
or one or more of its affiliates in the ordinary course of business.
The specific terms and manner of sale, including the place and time of
delivery, of the Securities in respect of which this Prospectus is being
delivered will be set forth or summarized in the applicable Prospectus
Supplement.
The Company has reserved the right to sell the Securities through American
General Securities Incorporated ("AGSI"), an affiliate of the Company which
may, as an agent acting on a best efforts basis, solicit offers to purchase the
Securities in those jurisdictions where it is authorized to do so. No
commissions will be payable to AGSI. AGSI is registered in all states and
primarily sells retail securities products (stocks, bonds, options, mutual
funds, variable insurance products and direct participation
13
<PAGE>
programs) through independent contractor registered representatives. AGSI also
underwrites certain variable insurance products issued by its parent company,
American General Life Insurance Company. To the extent AGSI participates in the
solicitation of offers to purchase the Securities, such solicitation will be
done by full-time employees of AGC who are registered representatives of AGSI.
These employees would not be compensated by AGSI but would receive their regular
salary for the performance of their duties with AGC. The Company intends to pay
all direct expenses associated with sales of Securities through AGSI. The
offering of the Securities will be conducted in compliance with any applicable
requirements of Conduct Rule 2720 of the NASD regarding the distribution by an
NASD member firm of the securities of an affiliate. In accordance with such
Rule, underwriters, dealers and agents who participate in the distribution of
Securities will not engage in transactions in Securities for any discretionary
account without the prior specific written approval of the customer.
DELAYED DELIVERY ARRANGEMENTS
If so indicated in a Prospectus Supplement, the Company will authorize
underwriters, dealers or other persons acting as the Company's agents to solicit
offers by certain institutions to purchase Securities from the Company pursuant
to contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such purchases by
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
Unless otherwise indicated in a Prospectus Supplement, the validity of each
issue of the Securities will be passed upon for the Company by Baker & Daniels,
Indianapolis, Indiana, and certain legal matters relating to the Securities
offered hereby will be passed upon for any underwriters, dealers or agents of a
particular issue of Securities by Brown & Wood LLP, New York, New York. Brown &
Wood LLP may rely as to matters of Indiana law on the opinion of Baker &
Daniels. Tibor D. Klopfer, a partner of Baker & Daniels, is a director of AGF
Funding, Inc., an indirect wholly-owned subsidiary of the Company.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. See "Incorporation by Reference." Such consolidated financial
statements are, and audited consolidated financial statements to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of Ernst & Young LLP pertaining to such consolidated financial
statements (to the extent covered by consents filed with the Commission) given
upon the authority of such firm as experts in accounting and auditing.
14
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
PROSPECTUS AND ANY PRICING SUPPLEMENT ATTACHED HERETO IN CONNECTION WITH THE
OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE
AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS AND
ANY PRICING SUPPLEMENT ATTACHED HERETO NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND ANY PRICING SUPPLEMENT ATTACHED HERETO
DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT ----
Description of Notes................. S-2
United States Tax Considerations..... S-12
Plan of Distribution of Notes........ S-16
PROSPECTUS
Available Information................ 2
Incorporation by Reference........... 2
The Company.......................... 3
Use of Proceeds...................... 3
Selected Financial Information....... 4
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 5
Description of Warrants.............. 12
Plan of Distribution................. 13
Legal Opinions....................... 14
Experts.............................. 14
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AMERICAN GENERAL
FINANCE CORPORATION
$1,000,000,000
MEDIUM-TERM NOTES, SERIES E
------------------------
PROSPECTUS SUPPLEMENT
------------------------
AMERICAN GENERAL
SECURITIES INCORPORATED
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J. P. MORGAN & CO.
SMITH BARNEY INC.
AUGUST 5, 1997
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