<PAGE> 1
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-40583
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PROSPECTUS SUPPLEMENT [AMERICAN GENERAL LOGO]
(TO PROSPECTUS DATED FEBRUARY 10, 1998)
</TABLE>
$300,000,000
AMERICAN GENERAL CAPITAL II
8 1/2% CAPITAL TRUST PASS-THROUGH SECURITIES(R) (TRUPS(R))
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
AMERICAN GENERAL CORPORATION
----------------------
THE TRUST:
American General Capital II is a Delaware business trust which will:
- sell preferred securities to the public;
- sell common securities to American General;
- use the proceeds from these sales to buy an equal principal amount of 8 1/2%
Junior Subordinated Debentures due 2030 of American General; and
- distribute the cash payments it receives from American General on the
debentures to the holders of the preferred securities and the common
securities.
SEMI-ANNUAL DISTRIBUTIONS:
- For each preferred security that you own, you will receive cumulative cash
distributions accumulating from June 27, 2000 at an annual rate of 8 1/2% of
the liquidation amount of $1,000 per preferred security, on January 1 and July
1 of each year, beginning January 1, 2001.
- American General may defer interest payments on the debentures at any time,
and from time to time, for up to 10 consecutive semi-annual periods. If
American General does defer interest payments, the Trust will also defer
payments of distributions on the preferred securities to you. However,
deferred distributions will themselves accumulate distributions at an annual
rate of 8 1/2% (to the extent permitted by law).
OPTIONAL REDEMPTION:
- The Trust may redeem some or all of the preferred securities at times
discussed herein at a redemption price calculated as described in this
prospectus supplement, plus accumulated distributions, if any.
AMERICAN GENERAL:
- American General will effectively guarantee, fully and unconditionally, the
payment by the Trust of amounts due on the preferred securities as discussed
herein and in the accompanying prospectus.
INVESTING IN THE PREFERRED SECURITIES INVOLVES CERTAIN RISKS WHICH ARE
DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-6 OF THIS PROSPECTUS
SUPPLEMENT.
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PER
TRUPS(R) TOTAL
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Public offering price(1)................................. $994.71 $298,413,000
Underwriting commission to be paid by American General... $ 10.00 $ 3,000,000
Proceeds, before expenses, to the Trust.................. $994.71 $298,413,000
</TABLE>
(1) Plus accumulated distributions from June 27, 2000, if settlement
occurs after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The preferred securities will be ready for delivery in book-entry form only
through The Depository Trust Company on or about June 27, 2000.
----------------------
(R) "Capital Trust Pass-through Securities" and "TRUPS" are registered service
marks of Salomon Smith Barney Inc.
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
----------------------
The date of this prospectus supplement is June 22, 2000.
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUPPLEMENT
Summary Information -- Q&A.................................. S-3
Risk Factors................................................ S-6
American General Capital II................................. S-8
Capitalization.............................................. S-10
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and
Preferred Stock Dividends................................. S-11
Use of Proceeds............................................. S-11
Selected Financial Data of American General................. S-12
American General Corporation................................ S-14
Description of Securities................................... S-15
Certain Terms of the Preferred Securities................... S-15
Certain Terms of the Debentures............................. S-22
Certain United States Federal Income Tax Consequences....... S-24
ERISA Considerations........................................ S-28
Underwriting................................................ S-30
Legal Matters............................................... S-31
Experts..................................................... S-31
PROSPECTUS
Available Information....................................... 2
Incorporation by Reference.................................. 3
Information Concerning Foward-Looking Statements............ 4
American General Corporation................................ 4
The Trusts.................................................. 4
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends...... 6
Description of Junior Subordinated Debentures............... 6
Description of Preferred Securities......................... 18
Book-Entry Issuance......................................... 28
Description of Guarantees................................... 30
Relationship among the Preferred Securities, the
corresponding Junior Subordinated Debentures and the
Guarantees................................................ 33
Description of Common Stock................................. 35
Description of Preferred Stock.............................. 38
Plan of Distribution........................................ 42
Legal Matters............................................... 43
Experts..................................................... 43
</TABLE>
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not, and the underwriters have not, authorized any person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus supplement or the accompanying prospectus, as well as
information we previously filed with the Securities and Exchange Commission and
incorporated by reference, is accurate as of the date on the front cover of this
prospectus supplement and the accompanying prospectus, respectively. American
General's business, financial condition, results of operations and prospects may
have changed since such dates.
The following information concerning American General, the Trust, the
preferred securities, the guarantee and the junior subordinated debentures adds
to, and should be read in conjunction with, the information contained in the
accompanying prospectus. Capitalized terms used in this prospectus supplement
have the same meanings as in the accompanying prospectus.
S-2
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SUMMARY INFORMATION -- Q&A
This prospectus supplement and the accompanying prospectus are referred to
collectively as the "Prospectus Documents" and should be read together. This
summary highlights selected information from the Prospectus Documents to help
you understand the preferred securities. You should carefully read the
Prospectus Documents to understand fully the terms of the preferred securities,
as well as the tax and other considerations that are important to you in making
a decision about whether to invest in the preferred securities. You should pay
special attention to the "Risk Factors" section beginning on page S-6 of this
prospectus supplement to determine whether an investment in the preferred
securities is appropriate for you.
For your convenience, we make reference to specific page numbers in this
prospectus supplement (pages S-1 through S-31) and the accompanying prospectus
(pages 1 through 43) for more detailed information regarding some of the terms
and concepts used throughout this prospectus supplement.
WHAT ARE THE PREFERRED SECURITIES?
Each preferred security represents an undivided beneficial interest in the
assets of the Trust. The underwriters are offering 300,000 preferred securities.
See "Underwriting" beginning on page S-30.
WHO IS THE TRUST?
American General Capital II, referred to as "the Trust," is a Delaware
business trust. The Trust will sell its preferred securities to the public and
its common securities to American General. The Trust will use the proceeds from
these sales to buy a series of 8 1/2% Junior Subordinated Debentures due 2030
(the "debentures") from American General with the same economic terms as the
preferred securities.
There are five trustees of the Trust. Three of the trustees are employees
or officers of American General, referred to as the "administrative trustees."
Bankers Trust Company will act as the property trustee of the Trust and Bankers
Trust (Delaware) will act as the Delaware trustee, in each case until removed or
replaced by the holder of the common securities. For the purposes of compliance
with the provisions of the Trust Indenture Act, Bankers Trust Company will also
act as indenture trustee under the guarantee.
WHO IS AMERICAN GENERAL?
American General, with assets of $122 billion and shareholders' equity of
$6.6 billion as of March 31, 2000, is the parent company of one of the nation's
largest diversified financial services organizations. American General's
operating divisions deliver a wide range of retirement services, life insurance,
and consumer finance products and services to diverse markets through focused
distribution channels.
American General, headquartered in Houston, was incorporated as a general
business corporation in Texas in 1980 and is the successor to American General
Insurance Company, an insurance company incorporated in Texas in 1926. The
principal executive offices of American General are located at 2929 Allen
Parkway, Houston, Texas 77019-2155, and its telephone number is (713) 522-1111.
WHEN WILL YOU RECEIVE SEMI-ANNUAL DISTRIBUTIONS ON THE PREFERRED SECURITIES?
If you purchase the preferred securities, you will be entitled to receive
cumulative cash distributions at an annual rate of 8 1/2% of the liquidation
amount of $1,000 per preferred security. Distributions will accumulate from June
27, 2000 and will be payable semi-annually in arrears on January 1 and July 1 of
each year, beginning January 1, 2001.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
American General may, on one or more occasions, defer interest payments on
the debentures for up to 10 consecutive semi-annual periods unless an event of
default under the debentures has occurred and is continuing. See "Description of
Junior Subordinated Debentures -- Debenture Events of Default" beginning on page
13 for a description of the events of default under the debentures. A deferral
of interest payments cannot extend beyond the stated maturity date of the
debentures (which is July 1, 2030).
If American General defers interest payments on the debentures, the Trust
will also defer its
S-3
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distributions on the preferred securities to you. During this deferral period,
distributions will continue to accumulate on the preferred securities at an
annual rate of 8 1/2% of the liquidation amount of $1,000 per preferred
security. Also, the deferred distributions will themselves accumulate
distributions at an annual rate of 8 1/2% (to the extent permitted by law). Once
American General makes all deferred interest payments on the debentures, with
accrued interest, it may again defer interest payments on the debentures if no
event of default under the debentures has then occurred and is continuing.
During any period in which American General defers interest payments on the
debentures, American General will not be permitted to (with certain exceptions
described under "Description of Junior Subordinated Debentures -- Restrictions
on Certain Payments" beginning on page 12):
- pay a dividend or make any other payment or distribution on its capital
stock;
- redeem, purchase or make a liquidation payment on any of its capital
stock; or
- make a principal, premium or interest payment, or repurchase or redeem,
any of its debt securities that rank equal with or junior to the
debentures.
If American General defers interest payments on the debentures, you will be
required to accrue interest income for United States federal income tax purposes
before you receive cash distributions. See "Certain United States Federal Income
Tax Consequences" beginning on page S-24 and "Risk Factors -- Ability to Defer
Distributions Has Tax Consequences For You and May Affect the Trading Price of
the Preferred Securities" on page S-7.
WHEN CAN THE TRUST REDEEM THE PREFERRED SECURITIES?
The Trust will redeem all of the outstanding preferred securities when the
debentures are paid either at maturity on July 1, 2030, or upon early
redemption.
American General will pay the debentures at maturity on July 1, 2030 and
may redeem the debentures at any time before their maturity at a redemption
price calculated as described herein on page S-16, plus accrued and unpaid
interest to the date of redemption. The redemption price is based on a
make-whole formula that will result in a lower redemption price if the
redemption is effected following certain changes in tax or investment company
law (each of which is a "Special Event" more fully described on pages S-16 and
S-17).
If American General redeems any debentures before their maturity, the Trust
will use the cash it receives on the redemption of the debentures to redeem, on
a pro rata basis, preferred securities and common securities having an aggregate
liquidation amount equal to the aggregate principal amount of the debentures
redeemed, unless an event of default under the amended and restated declaration
of trust of the Trust, referred to as the "trust agreement," or the
"declaration," has occurred and is continuing, in which case the preferred
securities will be redeemed before any common securities. An event of default
with respect to the debentures or the guarantee constitutes an event of default
under the trust agreement. See "Description of Junior Subordinated
Debentures -- Debenture Events of Default" beginning on page 13 and "Description
of Guarantees -- Events of Default" beginning on page 31 for a description of an
event of default in respect of the debentures and the guarantee.
WHAT IS THE NATURE OF AMERICAN GENERAL'S GUARANTEE OF THE PREFERRED SECURITIES?
American General will fully and unconditionally guarantee the preferred
securities through a combination of:
- its obligations to make payments on the debentures;
- its obligations under its guarantee of the preferred securities, referred
to as the "guarantee;" and
- its obligations under the trust agreement and its junior subordinated
indenture, referred to as the "indenture."
If American General does not make a required payment on the debentures, the
Trust will not have sufficient funds to make the related payment on the
preferred securities. The guarantee does not cover payments on the preferred
securities when the Trust does not have sufficient funds to make such payments.
American General's obligations under the debentures are junior to its
obligations to make payments on its Senior Indebtedness (as such term is defined
on page 16), and American General's obligations under the guarantee are junior
to its
S-4
<PAGE> 5
obligations to make payments on its Senior Indebtedness in the same manner as
the debentures. See "Risk Factors -- American General's Obligations Under the
Debentures and the Guarantee Are Subordinated" on page S-6.
WHEN CAN THE DEBENTURES BE DISTRIBUTED TO YOU?
American General, as the sponsor of the Trust, has the right to dissolve
the Trust at any time. If American General exercises this right to dissolve the
Trust, the Trust will be liquidated by distribution of the debentures to holders
of the preferred securities and the common securities.
WHAT HAPPENS IF THE TRUST IS DISSOLVED AND THE DEBENTURES ARE NOT DISTRIBUTED?
The Trust may also be dissolved in circumstances where the debentures will
not be distributed to you. In those situations, after satisfaction of creditors
of the Trust, if any, the Trust will be obligated to pay in cash the liquidation
amount of $1,000 or the applicable redemption price for each preferred security
plus accumulated distributions to the date such payment is made. The Trust will
be able to make this liquidation distribution only if the debentures are paid or
redeemed by American General.
WILL THERE BE A MARKET FOR THE PREFERRED SECURITIES?
Before this offering, there was no established public trading market for
the preferred securities. We do not intend to apply for listing of the preferred
securities on any national securities exchange or for quotation of the preferred
securities on any automated dealer quotation system. The underwriters have
advised American General that they intend to make a market in the preferred
securities after completion of this offering. However, the underwriters are not
obligated to do so and may discontinue any market making at any time without any
notice. We cannot give any assurance that a liquid trading market for the
preferred securities will develop or be maintained.
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The preferred securities will be represented by one or more global
securities that will be deposited with, or on behalf of, and registered in the
name of, The Depository Trust Company, New York, New York ("DTC") or its
nominee. This means that you will not receive a certificate for your preferred
securities but, instead, will hold your interest through DTC's book-entry
system. The preferred securities will be ready for delivery through DTC on or
about June 27, 2000.
S-5
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RISK FACTORS
Your investment in the preferred securities will involve certain risks. You
should carefully consider the following discussion of risks, and the other
information included or incorporated by reference in the Prospectus Documents,
before deciding whether an investment in the preferred securities is suitable
for you.
AMERICAN GENERAL'S OBLIGATIONS UNDER THE DEBENTURES AND THE GUARANTEE ARE
SUBORDINATED
American General's obligations under the debentures are unsecured and will
rank junior in priority of payment to American General's Senior Indebtedness.
This means that American General may not make any payments of principal
(including redemption payments) or interest on the debentures if it defaults on
a payment on its Senior Indebtedness. Also, payments on the debentures may be
blocked for up to 180 days in the event of certain non-payment defaults by
American General on its Senior Indebtedness. For more information on the
subordination provisions, see "Description of Junior Subordinated Debentures --
Subordination" beginning on page 15. In the event of the bankruptcy, liquidation
or dissolution of American General, its assets would be available to pay
obligations under the debentures only after all payments had been made on its
Senior Indebtedness. At March 31, 2000, on a pro forma basis, as if on that date
American General and the Trust had issued and sold the preferred securities and
the debentures and applied the estimated net proceeds thereof as described in
this prospectus supplement, the total amount of American General's Senior
Indebtedness would have been approximately $3.3 billion. See "Capitalization" on
page S-10 and "Use of Proceeds" on page S-11.
American General's obligations under the guarantee are unsecured and will
rank in priority of payment:
- junior to all of American General's Senior Indebtedness in the same
manner as the debentures; and
- equally with certain guarantees previously issued by American General
with respect to certain preferred securities and with all other
guarantees of securities issued by affiliates of American General similar
to the preferred securities issued by the Trust.
This means that American General cannot make any payments on the guarantee
if it defaults on a payment of any of its Senior Indebtedness. In the event of
the bankruptcy, liquidation or dissolution of American General, its assets would
be available to pay obligations under the guarantee only after all payments had
been made on its Senior Indebtedness.
Also, since American General is a holding company, rights to participate in
any distribution of assets of any subsidiary upon its liquidation or
reorganization or otherwise (and thus the ability of holders of preferred
securities or debentures to benefit indirectly from such distribution) are
subject to the prior claims of creditors of that subsidiary, except to the
extent that American General may itself be a creditor of that subsidiary. Claims
on American General's subsidiaries by other creditors include substantial claims
for policy benefits and debt obligations, as well as other liabilities incurred
in the ordinary course of business. In addition, since many of American
General's subsidiaries are insurance companies subject to regulatory control by
various state insurance departments, the ability of such subsidiaries to pay
dividends to American General without prior regulatory approval is limited by
applicable laws and regulations. Further, certain non-insurance subsidiaries are
similarly restricted in their ability to make dividend payments by long-term
debt agreements.
Neither the debentures nor the guarantee will limit the ability of American
General and its subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior in priority of payment to the debentures and the
guarantee.
For more information, see "Certain Terms of the Debentures --
Subordination" on page S-22 and "Description of Guarantees -- Status of the
Guarantees" on page 31.
GUARANTEE COVERS PAYMENTS ONLY IF THE TRUST HAS CASH AVAILABLE
The ability of the Trust to pay distributions on the preferred securities,
the redemption price of the preferred securities and the liquidation amount of
each preferred security is solely dependent upon American General making the
related payments on the debentures when due.
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If American General defaults on its obligation to pay principal (including
redemption payments) or interest on the debentures, the Trust will not have
sufficient funds to pay distributions, the redemption price or the liquidation
amount of each preferred security. In those circumstances, you will not be able
to rely upon the guarantee for payment of these amounts because the guarantee
covers such payment only when the Trust has sufficient funds on hand but fails
to make such payment.
Instead, you may:
- seek legal redress against American General directly or seek other
remedies to collect your pro rata share of payments owed; or
- rely on the property trustee to enforce the Trust's rights under the
debentures.
ABILITY TO DEFER DISTRIBUTIONS HAS TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE
TRADING PRICE OF THE PREFERRED SECURITIES
So long as no event of default under the debentures has occurred and is
continuing, American General may, on one or more occasions, defer interest
payments to the Trust on the debentures as described in this prospectus
supplement. See "Certain Terms of the Debentures -- Option to Extend Interest
Payment Period" on page S-23. If American General defers interest payments on
the debentures, the Trust will defer distributions on the preferred securities
to you during any deferral period.
If American General defers interest payments on the debentures, you will be
required to accrue interest income, as original issue discount or "OID," in
respect of the deferred stated interest allocable to your share of the preferred
securities for United States federal income tax purposes. As a result, you will
include such income in gross income for United States federal income tax
purposes prior to the receipt of any cash distributions. In addition, you will
not receive cash from the Trust related to such income if you dispose of your
preferred securities prior to the record date on which distributions of such
amounts are made.
American General has no current intention of deferring interest payments on
the debentures. However, if American General exercises its right to do so in the
future, the preferred securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the debentures. If you sell
the preferred securities during an interest deferral period, you may not receive
the same return on investment as someone else who continues to hold the
preferred securities. In addition, the existence of American General's right to
defer payments of interest on the debentures may mean that the market price for
the preferred securities (which represent an undivided beneficial interest in
the debentures) may be more volatile than other securities that do not have this
right.
See "Certain United States Federal Income Tax Consequences" beginning on
page S-24 for more information regarding United States federal income tax
consequences.
PREFERRED SECURITIES MAY BE REDEEMED AT AMERICAN GENERAL'S OPTION
At American General's option, the debentures may be redeemed, in whole or
in part, at any time at specified redemption prices, plus any accrued and unpaid
interest to the redemption date, as described under "Certain Terms of the
Preferred Securities -- Redemption" on page S-16. The redemption price is based
on a make-whole formula that will result in a lower redemption price if the
redemption is the result of a Special Event. If American General exercises such
redemption option, the Trust will use the cash it receives on the redemption of
the debentures to redeem an equivalent liquidation amount of the preferred
securities and the common securities on a pro rata basis, unless an event of
default under the trust agreement has occurred and is continuing, in which case
the preferred securities will be redeemed before any common securities.
See "Certain Terms of the Preferred Securities -- Redemption" on page S-16
for more information.
DISTRIBUTION OF DEBENTURES MAY HAVE A POSSIBLE ADVERSE EFFECT ON TRADING PRICE
American General has the right to dissolve the Trust at any time. If
American General dissolves the Trust, the Trust will be liquidated by
distribution of the debentures to holders of the preferred securities and the
common securities.
Under current United States federal income tax laws, a distribution of
debentures to you on the dissolution of the Trust would not be a taxable event
to you. Nevertheless, if the Trust is classified
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for United States federal income tax purposes as an association taxable as a
corporation at the time it is dissolved, the distribution of debentures to you
would be a taxable event. In addition, if there is a change in law, a
distribution of debentures to you on the dissolution of the Trust could also be
a taxable event.
American General has no current intention of causing the termination of the
Trust and the distribution of the debentures. However, there are no restrictions
on its ability to do so at any time. American General anticipates that it would
consider exercising this right in the event that expenses associated with
maintaining the Trust were substantially greater than currently expected, such
as if a Special Event occurred. American General cannot predict the other
circumstances under which this right would be exercised.
American General cannot predict the market prices for the debentures that
may be distributed. Accordingly, the debentures that you receive on a
distribution, or the preferred securities you hold pending such a distribution,
may trade at a discount to the price that you paid to purchase the preferred
securities.
Because you may receive debentures, you should make an investment decision
with regard to the debentures in addition to the preferred securities. You
should carefully review all the information regarding the debentures contained
in the Prospectus Documents. See "Certain United States Federal Income Tax
Consequences -- Receipt of Debentures or Cash Upon Liquidation of the Trust" on
page S-26 for more information.
LIMITED VOTING RIGHTS
You will have limited voting rights. In general, unless an event of default
under the trust agreement has occurred and is continuing, only American General
may elect or remove any of the trustees, and in no event may holders of the
preferred securities remove the administrative trustees.
See "The Trusts" beginning on page 4 and "Certain Terms of the Preferred
Securities -- Voting Rights" beginning on page S-18 for more information.
AMERICAN GENERAL CAPITAL II
GENERAL
The Trust is a statutory business trust formed under Delaware law. The
declaration of trust for the Trust will be amended and restated in its entirety,
referred to as the "declaration" or the "trust agreement," substantially in a
form to be filed as an exhibit to a Current Report on Form 8-K filed by American
General and incorporated by reference into the registration statement of which
this prospectus supplement and the accompanying prospectus form a part. The
declaration will be qualified as an indenture under the Trust Indenture Act.
Upon issuance of the preferred securities, the purchasers thereof will own all
of the preferred securities. American General will directly or indirectly
acquire common securities in an aggregate liquidation amount equal to at least
3% of the total capital of the Trust and will own all of the issued and
outstanding common securities. The Trust exists for the exclusive purposes of:
- issuing the preferred securities and the common securities representing
undivided beneficial interests in the assets of the Trust;
- investing the gross proceeds of the preferred securities and the common
securities in the debentures; and
- engaging in only those other activities necessary, appropriate,
convenient or incidental thereto.
The Trust has a term of approximately 55 years, but may be terminated earlier as
provided in the declaration.
Pursuant to the declaration, the number of trustees initially is five.
Three of the trustees are employees or officers of American General. Bankers
Trust Company will serve as property trustee under the declaration and as
indenture trustee for the purposes of the Trust Indenture Act. Bankers Trust
(Delaware) will act as the Delaware trustee. The
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property trustee and the Delaware trustee may at any time be removed or replaced
by the holder of the common securities. For purposes of compliance with the
provisions of the Trust Indenture Act, Bankers Trust Company will also act as
indenture trustee under the guarantee. See "Description of Guarantees" beginning
on page 30.
The property trustee will hold title to the debentures for the benefit of
the Trust and the holders of the preferred securities and common securities and,
so long as the debentures are held by the Trust, the property trustee will have
the power to exercise all rights, powers, and privileges of a holder of
debentures under the indenture. In addition, the property trustee will maintain
exclusive control of a segregated non-interest bearing bank account to hold all
payments made in respect of the debentures for the benefit of the holders of the
preferred securities and common securities. The property trustee will make
payments of distributions and payments on liquidation, redemption and otherwise
to the holders of the preferred securities and common securities out of funds
from the property account. Bankers Trust Company will hold the guarantee for the
benefit of the holders of the preferred securities. American General, as the
direct or indirect holder of all the common securities, will have the right to
appoint, remove or replace any trustee (subject to the limitations set forth in
the declaration) and to increase or decrease the number of trustees. American
General will pay all fees, expenses, debts and obligations (other than with
respect to the preferred securities and common securities) related to the Trust
and the offering of the preferred securities.
The rights of the holders of the preferred securities, including economic
rights, rights to information and voting rights are set forth in the
declaration, the Delaware Business Trust Act, as amended, the indenture and the
Trust Indenture Act. See "Certain Terms of the Preferred Securities" beginning
on page S-15.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in American
General's consolidated financial statements, with the preferred securities shown
as "Company-obligated mandatorily redeemable preferred securities of
subsidiaries holding solely company subordinated notes." In a footnote to
American General's audited consolidated financial statements, there will be a
statement that the Trust is wholly-owned by American General and that the sole
asset of the Trust is the debentures (indicating the principal amount, interest
rate and maturity date thereof). See "Capitalization" on page S-10.
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CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of American General as of March 31, 2000, and as adjusted to give
effect to the consummation of the offering of the preferred securities and the
application of the proceeds thereof. See "Use of Proceeds" on page S-11. The
following data should be read in conjunction with the consolidated financial
statements and notes thereto of American General incorporated by reference
herein as described in "Incorporation by Reference" on page 3.
<TABLE>
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MARCH 31, 2000
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AS
HISTORICAL ADJUSTED
(UNAUDITED IN MILLIONS) ---------- --------
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Short-term debt
Corporate.............................................. $ 2,049 $ 1,754
Consumer Finance....................................... 4,569 4,569
------- -------
Total short-term debt............................. $ 6,618 $ 6,323
======= =======
Long-term debt
Corporate.............................................. $ 1,188 $ 1,188
Consumer Finance....................................... 5,702 5,702
------- -------
Total long-term debt.............................. 6,890 6,890
------- -------
Company-obligated mandatorily redeemable preferred
securities of subsidiaries holding solely company
subordinated notes
Non-convertible........................................ 1,675 1,970
Convertible(a)......................................... 250 250
------- -------
Total redeemable equity........................... 1,925 2,220
------- -------
Shareholders' equity
Common stock........................................... 936 936
Retained earnings...................................... 7,907 7,907
Accumulated other comprehensive income (loss)(b)....... (1,181) (1,181)
Cost of treasury stock................................. (1,052) (1,052)
------- -------
Total shareholders' equity........................ 6,610 6,610
------- -------
Total capitalization (excluding short-term
debt)........................................... $15,425 $15,720
======= =======
</TABLE>
---------------
(a) Convertible into 6.1 million shares of American General common stock at
option of holders through June 30, 2000, after which the securities will no
longer be convertible. Based on American General's current common stock
price, American General anticipates that substantially all of these
securities will be converted on or before June 30, 2000.
(b) Includes $1.2 billion net unrealized losses on fixed maturity securities at
March 31, 2000, due to the effect of SFAS 115. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in American
General's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2000, incorporated by reference herein as described in "Incorporation by
Reference" on page 3.
S-10
<PAGE> 11
RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock dividends of
American General for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------- --------------------------------
2000 1999 1999 1998 1997 1996 1995
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
Consolidated operations............................. 3.1 3.5 3.4 2.9 2.5 2.5 2.3
Consolidated operations, corporate fixed charges
only.............................................. 8.8 10.0 9.3 7.3 6.4 6.4 5.3
Ratio of earnings to combined fixed charges and
preferred stock dividends:
Consolidated operations............................. 2.7 3.0 2.8 2.4 2.1 2.3 2.2
Consolidated operations, corporate fixed charges and
preferred stock dividends only.................... 5.3 5.9 5.6 4.3 3.7 4.7 4.7
</TABLE>
For purposes of computing these ratios, earnings represent income before
income tax expense, dividends on preferred securities of subsidiaries, and
minority interest, adjusted for undistributed income of an equity investee and
fixed charges (excluding capitalized interest). Fixed charges consist primarily
of interest expense (including capitalized interest) on short-term and long-term
borrowings. Preferred stock dividends consist of dividends on preferred
securities of subsidiaries and convertible preferred stock.
USE OF PROCEEDS
The proceeds from the sale of the preferred securities will be invested by
the Trust in debentures of American General issued pursuant to the indenture
described herein. American General intends to use all of the net proceeds from
the sale of the debentures to repay short-term indebtedness. As of June 22,
2000, the weighted average interest rate of such short-term indebtedness was
6.64%.
S-11
<PAGE> 12
SELECTED FINANCIAL DATA OF AMERICAN GENERAL
The following table presents selected financial data of American General
and its consolidated subsidiaries for the periods indicated. All data presented
includes the operating results and financial position of USLIFE Corporation
("USLIFE"), which was acquired June 17, 1997. The acquisition was accounted for
using the pooling of interests method and, accordingly, American General's
consolidated financial statements for all periods prior to the acquisition have
been restated to include the results of operations, financial position, and cash
flows of USLIFE.
The financial data as of December 31, 1999, 1998, 1997, 1996, and 1995 and
for the five years ended December 31, 1999 was derived from American General's
audited consolidated financial statements, incorporated herein by reference.
The financial data as of and for the three months ended March 31, 2000 and
1999 was derived from American General's unaudited quarterly financial
statements (incorporated herein by reference from American General's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2000), which, in
the opinion of management, reflect all adjustments necessary for a fair
presentation of such data. The data for the three months ended March 31, 2000
and 1999 is not necessarily indicative of results of operations for the entire
year. The data should be read in conjunction with the consolidated financial
statements, related notes, "Management's Discussion and Analysis," and other
financial information incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- --------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
(IN MILLIONS) ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Premiums and other considerations....... $ 993 $ 924 $ 3,772 $ 3,605 $ 3,362 $ 3,244 $ 2,969
Net investment income................... 1,330 1,285 5,232 5,095 4,020 3,773 3,584
Finance charges......................... 391 357 1,455 1,354 1,265 1,450 1,492
Realized investment gains (losses)...... (51) (2) (19) 6 40 62 18
Equity in earnings of investee.......... -- -- -- -- 54 40 43
Other................................... 74 56 239 191 186 145 130
-------- -------- -------- ------- ------- ------- -------
Total revenues................. 2,737 2,620 10,679 10,251 8,927 8,714 8,236
-------- -------- -------- ------- ------- ------- -------
Insurance and annuity benefits.......... 1,384 1,313 5,313 5,159 4,332 4,218 4,085
Operating costs and expenses............ 609 596 2,444 2,486 2,220 2,129 1,852
Provision for finance receivable
losses................................ 49 52 207 212 248 417 574
Interest expense
Corporate........................... 54 44 197 181 158 162 197
Consumer Finance.................... 163 138 574 512 461 493 518
Litigation settlements and other
charges............................... -- -- 57(a) 378(a) 50(a) 50(a) --
Merger-related costs.................... -- -- -- -- 272(a) -- --
Loss on sale of non-strategic assets.... -- -- -- -- 113(a) 165(a) --
-------- -------- -------- ------- ------- ------- -------
Total benefits and expenses.... 2,259 2,143 8,792 8,928 7,854 7,634 7,226
-------- -------- -------- ------- ------- ------- -------
Income before income tax expense........ 478 477 1,887 1,323 1,073 1,080 1,010
Income tax expense...................... 168 168 664 459 447 387 341
-------- -------- -------- ------- ------- ------- -------
Income before net dividends on preferred
securities of subsidiaries and
minority interest..................... 310 309 1,223 864 626 693 669
Net dividends on preferred securities of
subsidiaries.......................... 25 22 92 89 84 40 19
Minority interest in net income of
investee.............................. -- -- -- 11 -- -- --
-------- -------- -------- ------- ------- ------- -------
Net income..................... $ 285 $ 287 $ 1,131(b) $ 764(c) $ 542(d) $ 653(e) $ 650
======== ======== ======== ======= ======= ======= =======
</TABLE>
S-12
<PAGE> 13
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- -------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
(IN MILLIONS) ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Total assets(f)................... $121,767 $108,866 $115,447 $105,107 $80,620 $74,134 $69,083
Invested assets(f)................ 70,783 70,700 68,335 69,863 54,006 50,832 49,598
Finance receivables, net.......... 10,744 9,421 10,634 9,275 7,639 7,230 7,918
Debt (including short-term)
Corporate..................... 3,237 2,996 3,120 2,743 1,916 2,102 2,295
Consumer Finance.............. 10,271 8,974 10,206 8,863 7,266 7,630 7,470
Total liabilities (excluding
debt)........................... 99,724 86,766 93,777 82,902 62,129 56,331 51,480
Redeemable equity................. 1,925 1,729 1,924 1,728 1,726 1,227 729
Shareholders' equity(f)........... 6,610 8,401 6,420 8,871 7,583 6,844 7,109
</TABLE>
---------------
(a) See Note 3 of Item 8 within American General's Annual Report on Form 10-K
for the years ended December 31, 1999 and 1998, incorporated herein by
reference.
(b) Includes effect of $36 million aftertax charge for litigation settlement
related to financing of satellite dishes (see Note (a) above).
(c) Includes effect of $246 million aftertax litigation charge for market
conduct class action lawsuits (see Note (a) above).
(d) Includes effect of $247 million aftertax USLIFE merger-related costs, $73
million aftertax loss on sale of non-strategic assets, and $33 million
aftertax litigation charge (see Note (a) above).
(e) Includes effect of $111 million aftertax loss on sale of non-strategic
assets and $32 million aftertax write-down of USLIFE group business (see
Note (a) above).
(f) Includes effect of SFAS 115. To facilitate analysis of period-to-period
balances, the effect of SFAS 115 on reported balances was as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------- --------------------------------------------
2000 1999 1999 1998 1997 1996 1995
(IN MILLIONS) ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in assets........... $(1,289) $1,560 $(1,426) $2,436 $1,782 $ 949 $ 1,956
Increase (decrease) in invested
assets................................ (1,634) 2,215 (1,750) 3,519 2,786 1,488 3,071
Increase (decrease) in shareholders'
equity................................ (1,215) 1,009 (1,304) 1,575 1,154 610 1,265
</TABLE>
S-13
<PAGE> 14
AMERICAN GENERAL CORPORATION
American General, with assets of $122 billion and shareholders' equity of
$6.6 billion as of March 31, 2000, is the parent company of one of the nation's
largest diversified financial services organizations. American General's
operating divisions deliver a wide range of retirement services, life insurance,
consumer loans, and investments to 12 million customers through focused
distribution channels. American General, a general business corporation
headquartered in Houston, is the successor to American General Insurance
Company, an insurance company incorporated in Texas in 1926. The principal
executive offices of American General are located at 2929 Allen Parkway,
Houston, Texas 77019-2155, and its telephone number is (713) 522-1111.
RETIREMENT SERVICES
The retirement services division represented 37% of American General's
division earnings for the year ended December 31, 1999, and 40% for the three
months ended March 31, 2000. The division, with assets of $70 billion at March
31, 2000, is a leading provider of retirement products and services, and ranks
as the nation's third-largest writer of annuities. A broad range of retirement
savings products is offered through a sales force of 1,600 financial advisors
and more than 32,500 financial institution representatives.
The division sells tax-qualified annuities and mutual funds to employees of
educational, health care, and government entities, and other not-for-profit
organizations. The division also markets non-qualified annuities through
financial institution representatives at 250 banks and other financial
institutions. The non-qualified annuities are developed jointly with the
financial institution and tailored to meet the customers' specific needs. The
division has approximately 2.9 million customer accounts.
LIFE INSURANCE
The life insurance division represented 48% of American General's division
earnings for the year ended December 31, 1999, and 46% for the three months
ended March 31, 2000. This division is the second-largest writer of new
individual life insurance in the United States and offers a comprehensive
portfolio of life and annuity products.
With assets of $38 billion at March 31, 2000, the division provides
traditional, interest-sensitive, and variable life insurance and annuities to 8
million customers. The division reaches its customers through a distribution
system of 36,000 independent and career agents, as well as banks,
broker-dealers, and financial planners.
CONSUMER FINANCE
The consumer finance division represented 15% of American General's
division earnings for the year ended December 31, 1999, and 14% for the three
months ended March 31, 2000. The division is a leading provider of mortgages,
consumer loans, and credit-related insurance products. Gross finance
receivables, consisting of 65% real estate-secured loans, totaled $11.1 billion
at March 31, 2000.
The division services 2.1 million customer accounts through a nationwide
network of 1,350 branch offices located in 40 states and through financing
programs with 16,000 retail merchants. In addition to the mortgages originated
by the branch offices, the division acquires loans through bulk purchases.
S-14
<PAGE> 15
DESCRIPTION OF SECURITIES
The Prospectus Documents contain the material terms and conditions for
these securities, however, the summaries in this prospectus supplement are not
meant to be a complete description of the preferred securities, the guarantee
and the debentures. For more information, refer to the trust agreement, the
indenture and the guarantee. Forms of these documents are filed as exhibits to
the registration statement of which the prospectus is a part. All terms used in
the Prospectus Documents that are not defined in the Prospectus Documents have
the meanings given to them in the trust agreement, the indenture and the
guarantee.
The Trust may, without the consent of the holders of the preferred
securities or the common securities, issue additional preferred securities or
common securities having the same ranking and the same interest rate, maturity
and other terms as the preferred securities and common securities being offered
hereby. Any additional preferred securities will, together with the preferred
securities being offered hereby, constitute a single series of preferred
securities under the trust agreement.
CERTAIN TERMS OF THE PREFERRED SECURITIES
DISTRIBUTIONS
The preferred securities represent undivided beneficial interests in the
assets of the Trust. The only assets of the Trust will be the debentures.
Distributions on the preferred securities are cumulative and will accumulate
from June 27, 2000 at the annual rate of 8 1/2% of the $1,000 liquidation amount
of each preferred security. Distributions will be payable semi-annually in
arrears on January 1 and July 1 of each year, beginning January 1, 2001.
Distributions not paid when due will themselves accumulate distributions at the
annual rate of 8 1/2% (to the extent permitted by law). When we refer to any
payment of distributions, any such additional distributions are included. The
amount of distributions payable for any full semi-annual period will be computed
on the basis of a 360-day year of twelve 30-day months. The amount of
distributions payable for any partial period will be computed on the basis of
the actual number of days elapsed in such period.
If distributions are payable on a date that is not a business day (as
defined below), payment will be made on the next business day (and without any
interest or other payment in respect of such delay). However, if the next
business day is in the next calendar year, payment of distributions will be made
on the preceding business day. A "business day" means any day other than a
Saturday or a Sunday or a day on which banking institutions in New York, New
York are authorized or required by law or executive order to close.
DEFERRAL OF DISTRIBUTIONS
So long as no event of default has occurred and is continuing under the
debentures, American General may, on one or more occasions, defer interest
payments on the debentures to the Trust for up to 10 consecutive semi-annual
periods. A deferral of interest payments cannot extend beyond the stated
maturity date of the debentures on July 1, 2030. If American General defers
interest payments on the debentures, the Trust will also defer semi-annual
distributions on the preferred securities to you. During a deferral period, the
amount of distributions due to you would continue to accumulate and such
deferred distributions will themselves accumulate distributions at the rate
stated above (to the extent permitted by law).
Once American General makes all deferred interest payments on the
debentures, with accrued interest, it may again defer interest payments on the
debentures if no event of default under the debentures has then occurred and is
continuing.
American General has no current intention of deferring interest payments on
the debentures. If American General defers interest payments on the debentures,
American General will be subject to certain restrictions relating to the payment
of dividends on or redemption of its capital stock and payments on its debt
securities that rank equal with or junior to the debentures. See "Certain Terms
of the Debentures -- Option to Extend Interest Payment Period" on page S-23.
S-15
<PAGE> 16
PAYMENT OF DISTRIBUTIONS
Distributions on the preferred securities will be payable to holders named
on the securities register of the Trust on the relevant record date. As long as
the preferred securities are represented by a global security, the record date
for the payment of distributions will be one business day before the relevant
payment date. If the preferred securities are ever issued in certificated form,
the record date for the payment of distributions will be the 15th day of the
last month of each semi-annual distribution period, even if that day is not a
business day.
As long as the preferred securities are represented by a global security,
payments on the preferred securities will be made in immediately available funds
to DTC, the depositary for the preferred securities. If the preferred securities
are ever issued in certificated form, payment of distributions on the preferred
securities will be made by check mailed on or before the due date to the holders
thereof on the relevant record date.
REDEMPTION
American General will repay the debentures at maturity on July 1, 2030.
American General may redeem the debentures before their maturity:
- in whole but not in part within 90 days following the occurrence of a Tax
Event or an Investment Company Event (each of which is a "Special Event"
as more fully described below); or
- in whole or in part on one or more occasions any time.
When American General repays some or all of the debentures, either at
maturity on July 1, 2030 or upon early redemption, the Trust will use the cash
it receives upon the redemption of the debentures to redeem a like liquidation
amount of the preferred securities and, unless an event of default under the
trust agreement has occurred and is continuing, the common securities. The
preferred securities and common securities (if applicable) will be redeemed at a
price equal to the redemption price for a like amount of debentures, plus
accumulated distributions, if any. The redemption price for the debentures is
equal to the greater of (i) 100% of the principal amount of the debentures to be
redeemed or (ii) the sum, as determined by the Quotation Agent, of the present
values of the principal amount of the debentures to be redeemed and the
remaining scheduled payments of interest thereon from the redemption date to
July 1, 2030 (the "Remaining Life") discounted from their respective scheduled
payment dates to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of 30-day months) at the Adjusted Treasury Rate, plus, in either
case, accrued interest thereon to the date of redemption. See "Certain Terms of
the Debentures -- Redemption" on page S-22.
If less than all the preferred securities and common securities are to be
redeemed in situations where common securities may be redeemed consistent with
the provisions described under "-- Subordination of Common Securities" on page
S-19, then the aggregate liquidation amount of preferred securities and common
securities to be redeemed will be allocated pro rata based on the liquidation
amount of the preferred securities and the common securities.
"Adjusted Treasury Rate" means (a) with respect to a redemption following a
Special Event, the Treasury Rate plus .50%, or (b) or in the case of any other
redemption, the Treasury Rate plus .25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life of the debentures to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity with the Remaining
Life of the debentures. If no United States Treasury security has a maturity
which is within a period from three months before to three months after the
Remaining Life, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite
S-16
<PAGE> 17
3:30 p.m. Quotations for U.S. Government Securities" or (2) if such release (or
any successor release) is not published or does not contain such prices on such
business day, (a) the average of the five Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (b) if the indenture trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average of all
such quotations.
"Investment Company Event" means that the Trust has received an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or will be considered an "investment company" under the Investment
Company Act of 1940 that is required to be registered under this law, which
change becomes effective on or after the date of this prospectus supplement.
"Quotation Agent" means Salomon Smith Barney Inc. and its successors;
provided, however, that if the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
indenture trustee shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer" means: (1) the Quotation Agent; and (2) any
other Primary Treasury Dealer selected by the indenture trustee.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the indenture trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the indenture trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third business day preceding such redemption date.
"Tax Event" means that the Trust has received an opinion of counsel
experienced in such matters to the effect that, as a result of any:
- amendment to, or change (including any announced proposed change) in, the
laws or regulations of the United States or any political subdivision or
taxing authority affecting taxation; or
- official or administrative pronouncement or action, or judicial decision,
interpreting or applying such laws or regulations
where such change or amendment becomes effective, or such pronouncement, action
or decision is announced or occurs, on or after the date of this prospectus
supplement, there is more than an insubstantial risk that:
- the Trust is or, within 90 days of the date of such opinion, would be
subject to United States federal income tax with respect to interest
accrued or received on the debentures;
- interest payable by American General on the debentures is not or, within
90 days of the date of such opinion, would not be deductible by American
General in whole or in part for United States federal income tax
purposes; or
- the Trust is or, within 90 days of the date of such opinion, would be
subject to more than a minimal amount of other taxes, duties, assessments
or other governmental charges.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to (1) the yield, under the heading which represents the average for
the immediately prior week, appearing in the most recently published statistical
release designated "H.15 (519)" or any successor publication which is published
weekly by the Federal Reserve Board and which establishes yields on actively
traded United States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding to the
Remaining Life (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be interpolated and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line basis
rounding to the nearest month) or (2) if such release (or any successor release)
is not published during the week preceding the calculation date or does not
contain such yields, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a
S-17
<PAGE> 18
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date, in each case calculated on the third business day
preceding the redemption date.
REDEMPTION PROCEDURES
The Trust will give you at least 30 days, but not more than 60 days,
written notice before any redemption of preferred securities. To the extent
funds are available for payment, the Trust will irrevocably deposit with DTC
sufficient funds to pay the redemption amount for the preferred securities being
redeemed. The Trust will also give DTC irrevocable instructions and authority to
pay the redemption amount in immediately available funds to the beneficial
owners of the global securities representing the preferred securities.
Distributions to be paid on or before the redemption date for any preferred
securities called for redemption will be payable to the holders on the record
dates for the related dates of distribution.
Once notice of redemption is given and funds are irrevocably deposited,
distributions on the preferred securities will cease to accumulate immediately
prior to the close of business on the redemption date and all rights of the
holders of the preferred securities called for redemption will cease, except for
the right to receive the redemption amount (but without interest on such
redemption amount).
If any redemption date is not a business day, then the redemption amount
will be payable on the next business day (and without any interest or other
payment in respect of any such delay).
If payment of the redemption amount for any preferred securities called for
redemption is improperly withheld or refused and not paid either by the Trust or
by American General, distributions on the preferred securities will continue to
accumulate at the applicable rate from the original redemption date scheduled to
the actual date of payment. In this case, the actual payment date will be
considered the redemption date for purposes of calculating the redemption
amount.
In compliance with applicable law (including the United States federal
securities laws), American General or its affiliates may, at any time, purchase
outstanding preferred securities by tender, in the open market, or by private
agreement or otherwise.
EVENTS OF DEFAULT
An event of default under the indenture (an "indenture event of default")
constitutes an event of default under the declaration with respect to the
preferred securities (a "declaration event of default"), provided that pursuant
to the declaration, the holder of the common securities will be deemed to have
waived any declaration event of default with respect to the common securities
until all declaration events of defaults with respect to the preferred
securities have been cured, waived or otherwise eliminated. Until such
declaration event of default with respect to the preferred securities has been
cured, waived or otherwise eliminated, the property trustee will be deemed to be
acting solely on behalf of the holders of the preferred securities and only the
holders of the preferred securities will have the right to direct the property
trustee with respect to certain matters under the declaration, and therefore the
indenture.
Upon the occurrence of a declaration event of default, the indenture
trustee or the property trustee will have the right under the indenture to
declare the principal of and interest on the debentures to be immediately due
and payable.
VOTING RIGHTS
Subject to the requirement of the property trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the preferred
securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the property trustee, or direct the
exercise of any trust or power conferred upon the property trustee under the
declaration, including the right to direct the property trustee, as holder of
the debentures, to
- exercise the remedies available under the indenture with respect to the
debentures,
- waive any past indenture event of default that is waivable under the
indenture, or
- exercise any right to rescind or annul a declaration that the principal
of all the debentures shall be due and payable, or consent to any
amendment, modification or termination of the indenture or the
debentures, where such consent should be required;
S-18
<PAGE> 19
provided, however, that, where a consent or action under the indenture would
require the consent or act of the holders of greater than a majority in
principal amount of debentures affected thereby (a "super-majority"), the
property trustee may only give such consent or take such action at the written
direction of the holders of at least the proportion in liquidation amount of the
preferred securities which the relevant super-majority represents of the
aggregate principal amount of the debentures outstanding. The property trustee
shall notify all holders of the preferred securities of any notice of default
received from the indenture trustee with respect to the debentures. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the property trustee shall not take any of the actions described in the
bullet points above unless the property trustee has obtained an opinion of tax
counsel to the effect that, as a result of such action, the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes.
In the event the consent of the property trustee, as the holder of the
debentures, is required under the indenture with respect to any amendment,
modification or termination of the indenture or the debentures, the property
trustee shall request the direction of the holders of the preferred securities
with respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in liquidation amount of the preferred securities voting together as a single
class; provided, however, that where a consent under the indenture would require
the consent of a super-majority, the property trustee may only give such consent
at the direction of the holders of at least the proportion in liquidation amount
of the preferred securities which the relevant super-majority represents of the
aggregate principal amount of the debentures outstanding. The property trustee
shall not take any such action in accordance with the directions of the holders
of the preferred securities unless the property trustee has obtained an opinion
of tax counsel to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.
In addition to the provisions described under "Description of Preferred
Securities -- Voting Rights; Amendment of Each Declaration" on page 25, the
declaration may be amended by the trustees and American General with (1) the
consent of holders representing a majority in liquidation amount of all
outstanding preferred securities, and (2) receipt by the trustees of an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to the trustees in accordance with such amendment will not affect the
Trust's status as a grantor trust for United States federal income tax purposes
or the Trust's exemption from status as an investment company under the
Investment Company Act of 1940, provided that, without the consent of each
holder of preferred securities, the trust agreement may not be amended to (1)
change the amount or timing of any distribution or other payment on the
preferred securities or otherwise adversely affect the amount of any
distribution or other payment required to be made in respect of the preferred
securities as of a specified date, (2) change the purpose of the Trust, (3)
change the time or circumstances in which the preferred securities may be
redeemed or the amount payable upon such a redemption, (4) change the
liquidation distribution or other provisions relating to the timing or amount of
such distribution, (5) affect the limited liability of any holder of preferred
securities, or (6) restrict the right of holders of preferred securities to
institute suit for the enforcement of any such payment on or after such date.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption and liquidation amount of,
the preferred securities and the common securities will be made pro rata based
on the aggregate liquidation amounts of the preferred securities and the common
securities. However, if an event of default under the trust agreement has
occurred and is continuing, no payments may be made on the common securities
unless all unpaid amounts on the preferred securities have been provided for or
paid in full.
If an event of default under the trust agreement has occurred and is
continuing, the common securities holder will be deemed to have waived any right
to take any action with respect to the event of default until the event of
default has been cured, waived or eliminated. Until any such event of default
has been cured, waived or eliminated, the property trustee will act solely on
behalf of the holders of the preferred securities, and such holders will have
the right to direct the property trustee to act on their behalf.
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BOOK-ENTRY-ONLY ISSUANCE -- DTC
The preferred securities will be represented by one or more global
securities that will be deposited with, or on behalf of, and registered in the
name of, DTC or its nominee. This means that the Trust will not issue
certificates to you for the preferred securities. Each global security will be
issued to DTC which will keep a computerized record of its participants (for
example, a broker) whose clients have purchased the preferred securities. Each
participant will then keep a record of its clients. Unless a global security is
exchanged in whole or in part for a certificated security, a global security may
not be transferred. However, DTC, its nominees and their successors may transfer
a global security as a whole to one another.
Beneficial interests in a global security will be shown on, and transfers
of the global security will be made only through, records maintained by DTC and
its participants. DTC holds securities that its participants ("direct
participants") deposit with DTC. DTC also records the settlement among direct
participants of securities transactions, such as transfers and pledges, in
deposited securities through computerized records for direct participant's
accounts. This eliminates the need to exchange certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations.
DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
direct participant. The rules that apply to DTC and its participants are on file
with the Securities and Exchange Commission.
DTC is owned by a number of its direct participants and by the New York
Stock Exchange, the American Stock Exchange and the National Association of
Securities Dealers.
DTC has advised American General and the Trust that DTC is a
limited-purpose trust company organized under New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
Purchases under the DTC System
When you purchase preferred securities through the DTC system, the
purchases must be made by or through a direct participant, who will receive
credit for the preferred securities on DTC's records. Because you actually own
the preferred security, you are the beneficial owner. Your ownership interest
will be recorded only on the direct (or indirect) participants' records. DTC has
no knowledge of your individual ownership of the preferred securities. DTC's
records show only the identity of the direct participants and the amount of the
preferred securities held by or through them. You will not receive a written
confirmation of your purchase or sale or any periodic account statement directly
from DTC. You will receive these from your direct (or indirect) participant. As
a result, the direct (or indirect) participants are responsible for keeping
accurate account of the holdings of their customers, like you.
Payments under the DTC System
The property trustee will wire payments on the preferred securities to
DTC's nominee. American General, the Trust and the property trustee will treat
DTC's nominee as the owner and holder of each global security representing
preferred securities for all purposes. Accordingly, American General, the Trust
and the property trustee will have no direct responsibility or liability to pay
amounts due on the global security to you or any other beneficial owners in the
global security.
Any redemption notices will be sent by American General and the Trust
directly to DTC, who will in turn inform the direct participants, who will then
contact you as a beneficial owner. If less than all of the preferred securities
are being redeemed, DTC's practice is to choose by lot the amount of the
interest of each direct participant to be redeemed. The direct participant will
then use an appropriate method to allocate the redemption among its beneficial
owners, like you.
It is DTC's current practice, upon receipt of any payment of distributions
or liquidation or redemption amount, to credit direct participants' accounts on
the payment date based on their holdings of beneficial interests in the global
securities as shown on DTC's records. In addition, it is DTC's current practice
to assign any consenting or voting rights to direct participants whose accounts
are credited with preferred
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securities on a record date, by using an omnibus proxy. Payments by participants
to owners of beneficial interests in the global securities, and voting by
participants, will be based on the customary practices between the participants
and owners of beneficial interests, as is the case with securities held for the
account of customers registered in "street name." However, payments will be the
responsibility of the participants and not of DTC, the property trustee,
American General or the Trust.
EXCHANGE OF GLOBAL SECURITIES
Preferred securities represented by a global security will be exchangeable
for certificated securities with the same terms in authorized denominations only
if:
- DTC is unwilling, unable or ineligible to continue as depositary and a
successor depositary is not appointed by the Trust within 90 days; or
- American General decides to discontinue use of the system of book-entry
transfer through DTC (or any successor depositary).
If the book-entry-only system is discontinued, the property trustee will
keep the registration books for the preferred securities at its corporate office
and follow the practices and procedures discussed below.
CERTIFICATED SECURITIES -- REGISTRATION AND TRANSFER
If the Trust issues certificated securities, they will be registered in the
name of the securityholder. The preferred securities may be transferred or
exchanged, based on administrative procedures in the trust agreement, without
the payment of any service charge (other than any tax or other governmental
charge) by contacting the property trustee, Bankers Trust Company, Four Albany
Street, New York, New York 10006, attention: Corporate Trust and Agency
Services -- Corporate Market Services.
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CERTAIN TERMS OF THE DEBENTURES
The debentures will be issued as a series pursuant to a supplemental
indenture or a resolution of American General's board of directors or a
committee thereof as provided for in the indenture.
American General may issue additional debentures having the same ranking
and the same interest rate, maturity and other terms as the debentures being
offered hereby. Any such additional debentures will, together with the
debentures being offered hereby, constitute a single series of debentures under
the indenture.
SUBORDINATION
The debentures are unsecured and are junior in right of payment to all of
American General's Senior Indebtedness (as defined on page 16). American General
may not make any payments of principal (including redemption payments) or
interest on the debentures if it defaults on a payment on its Senior
Indebtedness. Also, payments on the debentures may be blocked for up to 180 days
in the event of certain non-payment defaults by American General on its Senior
Indebtedness. See "Description of Junior Subordinated
Debentures -- Subordination" beginning on page 15 for more detailed information
on the subordination provisions.
On any distribution of assets of American General to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency
or similar proceedings, all principal, premium, if any, and interest due or to
become due on all Senior Indebtedness must be paid in full before the holders of
the debentures are entitled to receive or retain any payment.
Neither the debentures nor the guarantee will limit the ability of American
General and its subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior in priority of payment to the debentures and the
guarantee. At March 31, 2000, on a pro forma basis, as if on that date American
General and the Trust had issued and sold the preferred securities and the
debentures and applied the estimated net proceeds thereof as described in this
prospectus supplement, the total amount of American General's Senior
Indebtedness would have been approximately $3.3 billion. See "Capitalization" on
page S-10 and "Use of Proceeds" on page S-11.
INTEREST RATE AND MATURITY
The debentures will mature on July 1, 2030 and will bear interest, accruing
from June 27, 2000, at the annual rate of 8 1/2% of their principal amount,
payable semi-annually in arrears on January 1 and July 1 of each year, beginning
January 1, 2001. Interest payments not paid when due will themselves accrue
additional interest at the annual rate of 8 1/2% (to the extent permitted by
law). When we refer to any payment of interest, interest includes such
additional interest and any Additional Sums, as defined below. The interest
payment provisions for the debentures correspond to the distribution provisions
of the preferred securities. The debentures do not have a sinking fund. This
means that American General is not required to make any principal payments prior
to maturity.
ADDITIONAL SUMS
If the Trust is required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority (collectively, "Taxes"),
then American General will be required to pay additional amounts ("Additional
Sums") on the debentures so that after the Trust pays any Taxes, the Trust will
be in the same position it would have been if it did not have to pay such Taxes.
REDEMPTION
American General may redeem the debentures before their maturity:
- in whole but not in part within 90 days following the occurrence of a
Special Event; or
- in whole or in part on one or more occasions at any time,
in each case at the applicable redemption price described under "Certain Terms
of the Preferred Securities -- Redemption" on page S-16, plus accrued and unpaid
interest on such debenture to the date of redemption.
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DISTRIBUTION OF DEBENTURES
If the property trustee distributes the debentures to the preferred
securities holders and common securities holder upon the dissolution and
liquidation of the Trust, the debentures will be issued in denominations of
$1,000 principal amount and integral multiples thereof. American General
anticipates that the debentures would be distributed in the form of one or more
global securities and DTC, or any successor depositary for the preferred
securities, would act as depositary for the debentures. The depositary
arrangements for the debentures would be substantially similar to those in
effect for the preferred securities.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemption, other notices and
other matters, see "Certain Terms of the Preferred Securities -- Book-Entry-Only
Issuance -- DTC" beginning on page S-20.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
American General may, on one or more occasions, defer interest payments on
the debentures for up to 10 consecutive semi-annual periods, if no event of
default has occurred and is continuing with respect to the debentures. A
deferral of interest payments cannot extend beyond the stated maturity date of
the debentures. No interest will be due and payable on the debentures until the
end of the deferral period unless the debentures are redeemed prior to such
time.
American General may pay at any time all or any portion of the interest
accrued to that point during a deferral period. At the end of the deferral
period or at a redemption or maturity date, American General will be obligated
to pay all accrued and unpaid interest.
Once American General makes all interest payments on the debentures, with
accrued interest, it may again defer interest payments on the debentures if no
event of default under the debentures has then occurred and is continuing.
During any deferral period and subject to the exceptions described on page
12, American General will not be permitted to:
- declare or pay any dividends or distributions or redeem, purchase,
acquire or make a liquidation payment with respect to, any shares of its
capital stock;
- make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any debt securities issued by American General
which rank equal with or junior to the debentures; or
- make any guarantee payments with respect to any guarantee by American
General of the debt securities of any subsidiary of American General if
such guarantee ranks equal with or junior to the debentures.
Because the debentures to be issued to the Trust will rank equal with all
other series of junior subordinated debt securities of American General
initially issued to the other trusts referred to in the accompanying prospectus
or to certain other trusts, partnerships or other entities affiliated with
American General, during an interest deferral period, American General will not
be permitted to make payments on such other series of junior subordinated debt
securities. Likewise, if American General defers interest payments on any other
of such series of junior subordinated debt securities, it is not expected that
American General will be permitted to make payments on the debentures.
The restrictions described in the bullet points above will also apply if
there occurs and is continuing a default or event of default under the indenture
of which American General has actual knowledge and in respect of which American
General has not taken reasonable steps to cure or if American General defaults
on its obligations under the guarantee.
American General will give the Trust, the administrative trustees, the
property trustee and the indenture trustee notice if it decides to defer
interest payments on the debentures as specified in the terms of the debentures.
There is no limitation on the number of times that American General may
elect to begin an extension period. The administrative trustees will give notice
to the property trustee and the holders of preferred securities if American
General decides to defer interest payments on the debentures.
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<PAGE> 24
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In this section, we summarize certain of the material United States federal
income tax consequences of purchasing, holding and selling the preferred
securities. Except where we state otherwise, this summary deals only with
preferred securities held as capital assets (as defined in the Internal Revenue
Code of 1986) by a US Holder (as defined below) who purchases the preferred
securities at their original offering price when the Trust originally issues
them.
We do not address all of the tax consequences that may be relevant to a US
Holder. We also do not address, except as stated below, any of the tax
consequences to holders that are Non-US Holders (as defined below) or to holders
that may be subject to special tax treatment including banks, thrift
institutions, real estate investment trusts, personal holding companies,
tax-exempt organizations, regulated investment companies, insurance companies,
and brokers and dealers in securities or currencies. Further, we do not address:
- the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of the preferred
securities;
- the United States federal estate and gift or alternative minimum tax
consequences of the purchase, ownership or sale of the preferred
securities;
- persons who hold the preferred securities in a "straddle" or as part of a
"hedging," "conversion" or "constructive sale" transaction or whose
"functional currency" is not the United States dollar; or
- any state, local or foreign tax consequences of the purchase, ownership
and sale of preferred securities.
Accordingly, you should consult your tax advisor regarding the tax
consequences of purchasing, owning and selling the preferred securities in light
of your circumstances.
A "US Holder" is a preferred securities holder who or which is:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States, any state thereof or the District of Columbia (unless,
in the case of a partnership, Treasury regulations provide otherwise);
- an estate if its income is subject to United States federal income
taxation regardless of its source; or
- a trust if (1) a United States court can exercise primary supervision
over its administration and (2) one or more United States persons have
the authority to control all of its substantial decisions.
A "Non-US Holder" is a preferred securities holder other than a US Holder.
This summary is based on the Internal Revenue Code, Treasury regulations
(proposed and final) issued under the Internal Revenue Code, and administrative
and judicial interpretations thereof, all as they currently exist as of the date
of this prospectus supplement. These income tax laws and regulations, however,
may change at any time, possibly on a retroactive basis. Any such changes may
affect this summary.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the debentures, Vinson & Elkins L.L.P.,
counsel to American General and the Trust ("Counsel"), will render a legal
opinion generally to the effect that under current law and assuming full
compliance with the terms of the indenture and certain other documents, and
based on certain facts and assumptions described in the opinion, the debentures
that will be held by the Trust will be classified, for United States federal
income tax purposes, as indebtedness of American General.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the preferred securities, Counsel will
render a legal opinion generally to the effect that, under current
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<PAGE> 25
law and assuming full compliance with the terms of the trust agreement, the
indenture, and certain other documents, and based on certain facts and
assumptions described in the opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and will not be subject to
tax as a corporation. Accordingly, for United States federal income tax
purposes, you will generally be treated as the owner of an undivided interest in
the assets of the Trust, including the debentures. You will be required to
include in ordinary income for United States federal income tax purposes your
allocable share of interest (or OID, if any) paid or accrued on the debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the Treasury regulations relating to OID, a debt instrument will be
deemed to be issued with OID if there is more than a "remote" contingency that
periodic stated interest payments due on the instrument will not be timely paid.
Because the exercise by American General of its option to defer payments of
stated interest on the debentures would prevent American General from (i)
declaring dividends, or engaging in certain other capital transactions, with
respect to its capital stock, or (ii) making any payment on any debt securities
issued by American General which rank equal with or junior to the debentures,
American General believes that the likelihood of its exercising the option is
"remote" within the meaning of the Treasury regulations. As a result, American
General intends to take the position, based on the advice of Counsel, that the
debentures will not be deemed to be issued with OID. Based on this position,
stated interest payments on the debentures will be includible in your ordinary
income at the time that such payments are received or accrued in accordance with
your regular method of accounting. Because the Internal Revenue Service has not
yet addressed the Treasury regulations in any published rulings or other
interpretations, it is possible that the Internal Revenue Service could take a
position contrary to the position taken by American General. In that event, the
Internal Revenue Service may, for example, require you to include interest on
the debentures in your taxable income as it accrues rather than when you receive
payment even though you use the cash method of accounting for federal income tax
purposes.
EXERCISE OF DEFERRAL OPTIONS
Under Treasury regulations, if American General were to exercise its option
to defer the payment of interest on the debentures, the debentures would be
treated as redeemed and reissued for OID purposes and the sum of the remaining
interest payments on the debentures would be treated as OID, which you would be
required to accrue and include in taxable income on an economic accrual basis
(regardless of your method of accounting for income tax purposes) over the
remaining term of the debentures (including any period of interest deferral),
without regard to the timing of payments under the debentures. The amount of
interest income includible in your taxable income would be determined on the
basis of a constant yield method over the remaining term of the debentures and
the actual receipt of future payments of stated interest on the debentures would
no longer be separately reported as taxable income. The amount of OID that would
accrue, in the aggregate, during the deferred interest payment period would be
approximately equal to the amount of the cash payment due at the end of such
period. Any OID included in income would increase your adjusted tax basis in
your preferred securities, and your actual receipt of cash interest payments
would reduce your basis in the preferred securities.
CORPORATE US HOLDERS
Corporate US Holders of the preferred securities will not be entitled to a
dividends-received deduction for any income from the preferred securities.
SALES OF PREFERRED SECURITIES
If you sell your preferred securities, you will recognize gain or loss in
an amount equal to the difference between your adjusted tax basis in the
preferred securities and the amount realized from the sale (generally, your
selling price less any amount received in respect of accrued but unpaid interest
not previously included in your income). Your adjusted tax basis in the
preferred securities generally will equal (1) the initial purchase price that
you paid for the preferred securities plus (2) any accrued and unpaid
distributions that you were required to treat as OID less any cash distributions
received in respect of accrued OID.
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<PAGE> 26
Gain or loss on the sale of preferred securities generally will be capital gain
or loss.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID if the debentures are
treated as having been issued or reissued with OID) relating to the underlying
debentures. If you dispose of your preferred securities, you will be required to
include in ordinary income for United States federal income tax purposes any
portion of the amount realized that is attributable to accrued but unpaid
interest (including OID, if any) through the date of sale. This income inclusion
will increase your adjusted tax basis in the preferred securities but may not be
reflected in the sale price. To the extent the sale price is less than your
adjusted tax basis, you will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
RECEIPT OF DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
If American General dissolves the Trust and causes the Trust to distribute
the debentures on a pro rata basis to you, you will not be subject to tax.
Rather, you would have an adjusted tax basis in the debentures received in the
liquidation equal to the adjusted tax basis in your preferred securities
surrendered for the debentures. Your holding period for the debentures would
include the period during which you had held the preferred securities. If,
however, the Trust is classified, for United States federal income tax purposes,
as an association that is subject to tax as a corporation at the time of the
liquidation, the distribution of the debentures would constitute a taxable event
to you and you would acquire a new holding period in the debentures received.
If the debentures are redeemed for cash and the proceeds of the redemption
are distributed to you in redemption of your preferred securities, the
redemption would be treated as a sale of the preferred securities, in which gain
or loss would be recognized, as described above under "-- Sales of Preferred
Securities."
INFORMATION REPORTING AND BACK-UP WITHHOLDING
Generally, income on the preferred securities will be reported to you on an
Internal Revenue Service Form 1099, which should be mailed to you by January 31
following each calendar year. If you fail to supply your correct taxpayer
identification number or under-report your tax liability, the Internal Revenue
Service may require the property trustee or its agent to withhold federal income
tax at the rate of 31% from each interest payment. You will be permitted to
credit any withheld tax against your federal income tax liability.
NON-US HOLDERS
Payments to a Non-US Holder will generally not be subject to United States
federal withholding tax, provided the Non-US Holder:
- does not own (directly or indirectly, actually or constructively) 10% or
more of the total combined voting power of all classes of stock of
American General entitled to vote;
- is not a controlled foreign corporation that is related to American
General through stock ownership; and
- is not a bank receiving interest described in section 881(c)(3)(A) of the
Internal Revenue Code.
To qualify for this exemption from withholding, the last United States
payer in the chain of payment prior to payment to a Non-US 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:
- is signed by the Non-US Holder under penalties of perjury;
- certifies that the holder of the preferred securities is a Non-US Holder;
and
- provides the name and address of the Non-US Holder.
The statement may be made on an Internal Revenue Service Form W-8BEN or a
substantially similar form, and the Non-US Holder must inform the withholding
agent of any change in the information on the statement within 30 days of any
change. If the preferred securities are held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the withholding agent along with a
copy of Internal Revenue
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Service Form W-8BEN or the substitute form provided by the Non-US Holder.
A Non-US Holder will generally not be subject to United States federal
withholding or income tax on any gain realized upon the sale or other
disposition of the preferred securities. If, however, a Non-US Holder holds the
preferred securities in connection with a trade or business conducted in the
United States or is present in the United States for 183 days or more during the
taxable year of disposition and certain other conditions are met, it may be
subject to income tax on all income and gains recognized.
NON-US HOLDER WITHHOLDING REGULATIONS
The Treasury Department has issued regulations which make certain
modifications to the withholding, backup withholding and information reporting
rules described above. These regulations attempt to unify certification
requirements and modify reliance standards. The regulations will generally be
effective for payments made after December 31, 2001, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding these regulations.
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ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA
in the context of the Plan's particular circumstances before authorizing an
investment in the Preferred Securities with assets of the Plan. Accordingly,
among other factors, the fiduciary should consider whether the investment would
satisfy the prudence and diversification requirements of ERISA and would be
consistent with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code; however, such plans may be
subject to federal, state or local laws or regulations which affect their
ability to invest in the preferred securities. Any fiduciary of such a
governmental, church or foreign plan considering an investment in the preferred
securities should determine the need for, and, if necessary, the availability
of, any exemptive relief under such laws or regulations.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust may be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Trust would not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interests in the Trust
were held by Plans, other employee benefit plans not subject to ERISA or Section
4975 of the Code (such as governmental, church and foreign plans), and entities
holding assets deemed to be "plan assets" of any Plan (collectively, "Benefit
Plan Investors"), or if the preferred securities qualify as "publicly-offered
securities" as defined in the Plan Assets Regulation. No assurance can be given
that the value of the preferred securities held by Benefit Plan Investors will
be less than 25% of the total value of such preferred securities at the
completion of the initial offering or thereafter, and no monitoring or other
measures will be taken with respect to the satisfaction of the conditions of
this exception. In addition, no assurance can be given that the preferred
securities would be considered to be "publicly-offered securities" under the
Plan Assets Regulation, which requires that the securities in question be
"widely held." All of the common securities will be purchased and held by
American General.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the preferred securities were acquired with "plan
assets" of such Plan and the assets of the Trust were deemed to be "plan assets"
of Plans investing in the Trust. For example, if American General were a Party
in Interest with respect to a Plan (either directly or by reason of ownership of
its subsidiaries), extensions of credit between American General and the Trust
(as represented by the debentures and the guarantee) would likely be prohibited
by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless
exemptive relief were available under an applicable administrative exemption
(see below). In addition, if American General were considered to be a fiduciary
S-28
<PAGE> 29
with respect to the Trust as a result of certain powers it holds (such as the
powers to remove and replace the property trustee and the administrative
trustees), certain operations of the Trust, including the optional redemption or
acceleration of the debentures, could be considered to be prohibited
transactions under Section 406(b) of ERISA and Section 4975(c)(1)(E) of the
Code. In order to avoid such prohibited transactions, each investing plan, by
purchasing preferred securities, will be deemed to have directed the Trust to
invest in the debentures and to have appointed the property trustee.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect prohibited
transactions that may arise from the purchase or holding of the preferred
securities if assets of the Trust were deemed to be "plan assets" of Plans
investing in the Trust as described above. Those class exemptions are PTCE 96-23
(for certain transactions determined by in-house asset managers), PTCE 95-60
(for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds),
PTCE 90-1 (for certain transactions involving insurance company separate
accounts), and PTCE 84-14 (for certain transactions determined by independent
qualified asset managers).
Because of the potential prohibited transaction exposures described above,
the preferred securities may not be purchased and should not be held by any
Plan, any entity whose underlying assets include "plan assets" by reason of any
Plan's investment in the entity (a "Plan Asset Entity") or any person investing
"plan assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption. Any purchaser or holder of the preferred
securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that it either (a) is not a Plan or a Plan Asset
Entity and is not purchasing such securities on behalf of or with "plan assets"
of any Plan, or (b) is eligible for the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect
to such purchase or holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the preferred
securities on behalf of or with "plan assets" of any Plan consult with their
counsel regarding the potential consequences if the assets of the Trust were
deemed to be "plan assets" and the availability of exemptive relief under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.
A Plan fiduciary should consider whether the purchase of preferred
securities could result in a delegation of fiduciary authority to the property
trustee, and, if so, whether such a delegation of authority is permissible under
the Plan's governing instrument or any investment management agreement with the
Plan. In making such a determination, a Plan fiduciary should note that, under
the governing documents, the property trustee will have only limited custodial
and ministerial authority with respect to Trust assets and will be required to
follow instructions of investors rather than exercising independent fiduciary
authority over Trust assets.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE COMPLETE. ANY FIDUCIARY OF A PLAN, GOVERNMENTAL PLAN, CHURCH PLAN OR FOREIGN
PLAN CONSIDERING AN INVESTMENT IN THE PREFERRED SECURITIES SHOULD CONSULT WITH
ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES AND ADVISABILITY OF SUCH
INVESTMENT.
S-29
<PAGE> 30
UNDERWRITING
GENERAL
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and the Trust has agreed to sell to such underwriter, the principal
amount of preferred securities set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF PREFERRED SECURITIES
-----------------------
<S> <C>
Salomon Smith Barney Inc. ............................... $165,000,000
Banc of America Securities LLC........................... 33,750,000
Chase Securities Inc. ................................... 33,750,000
Donaldson, Lufkin & Jenrette Securities Corporation...... 33,750,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 33,750,000
------------
Total........................................ $300,000,000
============
</TABLE>
In the underwriting agreement the several underwriters have agreed, subject
to the terms and conditions set forth in that agreement, to purchase all of the
preferred securities offered hereby if any of the preferred securities are
purchased. In the event of default by an underwriter, the underwriting agreement
provides that, in certain circumstances, the purchase commitments of the
non-defaulting underwriters may be increased or the underwriting agreement may
be terminated.
American General and the Trust have agreed with the underwriters to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments which the
underwriters may be required to make.
Certain of the underwriters and their affiliates have in the past and may
in the future engage in transactions with, or perform services for, American
General or its subsidiaries in the ordinary course of their businesses.
American General will pay all expenses, estimated to be approximately
$400,000, associated with the offer and sale of the preferred securities.
COMMISSIONS AND DISCOUNTS
The underwriters will offer the preferred securities directly to the public
initially at $994.71 per preferred security. The underwriters may also offer the
preferred securities to certain dealers at the above-mentioned offering price
less a concession of $6.00 per preferred security. The underwriters may allow,
and such dealers may reallow, a discount not in excess of $2.50 per preferred
security to certain dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
Because the proceeds from the sale of the preferred securities and the
common securities will be used to purchase the debentures, American General has
agreed to pay to the underwriters an underwriting commission of $10 per
preferred security (or a total of $3,000,000).
NEW ISSUE OF SECURITIES
Before this offering, there was no established public trading market for
the preferred securities. We do not intend to apply for listing of the preferred
securities on any national securities exchange or for quotation of the preferred
securities on any automated dealer quotation system. The underwriters have
advised American General that they intend to make a market in the preferred
securities after completion of this offering. However, the underwriters are not
obligated to do so and may discontinue market making at any time without notice.
We cannot give any assurance that a liquid trading market for the preferred
securities will develop or be maintained.
S-30
<PAGE> 31
NO SALES OF SIMILAR SECURITIES
American General and the Trust have agreed that, until after the issuance
of the preferred securities, they will not offer, sell, contract to sell, or
otherwise dispose of any preferred securities, any other beneficial interests of
the Trust, or any securities of American General, that are substantially similar
to the preferred securities, including the guarantee, and including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive preferred securities or any such substantially
similar securities of either the Trust or American General (except the
debentures and the preferred securities offered hereby), without the prior
consent of the underwriters.
PRICE STABILIZATION AND SHORT POSITIONS
In connection with the sale of the preferred securities, SEC rules permit
the underwriters to engage in transactions that stabilize the price of the
preferred securities. These transactions may include purchases for the purpose
of fixing or maintaining the price of the preferred securities.
The underwriters may create a short position in the preferred securities in
connection with this offering. That means they may sell a larger number of the
preferred securities than is shown on the cover page of this prospectus
supplement. If they create a short position, the underwriters may purchase
preferred securities in the open market to reduce the short position.
If the underwriters purchase the preferred securities to stabilize the
price or to reduce their short position, the price of the preferred securities
could be higher than it might be if they had not made such purchases. The
underwriters make no representation or prediction about any effect that the
purchases may have on the price of the preferred securities.
The underwriters may suspend any of these activities at any time.
PENALTY BIDS
The underwriters also may impose a penalty bid on certain underwriters and
selling group members. This means that, if the underwriters purchase preferred
securities in the open market to reduce the underwriters' short position or to
stabilize the price of the preferred securities, they may reclaim the amount of
the selling concession from the underwriters and selling group members who sold
those preferred securities as part of this offering.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the preferred
securities, the enforceability of the trust agreement and the creation of the
Trust will be passed upon on behalf of the Trust by Richards, Layton & Finger,
P.A., Wilmington, Delaware, special Delaware counsel to the Trust and American
General. The validity of the debentures, the guarantee and certain matters
relating thereto, will be passed upon on behalf of American General and the
Trust by Vinson & Elkins L.L.P. Certain legal matters will be passed upon for
the underwriters by Brown & Wood LLP, New York, New York. Vinson & Elkins L.L.P.
and Brown & Wood LLP will rely on the opinion of Richards, Layton & Finger, P.A.
as to matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for American General by Vinson &
Elkins L.L.P.
EXPERTS
The consolidated financial statements of American General Corporation
incorporated by reference in American General Corporation's Annual Report (Form
10-K) for the year ended December 31, 1999, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
S-31
<PAGE> 32
PROSPECTUS
[AMERICAN GENERAL LOGO]
$1,500,000,000
AMERICAN GENERAL CORPORATION
JUNIOR SUBORDINATED DEBENTURES
AMERICAN GENERAL CAPITAL I
AMERICAN GENERAL CAPITAL II
AMERICAN GENERAL CAPITAL III
AMERICAN GENERAL CAPITAL IV
PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN,
BY
AMERICAN GENERAL CORPORATION
------------------
American General Corporation, a Texas corporation ("American General" or the
"Company"), may from time to time offer in one or more series or issuances its
junior subordinated debentures (the "Junior Subordinated Debentures"). The
Junior Subordinated Debentures will be unsecured and subordinate and junior in
right of payment to the extent and in the manner set forth herein to Senior
Indebtedness (as defined in "Description of Junior Subordinated Debentures
--Subordination") of the Company. If provided in an accompanying Prospectus
Supplement, the Company will have the right to defer payments of interest on any
series of Junior Subordinated Debentures by extending the interest payment
period thereon at any time or from time to time for up to such number of
consecutive interest payment periods (which shall not extend beyond the Stated
Maturity Date (as defined herein) of the Junior Subordinated Debentures) with
respect to each deferral period as may be specified in such Prospectus
Supplement (each, an "Extension Period"). In such circumstance, however, the
Company would not be permitted, subject to certain exceptions set forth herein,
to declare or pay any dividends, distributions or other payments with respect
to, or repay, repurchase, redeem or otherwise acquire, the Company's capital
stock or debt securities that rank pari passu with or junior to such series of
Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Option to Defer Interest Payments" and "-- Restrictions on Certain
Payments."
American General Capital I, American General Capital II, American General
Capital III, and American General Capital IV, each a trust created under the
laws of the State of Delaware (each, a "Trust," and collectively, the "Trusts"),
may severally offer, from time to time, preferred securities (the "Preferred
Securities") representing beneficial ownership interests in such Trust. The
Company will be the owner of the common securities (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities") representing
common beneficial ownership interests in such Trust. Holders of the Preferred
Securities will be entitled to receive preferential cumulative cash
distributions ("Distributions") accumulating from the date of original issuance
and payable periodically as specified in an accompanying Prospectus Supplement.
(continued on next page)
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 February 10, 1998.
<PAGE> 33
(cover page continued)
Concurrently with the issuance by a Trust of its Preferred Securities, such
Trust will invest the proceeds thereof and of contributions received in respect
of the Common Securities in a corresponding series of the Company's Junior
Subordinated Debentures (the "Corresponding Junior Subordinated Debentures")
with terms corresponding to the terms of that Trust's Preferred Securities (the
"Related Preferred Securities"). Accordingly, if, as provided in an accompanying
Prospectus Supplement, the Company has the right to defer the payment of
interest on a series of Corresponding Junior Subordinated Debentures, then, if
interest payments are so deferred, Distributions on the Related Preferred
Securities would also be deferred, but would continue to accumulate at the rate
per annum set forth in the related Prospectus Supplement. See "Description of
Preferred Securities -- Distributions."
Taken together, the Company's obligations under each series of
Corresponding Junior Subordinated Debentures, the Indenture and the related
Declaration and the related Guarantee (each, as defined herein), in the
aggregate, provide a full, irrevocable and unconditional guarantee of payments
of Distributions and other amounts due on the Related Preferred Securities. See
"Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees -- Full and Unconditional Guarantee."
The payment of Distributions with respect to the Preferred Securities of each
Trust and payments on liquidation of such Trust or redemption of such Preferred
Securities, in each case out of funds held by such Trust, are each irrevocably
guaranteed by the Company to the extent described herein (each, a "Guarantee").
See "Description of Guarantees." The obligations of the Company under each
Guarantee will be unsecured and subordinate and junior in right of payment to
all Senior Indebtedness of the Company to the extent and in the manner set forth
herein and in such Guarantee.
The Corresponding Junior Subordinated Debentures will be the sole assets of
each Trust, and payments under the Corresponding Junior Subordinated Debentures
will be the only revenue of each Trust. If so provided in an accompanying
Prospectus Supplement, the Company may redeem the Corresponding Junior
Subordinated Debentures (and thereby cause the redemption of the related Trust
Securities) or may dissolve a Trust and, after satisfaction of liabilities to
the creditors of such Trust as required by applicable law, cause the
Corresponding Junior Subordinated Debentures to be distributed to the holders of
the Related Preferred Securities in exchange therefor upon liquidation of their
interests in such Trust. See "Description of Preferred Securities -- Liquidation
Distribution Upon Dissolution."
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, that the aggregate initial public offering price of all
Junior Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Preferred Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of which
this Prospectus forms a part shall not exceed $1,500,000,000. See "Additional
Information." Certain specific terms of the Junior Subordinated Debentures or
Preferred Securities in respect of which this Prospectus is being delivered will
be described in an accompanying Prospectus Supplement, including without
limitation and where applicable and to the extent not set forth herein, (a) in
the case of Junior Subordinated Debentures, the specific designation, aggregate
principal amount, denominations, Stated Maturity Date (including any provisions
for the shortening or extension thereof), interest payment dates, interest rate
(which may be fixed or variable) or method of calculating interest, if any,
applicable Extension Period or interest deferral terms, if any, place or places
where principal, premium, if any, and interest, if any, will be payable, any
terms of redemption, any sinking fund provisions, any terms for any conversion
or exchange into other securities, initial offering or purchase price, methods
of distribution and any other special terms, and (b) in the case of Preferred
Securities, the identity of the Trust, specific title, aggregate stated
liquidation amount, number of securities, Distribution rate or method of
calculating such rate, Distribution payment dates, applicable Distribution
deferral terms, if any, place or places where Distributions will be payable, any
terms of redemption, any terms for conversion or exchange into other securities,
initial offering or purchase price, methods of distribution and any other
special terms.
(ii)
<PAGE> 34
(cover page continued)
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures or Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them will be set forth in a Prospectus Supplement. The
Prospectus Supplement will state whether the Junior Subordinated Debentures or
Preferred Securities will be listed on any national securities exchange or
automated quotation system. If the Junior Subordinated Debentures or Preferred
Securities are not listed on any national securities exchange or automated
quotation system, there can be no assurance that there will be a secondary
market for the Junior Subordinated Debentures or Preferred Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
(iii)
<PAGE> 35
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 RULED UPON THE ACCURACY OR THE 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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
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.sec.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 and The Pacific Stock Exchange, Incorporated, 301 Pine
Street, San Francisco, California 94104.
The Company and the Trusts have filed with the Commission a registration
statement on Form S-3 (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the securities offered
hereby. 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.
In addition to this Prospectus, the Registration Statement contains another
prospectus which relates to the offer and sale from time to time of certain
other securities by the Company. The $1,500,000,000 aggregate maximum initial
public offering price of securities which may be sold under this Prospectus will
be reduced by the amount of the aggregate initial public offering price of any
securities sold under such other prospectus.
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.
No separate financial statements of any Trust have been included herein.
The Company and the Trusts do not consider that such financial statements would
be material to holders of the Preferred Securities because each Trust is a newly
formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Corresponding Junior Subordinated
Debentures of the Company and issuing the Trust Securities. See "The Trusts,"
"Description of Preferred Securities," "Description of Junior Subordinated
Debentures -- Corresponding Junior Subordinated Debentures" and "Description of
Guarantees." In addition, the Company does not expect that any of the Trusts
will file reports under the Exchange Act with the Commission.
2
<PAGE> 36
INCORPORATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-7981), are incorporated
herein by reference:
- the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
- the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
- the Company's Current Report on Form 8-K dated February 12, 1997 with
respect to the announcement of the signing of a merger agreement with
USLIFE Corporation;
- the Company's Current Report on Form 8-K dated February 21, 1997 with
respect to the filing of the Company's historical Consolidated Financial
Statements for the three years ended December 31, 1996 and the related
Management's Discussion and Analysis;
- the Company's Current Report on Form 8-K dated August 15, 1997 with
respect to the consolidated total revenues, net income and net income per
share of the Company for the one month and seven months ended July 31,
1997, which reflect the acquisition of USLIFE Corporation using the
pooling of interests method of accounting;
- the Company's Current Report on Form 8-K dated September 11, 1997 with
respect to the announcement of a definitive agreement under which the
Company will acquire the remaining common equivalent shares of Western
National Corporation;
- the Company's Current Report on Form 8-K dated October 10, 1997 with
respect to the filing of the Company's consolidated balance sheets as of
December 31, 1996 and 1995, and the related consolidated statements of
income, shareholders' equity, common stock activity, and cash flows, and
Management's Discussion and Analysis, for the three years ended December
31, 1996, restated to include the acquisition of USLIFE Corporation using
the pooling of interests method of accounting;
- the Company's Current Report on Form 8-K dated January 26, 1998 with
respect to certain management compensation information; and
- the Company's Current Report on Form 8-K dated January 27, 1998 with
respect to the Company's earnings release for the year ended December 31,
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 the filing of the
Registration Statement 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 other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
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 77019-2155, Attention: Treasury Department, telephone (713)
831-1949.
3
<PAGE> 37
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in documents incorporated herein by
reference may be considered forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act.
Forward-looking statements are made based upon American General's current
expectations and beliefs concerning future developments and their potential
effects upon American General. There can be no assurance that future
developments affecting American General will be those anticipated by its
management. Actual results may differ materially from those included in the
forward-looking statements. These forward-looking statements involve risks and
uncertainties including, but not limited to, the following: changes in general
economic conditions, including the performance of financial markets, interest
rates, and the level of personal bankruptcies; customer responsiveness to both
new products and distribution channels; competitive, regulatory, or tax changes
that affect the cost of or demand for American General's products; adverse
litigation results; American General's ability to render its computer systems
year 2000 compliant; American General's failure to achieve anticipated levels of
earnings or operational efficiencies related to recently acquired companies, as
well as other cost-saving initiatives; and difficulties in combining the
operations of American General with the operations of each of Western National
Corporation, USLIFE Corporation and Home Beneficial Corporation.
AMERICAN GENERAL CORPORATION
The Company, with assets of $80.6 billion and shareholders' equity of $7.6
billion as of December 31, 1997, is the parent company of one of the nation's
largest diversified financial services organizations. The Company provides
financial services to consumers, emphasizing personal service and frequent
customer contact.
Since American General is a holding company, rights to participate in any
distribution of assets of any subsidiary upon its liquidation or reorganization
or otherwise (and thus the ability of holders of Preferred Securities or Junior
Subordinated Debentures to benefit indirectly from such distribution) are
subject to the prior claims of creditors of that subsidiary, except to the
extent that American General may itself be a creditor of that subsidiary. Claims
on American General's subsidiaries by other creditors include substantial claims
for policy benefits and debt obligations, as well as other liabilities incurred
in the ordinary course of business. In addition, since many of American
General's subsidiaries are insurance companies subject to regulatory control by
various state insurance departments, the ability of such subsidiaries to pay
dividends to American General without prior regulatory approval is limited by
applicable laws and regulations. Further, certain non-insurance subsidiaries are
similarly restricted in their ability to make dividend payments by long-term
debt agreements. At December 31, 1996, the amount available to the Company for
dividends from subsidiaries not limited by such restrictions was approximately
$750 million.
The principal executive offices of American General are located at 2929
Allen Parkway, Houston, Texas 77019-2155, and its telephone number is (713)
522-1111.
THE TRUSTS
Each Trust is a statutory business trust created under Delaware law
pursuant to (i) a declaration of trust executed by the Company, as Sponsor of
the Trust, the Delaware Trustee and an Administrative Trustee (each as defined
herein) of such Trust and (ii) the filing of a certificate of trust with the
Delaware Secretary of State. Each declaration of trust will be amended and
restated in its entirety (each, as so amended and restated, a "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Each Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Each Trust exists for the exclusive purposes of (i) issuing and
selling its Trust Securities, which represent undivided beneficial interests in
the assets of such Trust, (ii) investing the gross proceeds from the sale of
such Trust Securities in a series of Corresponding Junior Subordinated
Debentures issued by the Company, and
4
<PAGE> 38
(iii) engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of Trust Securities). Accordingly, the
Corresponding Junior Subordinated Debentures will be the sole assets of each
Trust, and payments under the Corresponding Junior Subordinated Debentures will
be the sole source of revenue for each Trust.
All of the Common Securities of each Trust will be owned directly or
indirectly by the Company. The Common Securities of a Trust will rank pari
passu, and payments will be made thereon pro rata, with the Preferred Securities
of such Trust, except that upon the occurrence and continuance of an event of
default under a Declaration resulting from an event of default under the
Indenture, the rights of the Company as holder of the Common Securities to
payment in respect of Distributions and payments upon liquidation or redemption
will be subordinated to the rights of the holders of the Preferred Securities of
such Trust. See "Description of Preferred Securities -- Subordination of Common
Securities." The Company will acquire, directly or indirectly, Common Securities
in an aggregate Liquidation Amount equal to at least 3% of the total assets of
each Trust.
Each Trust will have a term that generally corresponds to the Stated
Maturity of the Corresponding Junior Subordinated Debentures specified in the
applicable Prospectus Supplement, but may dissolve earlier as provided in the
applicable Declaration. Each Trust's business and affairs are conducted by its
trustees, each appointed by the Company as holder of the Common Securities. The
trustees for each Trust will be Bankers Trust Company, as the Property Trustee
(the "Property Trustee"), Bankers Trust (Delaware), as the Delaware Trustee (the
"Delaware Trustee"), and three individual trustees (the "Administrative
Trustees") who are employees or officers of or affiliated with the Company
(collectively, the "Issuer Trustees"). Bankers Trust Company, as Property
Trustee, will act as sole trustee under each Declaration for purposes of
compliance with the Trust Indenture Act. Bankers Trust Company will also act as
trustee under the Guarantees and the Indenture. See "Description of Guarantees"
and "Description of Junior Subordinated Debentures." The holder of the Common
Securities of a Trust, or the holders of a majority in Liquidation Amount of the
Preferred Securities if an event of default under the Declaration for such Trust
has occurred and is continuing, will be entitled to appoint, remove or replace
the Property Trustee and/or the Delaware Trustee for such Trust. In no event
will the holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the applicable Declaration. The Company
will pay all fees and expenses related to each Trust and the offering of the
Preferred Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of each Trust.
The principal executive office of each Trust is c/o American General
Corporation, 2929 Allen Parkway, Houston, Texas 77019-2155, Attention: Treasury
Department, telephone (713) 831-1949.
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 any Junior
Subordinated Debentures being offered hereby (including Corresponding Junior
Subordinated Debentures issued to the Trusts in connection with the investment
by the Trusts of all of the proceeds from the sale of Trust Securities) will be
added to American General's general corporate funds and may be used for the
repayment of long- or short-term indebtedness or for other general corporate
purposes.
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RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred stock dividends for
the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- ------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
Consolidated operations................ 2.3 2.7 2.5 2.3 2.6 2.3 2.5
Consolidated operations, corporate
fixed charges only.................. 5.6 7.2 6.4 5.3 6.3 5.3 5.5
Ratio of earnings to combined fixed
charges and preferred stock dividends:
Consolidated operations................ 1.9 2.5 2.3 2.2 2.6 2.3 2.5
Consolidated operations, corporate
fixed charges and preferred stock
dividends only...................... 3.3 5.4 4.7 4.7 6.3 5.3 5.5
</TABLE>
For purposes of computing these ratios, earnings represent income before
income tax expense, net dividends on preferred securities of subsidiaries, and
the cumulative effect of accounting changes, adjusted for undistributed income
of an equity investee and fixed charges (excluding capitalized interest). Fixed
charges consist primarily of interest expense (including capitalized interest)
on short-term and long-term borrowings. Preferred stock dividends consist of
dividends on preferred securities of subsidiaries and convertible preferred
stock.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, dated as of November 15, 1997, as it may
be supplemented or amended from time to time (as so supplemented or amended, the
"Indenture"), between the Company and Bankers Trust Company, as trustee (the
"Debenture Trustee"). This summary of certain terms and provisions of the Junior
Subordinated Debentures and the Indenture, which summarizes the material
provisions thereof, does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Indenture, the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and to the Trust Indenture Act, to each of which reference is hereby
made. The Indenture is qualified under the Trust Indenture Act. Whenever
particular defined terms of the Indenture are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein by
reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Indebtedness (as defined below) of the
Company. See "--Subordination." Because the Company is a holding company, the
right of the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of the holders of Junior Subordinated Debentures and
Related Preferred Securities to benefit indirectly from such distribution), is
subject to the prior claims of creditors of that subsidiary, except to the
extent that the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Junior Subordinated Debentures should look only to
the assets of the Company for payments on the Junior
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<PAGE> 40
Subordinated Debentures. In addition, since many of the Company's subsidiaries
are insurance companies subject to regulatory control by various state insurance
departments, the ability of such subsidiaries to pay dividends to the Company
without prior regulatory approval is limited by applicable laws and regulations.
Further, certain non-insurance subsidiaries are similarly restricted in their
ability to make dividend payments by long-term debt agreements. Except as
otherwise provided in the applicable Prospectus Supplement, the Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Indebtedness, whether under the Indenture, any other
existing indenture or any other indenture that the Company may enter into in the
future or otherwise or afford holders of Junior Subordinated Debentures
protection in the event of a highly leveraged or similar transaction that may
adversely affect the holders of the Junior Subordinated Debentures. See
"-- Subordination" and the applicable Prospectus Supplement relating to any
offering of Preferred Securities or Junior Subordinated Debentures.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Company's Board of Directors or a committee thereof.
The applicable Prospectus Supplement will describe the following terms of
the Junior Subordinated Debentures: (1) the title of the Junior Subordinated
Debentures; (2) any limit upon the aggregate principal amount of the Junior
Subordinated Debentures; (3) the date or dates on which the principal of the
Junior Subordinated Debentures is payable (the "Stated Maturity Date") or the
method of determination thereof, including the right, if any, of the Company to
shorten or extend the Stated Maturity Date in certain circumstances; (4) the
rate or rates, if any, at which the Junior Subordinated Debentures shall bear
interest, the dates on which any such interest shall be payable (the "Interest
Payment Dates"), the right, if any, of the Company to defer or extend an
Interest Payment Date, and the record dates for any interest payable on any
Interest Payment Date (the "Regular Record Dates") or the method by which any of
the foregoing shall be determined; (5) the place or places where, subject to the
terms of the Indenture as described below under "-- Payment and Paying Agents,"
the principal of and premium, if any, and interest on the Junior Subordinated
Debentures will be payable and where, subject to the terms of the Indenture as
described below under "-- Denominations, Registration and Transfer," the Junior
Subordinated Debentures may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon the
Company in respect of the Junior Subordinated Debentures and the Indentures may
be made ("Place of Payment"); (6) any period or periods within which, or date or
dates on which, the price or prices at which and the terms and conditions upon
which Junior Subordinated Debentures may be redeemed, in whole or in part, at
the option of the Company or a holder thereof; (7) the obligation, if any, of
the Company to redeem, purchase or repay the Junior Subordinated Debentures and
the period or periods within which, the price or prices at which, and the other
terms and conditions upon which the Junior Subordinated Debentures shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;
(8) the denominations in which any Junior Subordinated Debentures shall be
issuable if other than denominations of $1,000 and any integral multiple
thereof; (9) if other than in U.S. Dollars, the currency or currencies
(including currency unit or units) in which the principal of (and premium, if
any) and interest, if any, on the Junior Subordinated Debentures shall be
payable, or in which the Junior Subordinated Debentures shall be denominated;
(10) any additions, modifications or deletions in the events of default under
the Indenture or covenants of the Company specified in the Indenture with
respect to the Junior Subordinated Debentures; (11) if other than the principal
amount thereof, the portion of the principal amount of Junior Subordinated
Debentures that shall be payable upon declaration of acceleration of the
maturity thereof; (12) any additions or changes to the Indenture with respect to
a series of Junior Subordinated Debentures as shall be necessary to permit or
facilitate the issuance of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons; (13) any
index or indices used to determine the amount of payments of principal of and
premium, if any, on the Junior Subordinated Debentures and the manner in which
such amounts will be determined; (14) the terms and conditions relating to the
issuance of a temporary Global Security representing all of the Junior
Subordinated Debentures of such series and the exchange of such temporary Global
Security for definitive Junior
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<PAGE> 41
Subordinated Debentures of such series; (15) subject to the terms described
herein under "-- Global Junior Subordinated Debentures," whether the Junior
Subordinated Debentures of the series shall be issued in whole or in part in the
form of one or more Global Securities and, in such case, the depository for such
Global Securities, which depository shall be a clearing agency registered under
the Exchange Act; (16) the appointment of any paying, authenticating or
conversion agent or agents; (17) the terms and conditions of any obligation or
right of the Company or a holder to convert or exchange the Junior Subordinated
Debentures into Preferred Securities; (18) whether such Junior Subordinated
Debentures shall be convertible or exchangeable for other securities or property
and, if so, the terms of any such conversion or exchange and the terms of such
other securities; (19) the form of Declaration and Guarantee Agreement, if
applicable; (20) the relative degree, if any, to which such Junior Subordinated
Debentures of the series shall be senior to or be subordinated to other series
of such Junior Subordinated Debentures or other indebtedness of the Company in
right of payment, whether such other series of Junior Subordinated Debentures or
other indebtedness are outstanding or not; (21) the right, if any, of the
Company to defease any obligations under the Indenture, and the terms,
conditions and provisions relating thereto; and (22) any other terms of the
Junior Subordinated Debentures not inconsistent with the provisions of the
Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest on any
Junior Subordinated Debentures is payable in one or more foreign currencies or
currency units, the restrictions, elections, certain United States federal
income tax consequences, specific terms and other information with respect to
such series of Junior Subordinated Debentures and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. Junior
Subordinated Debentures of any series will be exchangeable for other Junior
Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original issue
date and stated maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Junior Subordinated Debentures and referred to in the
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. The Company
will appoint the Debenture Trustee as securities registrar under the Indenture.
If the applicable Prospectus Supplement refers to any transfer agents (in
addition to the securities registrar) initially designated by the Company with
respect to any series of Junior Subordinated Debentures, the Company may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, provided that the
Company maintains a transfer
8
<PAGE> 42
agent in each place of payment for such series. The Company may at any time
designate additional transfer agents with respect to any series of Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of Junior
Subordinated Debentures of that series and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that will
be deposited with, or on behalf of, a depository (the "Depository") identified
in the Prospectus Supplement relating to such series. Unless and until it is
exchanged in whole or in part for the individual Junior Subordinated Debentures
represented thereby, a Global Junior Subordinated Debenture may not be
transferred except as a whole among the Depository, one or more successor
Depositories or their respective nominees.
The specific terms of the depository arrangement with respect to a series
of Junior Subordinated Debentures 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 depository arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, the Depository
for such Global Junior Subordinated Debenture or its nominee will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the individual Junior Subordinated Debentures represented by such Global Junior
Subordinated Debenture to the accounts of persons that have accounts with such
Depository ("Participants"). Such accounts shall be designated by the
underwriters or agents with respect to such Junior Subordinated Debentures or by
the Company if such Junior Subordinated Debentures are offered and sold directly
by the Company. Ownership of beneficial interests in a Global Junior
Subordinated Debenture will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Junior Subordinated Debenture 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 who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Junior Subordinated Debenture.
So long as the Depository for a Global Junior Subordinated Debenture, or
its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depository or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated Debentures. Except as provided
below, owners of beneficial interests in a Global Junior Subordinated Debenture
will not be entitled to have any of the individual Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture registered in their names, will not receive or be entitled to receive
physical delivery of any such Junior Subordinated Debentures of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture 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 Junior Subordinated Debenture representing such Junior Subordinated
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<PAGE> 43
Debentures. None of the Company, the Debenture Trustee, any Paying Agent, or the
Securities Registrar for such Junior Subordinated Debentures 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 Junior
Subordinated Debenture representing such Junior Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depository for a series of Junior Subordinated
Debentures or its nominee, upon receipt of any payment of principal, premium, if
any, or interest in respect of a permanent Global Junior Subordinated Debenture
representing any of such Junior Subordinated Debentures, immediately will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of such Global Junior
Subordinated Debenture for such Junior Subordinated Debentures 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 Junior
Subordinated Debenture held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depository for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depository and a successor
depository is not appointed by the Company within 90 days or there shall have
occurred and be continuing an Event of Default with respect to such Global
Security, the Company will issue individual Junior Subordinated Debentures of
such series in exchange for the Global Junior Subordinated Debenture
representing such series of Junior Subordinated Debentures. In addition, the
Company may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Junior Subordinated
Debentures, determine not to have any Junior Subordinated Debentures of such
series represented by one or more Global Junior Subordinated Debentures and, in
such event, will issue certificated Junior Subordinated Debentures of such
series in exchange for the Global Junior Subordinated Debenture. Further, if the
Company so specifies with respect to the Junior Subordinated Debentures of a
series, an owner of a beneficial interest in a Global Junior Subordinated
Debenture representing Junior Subordinated Debentures of such series may, on
terms acceptable to the Company, the Debenture Trustee and the Depository for
such Global Junior Subordinated Debenture, receive certificated Junior
Subordinated Debentures of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Junior Subordinated Debentures. In any such instance, an owner
of a beneficial interest in a Global Junior Subordinated Debenture will be
entitled to physical delivery of certificated Junior Subordinated Debentures of
the series represented by such Global Junior Subordinated Debenture equal in
principal amount to such beneficial interest and to have such Junior
Subordinated Debentures registered in its name. Individual Junior Subordinated
Debentures of such series so issued will be issued in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof.
Any Global Junior Subordinated Debenture that is exchangeable pursuant to
the preceding paragraph shall be exchangeable for certificated Junior
Subordinated Debentures registered in such names as the Depository shall direct.
It is expected that such instructions will be based upon directions received by
the Depository from its Participants with respect to ownership of beneficial
interests in such Global Junior Subordinated Debenture. The Company and the
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the Depository or its nominee for all purposes.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in The City of
New York or at the office of such paying agent or paying agents as the Company
may designate from time to time in the applicable Prospectus Supplement or
otherwise, except that at the option of the Company payment of any interest may
be made (i) except in the case of
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<PAGE> 44
Global Junior Subordinated Debentures, by check mailed to the address of the
person entitled thereto as such address shall appear in the securities register
or (ii) by transfer to an account maintained by the person entitled thereto as
specified in the securities register, provided that proper transfer instructions
have been received by the Regular Record Date. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of any interest on Junior Subordinated
Debentures will be made to the person in whose name such Junior Subordinated
Debenture is registered at the close of business on the Regular Record Date for
such interest, except in the case of defaulted interest. The Company may at any
time designate additional paying agents or rescind the designation of any paying
agent; however the Company will at all times be required to maintain a paying
agent in each Place of Payment for each series of Junior Subordinated
Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or
then held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Company will have
the right at any time and from time to time during the term of any series of
Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in such
Prospectus Supplement (each, an "Extension Period"), subject to the terms,
conditions and covenants, if any, specified in such Prospectus Supplement,
provided that such Extension Period may not extend beyond the Stated Maturity
Date of such series of Junior Subordinated Debentures. During an Extension
Period, the Company will be restricted from making certain payments described
below under "-- Restrictions on Certain Payments." Certain United States federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures will be described in the applicable Prospectus
Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
To the extent set forth in the applicable Prospectus Supplement, the
Company may, or may be required to, redeem the Junior Subordinated Debentures of
any series at prices and on terms set forth in such Prospectus Supplement. If
the Junior Subordinated Debentures of any series are so redeemable only on or
after a specified date or event or upon the satisfaction of additional
conditions, the applicable Prospectus Supplement will specify such date or event
or describe such conditions.
If set forth in the applicable Prospectus Supplement, a series of Junior
Subordinated Debentures may be redeemable in the event of certain changes in tax
law affecting the ability of the Company to deduct, for federal income tax
purposes, the interest payable on such Junior Subordinated Debentures. The
applicable Prospectus Supplement will describe the terms of any such right and
the status of any then pending changes in tax law relevant to such right.
For so long as an applicable Trust is the holder of Corresponding Junior
Subordinated Debentures, the proceeds of any redemption of such Corresponding
Junior Subordinated Debentures will be used by the Trust to redeem the related
Trust Securities in accordance with their terms.
Except as set forth in the applicable Prospectus Supplement, notice of any
redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of Junior Subordinated Debentures to be redeemed
at its registered address. Unless the Company defaults in
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<PAGE> 45
payment of the redemption price, on and after the redemption date interest will
cease to accrue on such Junior Subordinated Debentures or portions thereof
called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
Except as otherwise specified in an applicable Prospectus Supplement, the
Company will covenant, as to each series of Junior Subordinated Debentures, that
it will not, and will not permit any subsidiary of the Company to, (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock, (ii)
make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Company (including other series
of Junior Subordinated Debentures) that rank pari passu in all respects with or
junior in interest to the Junior Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Company, (b) any
declaration of a dividend in connection with the implementation or extension of
a stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee with respect to the series of Related Preferred
Securities, (d) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (e) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (f) acquisitions of common stock of
the Company in connection with the satisfaction by the Company or any of its
subsidiaries of its obligations under any benefit plan for its directors,
officers or employees), if at such time (i) there shall have occurred and be
continuing any event of which the Company has actual knowledge (a) that is, or
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default under the Indenture with respect to the Junior Subordinated
Debentures of such series and (b) in respect of which the Company shall not have
taken reasonable steps to cure, (ii) if such Junior Subordinated Debentures are
held by a Trust, the Company shall be in default with respect to its payment of
any obligations under the Guarantee relating to the Related Preferred Securities
or (iii) the Company shall have given notice of its election of an Extension
Period as provided in the Indenture with respect to the Junior Subordinated
Debentures of such series and shall not have rescinded such notice, and such
Extension Period, or any extension thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies or to make any other provision
with respect to matters or questions arising under the Indenture (provided that
any such action does not materially adversely affect the interest of the holders
of any series of Junior Subordinated Debentures or the holders of any Related
Preferred Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of a majority in principal amount of
each outstanding series of Junior Subordinated Debentures affected, to modify
the Indenture in any manner affecting the rights of the holders of such series
of the Junior Subordinated Debentures; provided, that no such modification may,
without the consent of the holder of each outstanding Junior Subordinated
Debenture so affected, (i) change the Stated Maturity Date of any series of
Junior Subordinated Debentures (except as otherwise specified in the applicable
Prospectus Supplement), or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures of any series,
the holders of which are required to consent to any such
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<PAGE> 46
modification of the Indenture or (iii) effect certain other changes specified in
the Indenture. Notwithstanding the foregoing, in the case of Corresponding
Junior Subordinated Debentures, so long as any of the Related Preferred
Securities remain outstanding, no such modification may be made that adversely
affects the holders of such Related Preferred Securities in any material respect
without the prior consent of the holders of at least a majority of the aggregate
Liquidation Amount of such Related Preferred Securities and no amendment may be
made that would impair the right of the holders of such Related Preferred
Securities to institute a Direct Action as discussed under "-- Enforcement of
Certain Rights by Holders of Related Preferred Securities" without the consent
of each holder thereof.
In addition, the Company and the Debenture Trustee may execute, without the
consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures (whatever the reason
for such Debenture Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures when due (subject to the deferral of any due date
in the case of an Extension Period);
(ii) failure to pay any principal or premium, if any, on such series
of Junior Subordinated Debentures when due whether at maturity, upon
redemption, by acceleration of maturity or otherwise; provided that a valid
exchange upon its maturity of a Junior Subordinated Debenture in accordance
with its terms for another security shall not constitute such a default;
(iii) if applicable to such series of Junior Subordinated Debentures,
failure by the Company to issue any property or other securities into which
or for which the Junior Subordinated Debentures are convertible or
exchangeable upon an election by the holder or holders of such Junior
Subordinated Debentures to convert or exchange such Junior Subordinated
Debentures, as the case may be;
(iv) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or to the Company and the
Debenture Trustee from the holders of at least 25% in aggregate outstanding
principal amount of such affected series of outstanding Junior Subordinated
Debentures; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures of each series affected have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Debenture Trustee. The Debenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of Junior Subordinated Debentures
of each series affected may declare the principal due and payable immediately
upon a Debenture Event of Default (other than a Debenture Event of Default
described in clause (v) above, which shall result in the immediate acceleration
of the maturity of all such Junior Subordinated Debentures). The holders of a
majority in aggregate outstanding principal amount of Junior Subordinated
Debentures of each series affected may annul such declaration and waive the
default if the default (other than the nonpayment of the principal of such
Junior Subordinated Debentures which has become due solely by such acceleration)
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee.
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The holders of a majority in aggregate outstanding principal amount of each
series of the Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive any
past default, except a default in the payment of principal or interest (unless
such default has been cured and a sum sufficient to pay all matured installments
of interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each outstanding Junior Subordinated Debenture of such series. The
Company is required to file annually with the Debenture Trustee a certificate as
to whether or not the Company is in compliance with all the conditions and
covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing with
respect to a series of Corresponding Junior Subordinated Debentures, the
Property Trustee will have the right to declare the principal of and the
interest on such Corresponding Junior Subordinated Debentures, and any other
amounts payable thereon or with respect thereto under the Indenture, to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to such Corresponding Junior Subordinated Debentures. See "Description
of Preferred Securities -- Enforcement of Certain Rights by Holders of Preferred
Securities" and "-- Voting Rights; Amendment of Each Declaration."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF RELATED PREFERRED SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest, or premium, if any,
on or principal of such Corresponding Junior Subordinated Debentures on the due
date, a holder of Related Preferred Securities may institute a legal proceeding
directly against the Company for enforcement of payment to such holder of the
principal of, or premium, if any, or interest on such Corresponding Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Related Preferred Securities of such holder (a "Direct
Action"). The Company may not amend the Indenture to remove the foregoing right
to bring a Direct Action without the prior written consent of the holders of all
of the Related Preferred Securities outstanding. Notwithstanding any payments
made to a holder of Related Preferred Securities by the Company in connection
with a Direct Action, the Company shall remain obligated to pay the principal of
or premium, if any, or interest on the Corresponding Junior Subordinated
Debentures, and the Company shall be subrogated to the rights of the holder of
such Related Preferred Securities with respect to payments on the Related
Preferred Securities to the extent of any payments made by the Company to such
holder in any Direct Action.
The holders of the Related Preferred Securities will not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the Corresponding Junior Subordinated
Debentures. See "Description of Preferred Securities -- Events of Default;
Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
as an entirety or substantially as an entirety to the Company, unless (i) in
case the Company consolidates with or merges into another Person or conveys or
transfers its properties and assets substantially as an entirety to any Person,
the successor Person is organized under the laws of the United States or any
state or the District of Columbia, and such successor Person expressly assumes
the Company's obligations on the Junior Subordinated Debentures issued under the
Indenture; (ii) immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of time or both, would become
a Debenture Event of Default, shall have occurred and be continuing; and (iii)
certain other conditions as prescribed by the Indenture are met.
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The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures of a particular series not previously delivered to the
Debenture Trustee for cancellation (i) have become due and payable or (ii) will
become due and payable at their Stated Maturity Date within one year of the date
of deposit or (iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense of, the Company, and the Company
deposits or causes to be deposited irrevocably with the Debenture Trustee funds,
in trust, for the purpose and in an amount in the currency or currencies in
which such Junior Subordinated Debentures are payable sufficient to pay and
discharge the entire indebtedness on such Junior Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation, for the
principal (and premium, if any) and interest to the date of the deposit or to
the Stated Maturity Date or redemption date, as the case may be, then the
Indenture will cease to be of further effect with respect to such series of
Junior Subordinated Debentures (except as to the Company's obligations to pay
all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein and obligations with
respect to transfer, exchange, conversion and certain other matters), and the
Company will be deemed to have satisfied and discharged the Indenture with
respect to such series of Junior Subordinated Debentures.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or exchangeable
into Junior Subordinated Debentures of another series, Preferred Securities or
other debt or equity securities or property. The specific terms on which Junior
Subordinated Debentures of any series may be so converted or exchanged will be
set forth in the applicable Prospectus Supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Company, in which case the number of shares of
Preferred Securities or other securities to be received by the holders of Junior
Subordinated Debentures would be calculated as of a time and in the manner
stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture.
Upon any payment or distribution of assets of the Company to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or liabilities or any bankruptcy,
insolvency or similar proceedings of the Company, the holders of Senior
Indebtedness will be entitled to receive payment in full of all amounts due on
or to become due on or in respect of all Senior Indebtedness (including any
interest accruing thereon after commencement of such proceedings), before the
holders of Junior Subordinated Debentures will be entitled to receive any
payment (other than payment in shares of stock or other subordinated securities
issued in a reorganization proceeding or payments from funds previously
deposited in trust to defease the Junior Subordinated Debentures under the
Indenture) on account of the principal of, premium, if any, or interest on the
Junior Subordinated Debentures or on account of any purchase, redemption or
other acquisition of the Junior Subordinated Debentures by the Company.
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The holders of the Junior Subordinated Debentures will be subrogated to the
rights of the holders of the Senior Indebtedness to the extent of payments made
to the holders of Senior Indebtedness out of the distributive share of the
Junior Subordinated Debentures.
The Company may not make any payments in respect of the Junior Subordinated
Debentures or on account of the purchase, redemption or other acquisition of the
Junior Subordinated Debentures (other than payment in shares of stock or other
subordinated securities issued in a reorganization proceeding or payments from
funds previously deposited in trust to defease the Junior Subordinated
Debentures under the Indenture) if there has occurred and is continuing a
default in the payment of the principal of (or premium, if any) or interest on
any Senior Indebtedness (a "Senior Payment Default"). In addition, if any event
of default (other than a Senior Payment Default), or any event which after
notice or lapse of time (or both) would become an event of default, with respect
to Senior Indebtedness, permitting the holders thereof (or a trustee or agent on
behalf of the holders thereof) to accelerate the maturity thereof has occurred
and is continuing (a "Senior Nonmonetary Default"), and the Company or the
Debenture Trustee has received written notice thereof from a holder of such
Senior Indebtedness or a trustee on behalf of a holder of such Senior
Indebtedness, then the Company may not make any payments in respect of the
Junior Subordinated Debentures or on account of the purchase, redemption or
other acquisition of the Junior Subordinated Debentures (other than payment in
shares of stock or other subordinated securities issued in a reorganization
proceeding or payments from funds previously deposited in trust to defease the
Junior Subordinated Debentures under the Junior Subordinated Indenture), for a
period (a "blockage period") commencing on the date the Company or the Debenture
Trustee receive such written notice and ending on the earlier of (i) 179 days
after such date and (ii) the date, if any, on which the Senior Indebtedness to
which such default relates is discharged or such default is waived in writing or
otherwise cured or ceases to exist and any acceleration of Senior Indebtedness
to which such Senior Nonmonetary Default relates is rescinded or annulled.
In any event, not more than one blockage period may be commenced during any
period of 360 consecutive days, and there must be a period of at least 181
consecutive days in each period of 360 consecutive days when no blockage period
is in effect. Following the commencement of a blockage period, the holders of
Senior Indebtedness will be precluded from commencing a subsequent blockage
period until the conditions set forth in the preceding sentence are satisfied.
No Senior Nonmonetary Default that existed or was continuing on the date of
commencement of any blockage period with respect to the Senior Indebtedness
initiating such blockage period will be, or can be, made the basis for the
commencement of a subsequent blockage period, unless such default has been cured
for a period of not less than 90 consecutive days.
The term "Senior Indebtedness" shall mean the principal of, and any premium
and interest on, and any other payment due pursuant to, any of the following,
whether outstanding at the date of execution of the Indenture or thereafter
incurred, created or assumed:
(a) all obligations of the Company for money borrowed;
(b) all obligations of the Company evidenced by notes, debentures,
bonds or other securities, including, without limitation, the Company's
13 1/2% Restricted Subordinated Notes Due 2002 and obligations incurred,
created or assumed in connection with the acquisition of property, assets
or businesses;
(c) all Capitalized Lease Obligations of the Company (as defined in
the Indenture);
(d) all reimbursement obligations of the Company with respect to
letters of credit, bankers acceptances or similar facilities issued for the
account of the Company;
(e) all obligations of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business);
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(f) all payment obligations of the Company under any interest rate,
currency or commodity swap agreement, option agreement, hedge agreement,
forward contract, or similar agreement designed to protect the Company or
another person against fluctuations in interest rates, exchange rates or
commodity prices;
(g) all obligations of the type referred to in clauses (a) through (f)
above of another person and all dividends of another person, the payment of
which, in either case, the Company has assumed or guaranteed, or for which
the Company is responsible or liable, directly or indirectly, jointly or
severally, as obligor, guarantor or otherwise; and
(h) all amendments, modifications, renewals, extensions, refinancings,
replacements and refundings by the Company of any such indebtedness
referred to in clauses (a) through (g) above (and of any such amended,
modified, renewed, extended, refinanced, replaced or refunded indebtedness
or obligations);
other than (i) the Junior Subordinated Debentures and the 8.45% Series A Junior
Subordinated Debentures of the Company; the 6% Series A Convertible Junior
Subordinated Debentures due 2025 of the Company; the 8 1/8% Series B Junior
Subordinated Debentures of the Company; the 7.57% Junior Subordinated Deferrable
Interest Debentures, Series A of the Company; and the 8 1/8% Junior Subordinated
Deferrable Interest Debentures, Series B of the Company, each of which shall
rank pari passu with the Junior Subordinated Debentures; (ii) any Guarantee
executed with respect to a Trust; the Guarantee Agreement of the Company dated
as of May 24, 1995 in respect of certain securities issued by American General
Capital, L.L.C., a Delaware limited liability company; the Guarantee Agreement
of the Company dated as of May 24, 1995 in respect of certain securities issued
by American General Delaware, L.L.C., a Delaware limited liability company; the
Guarantee Agreement dated as of December 4, 1996 with respect to certain
securities issued by American General Institutional Capital A, a Delaware
business trust, and the Guarantee Agreement dated as of March 14, 1997 with
respect to certain securities issued by American General Institutional Capital
B, a Delaware business trust, and (iii) any indebtedness, renewal, extension,
refinancing, replacement, refunding, assumption, guarantee or other obligation
which expressly provides, or in the instrument creating or evidencing the same
or the assumption or guarantee of the same it is expressly provided, that such
indebtedness, renewal, extension, refinancing, replacement, refunding,
assumption, guarantee or other obligation is junior in right of payment to or is
pari passu with the Junior Subordinated Debentures. Such Senior Indebtedness
shall continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
By reason of such subordination, in the event of an insolvency, creditors
of the Company who are holders of Senior Indebtedness, as well as certain
general creditors of the Company, may recover more, ratably, than the holders of
the Junior Subordinated Debentures. Additionally, the Company currently conducts
substantially all of its operations through subsidiaries, and the holders of
Junior Subordinated Debentures will be structurally subordinated to the
creditors of the Company's subsidiaries.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued. As of December 31, 1997, Senior Indebtedness of the Company
aggregated approximately $2.1 billion.
TRUST EXPENSES
Pursuant to the Indenture, the Company will irrevocably and unconditionally
agree with each Trust that holds Junior Subordinated Debentures that the Company
will pay the full amount of any costs, expenses or liabilities of the Trust,
other than obligations of the Trust to pay to the holders of any Preferred
Securities or other similar interests in the Trust the amounts due such holders
pursuant to the terms of the Preferred Securities or such other similar
interests, as the case may be. Such payment obligation will include any such
costs, expenses or liabilities of the Trust that are required by applicable law
to be satisfied in connection with a dissolution of such Trust.
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York, without
regard to the conflicts of laws principles thereof.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Company and certain of its affiliates maintain banking, borrowing and
other relations with Bankers Trust Company and certain of its affiliates.
Bankers Trust Company serves as trustee under other indentures maintained by the
Company and it may own Junior Subordinated Debentures. The Debenture Trustee
also serves as Property Trustee under each Declaration and as Guarantee Trustee
under each Guarantee.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Preferred Securities. In that
event, concurrently with the issuance by a Trust of its Preferred Securities,
such Trust will invest the proceeds thereof and the consideration paid by the
Company for the Common Securities of such Trust in such series of Corresponding
Junior Subordinated Debentures issued by the Company to such Trust. Each series
of Corresponding Junior Subordinated Debentures will be in the principal amount
equal to the aggregate stated Liquidation Amount of the Related Preferred
Securities and the Common Securities of such Trust and will rank pari passu with
all other series of Junior Subordinated Debentures.
The Company will covenant, as to each series of Corresponding Junior
Subordinated Debentures, (i) to directly or indirectly maintain 100 percent
ownership of the Common Securities of the related Trust; provided, however, that
any permitted successor of the Company under the Indenture may succeed to the
Company's ownership of the Common Securities, (ii) to use its reasonable efforts
to cause the relevant Trust (a) to remain a business trust, except as permitted
by the Declaration of such Trust, and (b) to continue to be classified as a
grantor trust and not as an association taxable as a corporation or a
partnership for United States federal income tax purposes and (iii) to use its
reasonable efforts to cause each holder of related Trust Securities to be
treated as owning an undivided beneficial interest in the Corresponding Junior
Subordinated Debentures.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Declaration for each Trust, the Issuer
Trustees on behalf of such Trust will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will represent
beneficial ownership interests in the applicable Trust and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation over the Common
Securities of such Trust, as well as other benefits as described in the
corresponding Declaration. This summary of certain provisions of the Preferred
Securities and each Declaration, which summarizes the material terms thereof,
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of each
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Declaration, including the definitions therein of certain terms, and the Trust
Indenture Act, to each of which reference is hereby made. Wherever particular
defined terms of a Declaration (as amended or supplemented from time to time)
are referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Declaration has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Each of the Trusts is a legally separate entity and the assets of
one are not available to satisfy the obligations of any of the others.
GENERAL
The Preferred Securities of a Trust will rank pari passu, and payments will
be made thereon pro rata, with the Common Securities of that Trust except as
described under "-- Subordination of Common Securities." Legal title to the
Corresponding Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Related Preferred
Securities and Common Securities. Each Guarantee Agreement executed by the
Company for the benefit of the holders of a Trust's Trust Securities (the
"Guarantee") will be a guarantee on a subordinated basis with respect to the
related Trust Securities but will not guarantee payment of Distributions or
amounts payable on redemption or liquidation of such Trust Securities when the
related Trust does not have funds on hand available to make such payments. See
"Description of Guarantees."
DISTRIBUTIONS
Unless otherwise specified in an applicable Prospectus Supplement,
Distributions on each series of Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. Except as set forth in the
applicable Prospectus Supplement, in the event that any date on which
Distributions are payable on a series of Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). A "Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which banking institutions in New York, New York are authorized or
required by law or executive order to close.
Each Trust's Preferred Securities will represent beneficial ownership
interests in the applicable Trust, and the Distributions on each Preferred
Security will be payable at a rate specified in the applicable Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months and, for any period of less than a full calendar month, the number of
days elapsed in such month, unless otherwise specified in the applicable
Prospectus Supplement. Distributions to which holders of Preferred Securities
are entitled will accumulate additional Distributions at the rate per annum if
and as specified in the applicable Prospectus Supplement. The term
"Distributions" as used herein includes any such additional Distributions unless
otherwise stated.
If provided in the applicable Prospectus Supplement, the Company may have
the right under the Indenture pursuant to which it will issue the Corresponding
Junior Subordinated Debentures to elect to defer the payment of interest at any
time or from time to time on any series of the Corresponding Junior Subordinated
Debentures for up to such number of consecutive interest payment periods as may
be specified in such Prospectus Supplement relating to such series (each, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity Date of the Corresponding Junior Subordinated Debentures. As a
consequence of any such deferral, Distributions on the Related Preferred
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Preferred Securities) by the applicable Trust during any
such Extension Period.
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Unless otherwise specified in an applicable Prospectus Supplement, during
any such Extension Period, the Company will not, and will not permit any
subsidiary to (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock, (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of the
Company (including other series of Junior Subordinated Debentures) that rank
pari passu in all respects with or junior in interest to the Corresponding
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debentures (other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, common stock of the Company, (b) any declaration of a dividend in connection
with the implementation or extension of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Guarantee
with respect to the series of Related Preferred Securities, (d) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (e) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) acquisitions of common stock of the Company in connection with the
satisfaction by the Company or any of its subsidiaries of its obligations under
any benefit plan for its directors, officers or employees). See "Description of
Junior Subordinated Debentures -- Restrictions on Certain Payments."
The revenue of each Trust available for distribution to holders of its
Preferred Securities will be limited to payments made on the Corresponding
Junior Subordinated Debentures in which the Trust will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures." If the
Company does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Preferred Securities. The payment of
Distributions (if and only to the extent the Trust has funds sufficient and
legally available for the payment of such Distributions) will be guaranteed by
the Company on the basis set forth herein under "Description of Guarantees."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Trust on the relevant record
dates as specified in the applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debentures, whether at maturity
or upon earlier redemption as provided in the terms of such Corresponding Junior
Subordinated Debentures, the proceeds from such repayment or redemption shall be
applied by the Property Trustee to redeem a Like Amount (as defined below) of
the related Trust Securities, upon not less than 30 nor more than 60 days notice
(unless otherwise specified in the applicable Prospectus Supplement), at a
redemption price (the "Redemption Price") equal to the aggregate Liquidation
Amount (as specified in the applicable Prospectus Supplement) of such Trust
Securities plus accumulated and unpaid Distributions thereon to the date of
redemption (the "Redemption Date") and the related amount of the premium, if
any, paid by the Company upon the concurrent redemption of such Corresponding
Junior Subordinated Debentures. If less than all of any series of Corresponding
Junior Subordinated Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption shall be allocated to
the redemption pro rata of the Related Preferred Securities and the Common
Securities of the applicable Trust. The amount of premium, if any, paid by the
Company upon the redemption of all or any part of any series of any
Corresponding Junior Subordinated Debentures to be repaid or redeemed
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on a Redemption Date shall be allocated to the redemption pro rata of the
Related Preferred Securities and the Common Securities of the applicable Trust.
The Company will have the right to redeem any series of Corresponding
Junior Subordinated Debentures on or after such dates or upon the occurrence of
such events as may be specified in the applicable Prospectus Supplement. If set
forth in the applicable Prospectus Supplement, a series of Corresponding Junior
Subordinated Debentures may be redeemable in the event of certain changes in tax
law affecting the ability of the Company to deduct, for federal income tax
purposes, the interest payable on such Junior Subordinated Debentures. The
applicable Prospectus Supplement will describe the terms of any such right and
the status of any then pending changes in tax law relevant to such right.
Distribution of Corresponding Junior Subordinated Debentures. Unless
otherwise specified in the applicable Prospectus Supplement and upon
satisfaction of any conditions set forth in such Prospectus Supplement, the
Company will have the right at any time to dissolve any Trust and, after
satisfaction of the liabilities of creditors of such Trust as provided by
applicable law, cause a Like Amount of Corresponding Junior Subordinated
Debentures in respect of the Related Preferred Securities and Common Securities
issued by such Trust to be distributed to the holders of such Related Preferred
Securities and Common Securities in exchange therefor upon liquidation of the
Trust.
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Corresponding Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Corresponding Junior
Subordinated Debentures upon the liquidation of the related Trust, Corresponding
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities of the holder to whom such
Corresponding Junior Subordinated Debentures are distributed.
After the liquidation date is fixed for any distribution of Corresponding
Junior Subordinated Debentures to holders of the related Trust Securities, (i)
the related Trust Securities will no longer be deemed to be outstanding, (ii)
each holder of such Trust Securities will receive a registered certificate or
certificates representing the Corresponding Junior Subordinated Debentures to be
delivered upon such distribution and (iii) such Trust Securities will be deemed
to represent Corresponding Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of such Trust Securities, and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Securities, until such Trust Securities are
presented to the Administrative Trustees or their agent for cancellation,
whereupon the Company will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Corresponding Junior Subordinated
Debentures.
There can be no assurance as to the market price for the Corresponding
Junior Subordinated Debentures that may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of a Trust were to occur.
Accordingly, the Corresponding Junior Subordinated Debentures that the investor
may subsequently receive on dissolution and liquidation of a Trust may trade at
a discount to the price of the Related Preferred Securities exchanged.
Conversion or Exchange. If and to the extent set forth in the applicable
Prospectus Supplement, the Trust Securities issued by a Trust may be convertible
or exchangeable for other debt or equity securities as described in such
Prospectus Supplement. The terms of any such conversion or exchange will be set
forth in the applicable Prospectus Supplement.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Trust's
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if an Event of Default under the Declaration
of Trust occurs and is continuing, no payments in respect of Distributions on,
or payments upon liquidation, redemption or otherwise with respect to, the
Common Securities of such Trust shall be
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made until the holders of the Preferred Securities of such Trust shall be paid
in full the Distributions, Redemption Price, Liquidation Distribution and other
payments to which they are entitled at such time.
In the case of any Event of Default under the applicable Declaration, the
Company as holder of such Trust's Common Securities will be deemed to have
waived any right to act with respect to any such event of default under the
applicable Declaration until the effect of all such events of default with
respect to such Preferred Securities have been cured, waived or otherwise
eliminated. Until all events of default under the applicable Declaration with
respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Preferred Securities and not on behalf of the Company as holder of the
Trust's Common Securities, and only the holders of such Preferred Securities
will have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to each Declaration, unless otherwise specified in the applicable
Prospectus Supplement, each Trust shall automatically dissolve upon expiration
of its term and shall dissolve on the first to occur of: (i) certain events of
bankruptcy, dissolution or liquidation of the Company; (ii) the distribution of
a Like Amount of the Corresponding Junior Subordinated Debentures to the holders
of its Trust Securities if and as provided in the applicable Prospectus
Supplement; (iii) redemption of all of its Trust Securities if and as provided
in the applicable Prospectus Supplement; (iv) conversion or exchange of all of
its Trust Securities into other securities if and as provided in the applicable
Prospectus Supplement; and (v) upon the dissolution of such Trust after
obtaining the consent of a majority in Liquidation Amount of its Trust
Securities; and (vi) the entry of an order for the dissolution of such Trust by
a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), (v) or
(vi) above, such Trust shall be liquidated by the Administrative Trustees as
expeditiously as the Administrative Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of such Trust as
provided by applicable law, to the holders of such Trust Securities in exchange
therefor a Like Amount of the Corresponding Junior Subordinated Debentures,
unless such distribution is determined by the Property Trustee not to be
practicable, in which event such holders will be entitled to receive out of the
assets of the Trust available for distribution to holders, after satisfaction of
liabilities to creditors of such Trust as provided by applicable law, an amount
equal to, in the case of holders of Preferred Securities, the aggregate of the
Liquidation Amount plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because such Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by such Trust on its Trust
Securities shall be paid on a pro rata basis, except that if a Debenture Event
of Default has occurred and is continuing, the Preferred Securities of such
Trust shall have a priority over the Common Securities of such Trust.
EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default with respect to a series of
Corresponding Junior Subordinated Debentures (see "Description of Junior
Subordinated Debentures -- Debenture Events of Default") constitutes an "Event
of Default" under the Declaration pursuant to which the Related Preferred
Securities are issued.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Trust's Preferred
Securities, the Administrative Trustees and the Company, as Sponsor, unless such
Event of Default shall have been cured or waived. The Company, as Sponsor, and
the Administrative Trustees of each Trust are required to file annually with the
Property Trustee a certificate as to whether or not they are in compliance with
all the conditions and covenants applicable to them under each Declaration.
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If an Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities as described
above. See " -- Subordination of Common Securities" and " -- Liquidation
Distribution Upon Termination." A waiver of a Debenture Event of Default will
constitute a waiver of the corresponding Event of Default. The existence of an
Event of Default does not entitle the holders of Preferred Securities to
accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default occurs and is continuing, then the holders
of the Preferred Securities of the applicable Trust would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Corresponding Junior Subordinated Debentures against the Company.
Notwithstanding the foregoing, if an Event of Default under a Declaration has
occurred and is continuing and such event is attributable to the failure of the
Company to pay the principal of or premium, if any, or interest on such
Corresponding Junior Subordinated Debentures on the date such principal, premium
or interest, as the case may be, is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of the Related Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal, premium or interest, as the case may be, on such
Corresponding Junior Subordinated Debentures having a principal amount equal to
the aggregate Liquidation Amount of the Related Preferred Securities of such
holder (a "Direct Action") on or after the respective due date specified in the
Corresponding Junior Subordinated Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of the
Related Preferred Securities under the Declaration to the extent of any payment
made by the Company to such holder of Preferred Securities in such Direct
Action.
REMOVAL OF ISSUER TRUSTEES
Unless an Event of Default shall have occurred and be continuing with
respect to a Trust, any Issuer Trustee of such Trust may be removed at any time
by the holder of the Common Securities of such Trust. If an Event of Default
with respect to a Trust has occurred and is continuing, the Property Trustee and
the Delaware Trustee may be removed by the holders of a majority in Liquidation
Amount of the outstanding Preferred Securities of such Trust. In no event will
the holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees of any Trust, which voting rights
are vested exclusively in the Company as the holder of the Common Securities. No
resignation or removal of an Issuer Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the successor
trustee in accordance with the provisions of the applicable Declaration.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements of
the Trust Indenture Act or of any jurisdiction in which any part of the trust
property of a Trust may at the time be located, the Company, as the holder of
the Common Securities of such Trust, shall have power to appoint one or more
persons either to act as a co-trustee, jointly with the Property Trustee, of all
or any part of such trust property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Declaration. In case a Debenture Event of Default
has occurred and is continuing, the Property Trustee alone shall have power to
make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a
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party, or any Person succeeding to all or substantially all the corporate trust
business of such Issuer Trustee, shall be the successor of such Issuer Trustee
under each Declaration, provided such Person shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUSTS
A Trust may not merge or convert with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other Person, except as
described below or under "-- Liquidation Distribution upon Dissolution" or as
otherwise provided in an applicable Prospectus Supplement. A Trust may, at the
request of the Company, with the consent of the Administrative Trustees but
without the consent of the holders of the Preferred Securities, the Property
Trustee or the Delaware Trustee, merge or convert with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of such Trust with respect
to the Preferred Securities or (b) substitutes for the Preferred Securities
other securities having substantially the same terms as the Preferred Securities
(the "Successor Securities") so long as the Successor Securities rank the same
as the Preferred Securities in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Corresponding Junior
Subordinated Debentures, (iii) the Successor Securities are listed or quoted, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed or quoted, if any, (iv) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect (other than any dilution of such holders'
interests in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) prior to such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (a) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect (other than any dilution of such holders' interests in the new entity),
(b) following such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust nor such successor entity will
be required to register as an investment company under the Investment Company
Act of 1940, as amended (the "Investment Company Act"),and (c) following such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Trust (or successor entity) will continue to be
classified as a grantor trust for United States federal income taxes, and (viii)
the Company or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, a Trust shall not, except with
the consent of holders of 100% in Liquidation Amount of the Preferred
Securities, consolidate, amalgamate, merge or convert with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety or substantially as an entirety to any other entity or permit any
other entity to consolidate, amalgamate, merge or convert with or into, or
replace it if such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity not
to be classified as a grantor trust for United States federal income tax
purposes.
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VOTING RIGHTS; AMENDMENT OF EACH DECLARATION
Except as provided below and under "Description of Guarantees -- Amendments
and Assignment" and as otherwise required by law and the applicable Declaration,
the holders of the Preferred Securities will have no voting rights.
Except as set forth in an applicable Prospectus Supplement, each
Declaration may be amended from time to time by the Administrative Trustees (and
in certain circumstances, the Company, the Delaware Trustee or the Property
Trustee), without the consent of the holders of the relevant Trust Securities
(i) to cure any ambiguity, correct or supplement any provisions in such
Declaration that may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under such
Declaration, which shall not be inconsistent with the other provisions of such
Declaration, (ii) add to the covenants, restrictions, or obligations of the
Company as Sponsor, or (iii) to modify, eliminate or add to any provisions of
such Declaration to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes as a grantor
trust at all times that any Trust Securities are outstanding or to ensure that
the Trust will not be required to register as an "investment company" under the
Investment Company Act. Each Declaration may be amended by its Issuer Trustees
and the Company (i) with the consent of holders representing a majority (based
upon Liquidation Amounts) of the outstanding Trust Securities of the relevant
Trust, and (ii) upon receipt by the Issuer Trustees of such Trust of an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to such Issuer Trustees in accordance with such amendment will not
affect such Trust's status as a grantor trust for United States federal income
tax purposes or such Trust's exemption from status as an "investment company"
under the Investment Company Act, provided that, without the consent of each
holder of Trust Securities of such Trust, such Declaration may not be amended to
(i) change the amount or timing of any Distribution or other payment on the
Trust Securities of such Trust or otherwise adversely affect the amount of any
Distribution or other payment required to be made in respect of the Trust
Securities of such Trust as of a specified date or (ii) restrict the right of a
holder of such Trust Securities to institute suit for the enforcement of any
such payment on or after such date.
Except as set forth in an applicable Prospectus Supplement, so long as any
Corresponding Junior Subordinated Debentures are held by the Property Trustee of
a Trust, the Issuer Trustees of such Trust shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust or power conferred on the Debenture Trustee
with respect to such Corresponding Junior Subordinated Debentures, (ii) waive
any past default that is waivable under certain provisions of the Indenture,
(iii) exercise any right to rescind or annul a declaration of acceleration of
the maturity of principal of such Corresponding Junior Subordinated Debentures
or (iv) consent to any amendment, modification or termination of the Indenture
or such Corresponding Junior Subordinated Debentures, where such consent shall
be required, without, in each case, obtaining the prior approval of the holders
of a majority in aggregate Liquidation Amount of all outstanding Related
Preferred Securities; provided, however, that where a consent or other action
under the Indenture with respect to the Corresponding Junior Subordinated
Debentures would require the consent or act of holders of Corresponding Junior
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the outstanding Corresponding Junior
Subordinated Debentures, no consent or act shall be given or taken without the
prior approval of the Holders of outstanding Related Preferred Securities
representing at least such specified percentage of the aggregate Liquidation
Amount of the Related Preferred Securities then outstanding. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Related Preferred Securities except by subsequent vote of the
holders of such Preferred Securities. The Property Trustee shall notify each
holder of Related Preferred Securities of any notice of default with respect to
the Corresponding Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of the holders of the Related Preferred Securities, prior to
taking any of the foregoing actions, the Issuer Trustees of such Trust shall
obtain an opinion of counsel experienced in such matters to the
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effect that the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Preferred Securities of a Trust may be
given at a meeting of holders of such Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee of such Trust will
cause a notice of any meeting at which holders of Preferred Securities of such
Trust are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be given to each holder of record of
such Preferred Securities in the manner set forth in each Declaration.
No vote or consent of the holders of Preferred Securities of a Trust will
be required for a Trust to redeem and cancel its Preferred Securities in
accordance with the applicable Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company or any affiliate of the Company shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited with,
or on behalf of, the Depository identified in the Prospectus Supplement relating
to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depository will be DTC. Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred Security
may not be transferred except as a whole among the Depository, one or more
successor depositories or their respective nominees.
The specific terms of the depository arrangement with respect to a series
of Preferred Securities will be described in the Prospectus Supplement relating
to such series. Unless otherwise specified in the applicable Prospectus
Supplement, the Company anticipates that the following provisions will generally
apply to depository arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depository, the Depository
for such Global Preferred Security or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate Liquidation Amounts
of the individual Preferred Securities represented by such Global Preferred
Securities to the accounts of Participants. Such accounts shall be designated by
the dealers, underwriters or agents with respect to such Preferred Securities or
by the Company if such Preferred Securities are offered and sold directly by the
Company. Ownership of beneficial interests in a Global Preferred Security will
be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Preferred
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 who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the Depository for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Preferred Securities represented by such Global Preferred Security for all
purposes under the Declaration governing such Preferred Securities. Except as
provided below, owners of beneficial interests in a Global Preferred Security
will not be entitled to have any of the individual Preferred Securities of the
series represented by such Global Preferred Security registered in their names,
will not receive or be entitled to receive physical delivery of any such
Preferred Securities
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of such series in definitive form and will not be considered the owners or
holders thereof under the applicable Declaration.
Payments of the Liquidation Amount, Redemption Price and Distributions or
other payments on individual Preferred Securities represented by a Global
Preferred 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 Preferred Security representing such Preferred Securities.
None of the Company, the Property Trustee, any Paying Agent, or the Securities
Registrar for such Preferred 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 Preferred Security representing
such Preferred Securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depository for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
Redemption Price, premium or Distributions in respect of a permanent Global
Preferred Security representing any of such Preferred Securities, immediately
will credit Participants' accounts with payments in amounts proportionate to
their respective beneficial interest in the aggregate Liquidation Amount of such
Global Preferred Security for such Preferred 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 Preferred Security
held through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depository for a series of Preferred Securities is at any time unwilling, unable
or ineligible to continue as depository and a successor depository is not
appointed by the Trust within 90 days, the Trust will issue individual Preferred
Securities of such series in exchange for the Global Preferred Security
representing such series of Preferred Securities. In addition, the Trust may at
any time and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to such Preferred Securities, determine not to
have any Preferred Securities of such series represented by one or more Global
Preferred Securities and, in such event, will issue individual Preferred
Securities of such series in exchange for the Global Preferred Security or
Securities representing such series of Preferred Securities. Further, if the
Trust so specifies with respect to the Preferred Securities of a series, an
owner of a beneficial interest in a Global Preferred Security representing
Preferred Securities of such series may, on terms acceptable to the Trust, the
Property Trustee and the Depository for such Global Preferred Security, receive
individual Preferred Securities of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Preferred Securities. In any such instance, an owner of a
beneficial interest in a Global Preferred Security will be entitled to physical
delivery of individual Preferred Securities of the series represented by such
Global Preferred Security equal in principal amount to such beneficial interest
and to have such Preferred Securities registered in its name. Individual
Preferred Securities of such series so issued will be issued in denominations,
unless otherwise specified by the Trust, of $1,000 and integral multiples
thereof.
PAYMENT AND PAYING AGENCY
Unless otherwise specified in the applicable Prospectus Supplement,
payments in respect of the Preferred Securities of each Trust shall be made to
the Depository, which shall credit the relevant accounts at the Depository on
the applicable Distribution Dates or, if any Trust's Preferred Securities are
not held by the Depository, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee of
each Trust and any co-paying agent chosen by such Trust. The Paying Agent shall
be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the
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Company. In the event that the Property Trustee shall no longer be the Paying
Agent, the Administrative Trustees of such Trust shall appoint a successor to
act as Paying Agent for such Trust.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee of each Trust will act as registrar and transfer agent for the
Preferred Securities of such Trust.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. No Trust will be required to register or cause to be registered the
transfer of its Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee of each Trust, other than during the occurrence and
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in each Declaration and, after any such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee of each Trust is under no obligation to exercise
any of the powers vested in it by the applicable Declaration at the request of
any holder of the Trust's Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
MISCELLANEOUS
The Administrative Trustees of each Trust are authorized and directed to
conduct the affairs of and to operate the Trusts in such a way that no Trust
will be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that Corresponding Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
No Trust may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depository for all of the Preferred Securities
and the Junior Subordinated Debentures, unless otherwise set forth in the
Prospectus Supplement relating to an offering of Preferred Securities or Junior
Subordinated Debentures. The following discussion assumes that DTC will so act.
The Preferred Securities or the Junior Subordinated Debentures will be issued
only as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global certificates will be issued for
the Preferred Securities of each Trust or for the Junior Subordinated
Debentures, representing in the aggregate the total number of such Trust's
Preferred Securities or aggregate principal balance of Junior Subordinated
Debentures, respectively, and will be deposited with DTC or its agent.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks,
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trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain custodial relationships with Direct Participants, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debentures
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security and each Junior Subordinated Debenture ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for a series of Preferred Securities or Junior
Subordinated Debentures is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debentures. If less than all of
a Trust's Preferred Securities or the Junior Subordinated Debentures are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a vote
is required, neither DTC nor Cede & Co. will itself consent or vote with respect
to Preferred Securities or Junior Subordinated Debentures. Under its usual
procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts such Preferred Securities or Junior Subordinated Debentures are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, or Trust or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of Distributions to DTC is the responsibility of the
relevant Trustee, disbursement of such
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payments to Direct Participants is the responsibility of DTC, and disbursements
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to any of the Preferred Securities or Junior Subordinated Debentures at
any time by giving reasonable notice to the relevant Trustee and the Company. In
the event that a successor securities depository is not obtained, definitive
Preferred Security or Junior Subordinated Debenture certificates representing
such Preferred Securities or Junior Subordinated Debentures are required to be
printed and delivered. The Company, at its option, may decide to discontinue use
of the system of book-entry transfers through DTC (or a successor depository).
In any such event, definitive certificates for such Preferred Securities or
Junior Subordinated Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trusts and the Company believe to be
accurate, but the Trusts and the Company assume no responsibility for the
accuracy thereof. Neither the Trusts nor the Company has any responsibility for
the performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Company concurrently with
the issuance by each Trust of its Preferred Securities for the benefit of the
holders from time to time of such Preferred Securities. Bankers Trust Company
will act as indenture trustee ("Guarantee Trustee") under each Guarantee for the
purposes of compliance with the Trust Indenture Act and each Guarantee will be
qualified as an indenture under the Trust Indenture Act. This summary of certain
provisions of the Guarantees, which summarizes the material terms thereof, does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of each Guarantee, including the definitions
therein of certain terms, and the Trust Indenture Act, to each of which
reference is hereby made. The form of the Guarantee has been filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. Reference
in this summary to Preferred Securities means the Preferred Securities of a
Trust to which a Guarantee relates. The Guarantee Trustee will hold each
Guarantee for the benefit of the holders of the related Trust's Preferred
Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Preferred Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that such Trust may have or assert other than
the defense of payment. The following payments with respect to the Preferred
Securities, to the extent not paid by or on behalf of the related Trust (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and
unpaid Distributions required to be paid on such Preferred Securities, to the
extent that such Trust has funds on hand available therefor at such time, (ii)
the Redemption Price with respect to any Preferred Securities called for
redemption, to the extent that such Trust has funds on hand available therefor,
or (iii) upon a voluntary or involuntary dissolution and liquidation of such
Trust (unless the Corresponding Junior Subordinated Debentures are distributed
to holders of such Preferred Securities in exchange therefor), the lesser of (a)
the Liquidation Distribution and (b) the amount of assets of such Trust
remaining available for distribution to holders of Preferred Securities. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the applicable
Preferred Securities or by causing the Trust to pay such amounts to such
holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Trust's obligations under its Preferred Securities, but will apply
only to the extent that such Trust has funds sufficient to make such payments,
and is not a guarantee of collection.
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If the Company does not make interest payments on the Corresponding Junior
Subordinated Debentures held by a Trust, the Trust will not be able to pay
Distributions on its Preferred Securities and will not have funds legally
available therefor. Each Guarantee will rank subordinate and junior in right of
payment to all Senior Indebtedness of the Company to the extent and in the
manner set forth in the Guarantee. See "-- Status of the Guarantees." Because
the Company is a holding company, the right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of that
subsidiary, except to the extent the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Company's obligations under the
Guarantees will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, and claimants should look only to the
assets of the Company for payments thereunder. See "American General
Corporation." Except as otherwise provided in the applicable Prospectus
Supplement, the Guarantees do not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior Indebtedness, whether
under the Indenture, any other existing indenture or any other indenture that
the Company may enter into in the future or otherwise. See the applicable
Prospectus Supplement relating to any offering of Preferred Securities.
The Company will, through the applicable Guarantee, the applicable
Declaration, the applicable series of Corresponding Junior Subordinated
Debentures and the Indenture, taken together, fully, irrevocably and
unconditionally guarantee all of each Trust's obligations under its Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of a Trust's obligations under its
Preferred Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantees."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Indebtedness
of the Company in the same manner as the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures -- Subordination."
Each Guarantee will rank pari passu with each other Guarantee, with certain
guarantees previously issued by the Company with respect to certain preferred
securities and with all other guarantees (if any) to be issued by other issuers
to be established by the Company similar to the Trusts. Each Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against the Company to enforce
its rights under the Guarantee without first instituting a legal proceeding
against any other person or entity). Each Guarantee will be held by the
Guarantee Trustee of the relevant Trust for the benefit of the holders of the
related Preferred Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the relevant
Trust or upon distribution to the holders of the Preferred Securities of the
Corresponding Junior Subordinated Debentures. None of the Guarantees places a
limitation on the amount of additional Senior Indebtedness that may be incurred
by the Company. The Company expects from time to time to incur additional
indebtedness constituting Senior Indebtedness.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder or, if
applicable, the failure of the Company to deliver other securities in exchange
for the Preferred Securities upon the conversion or exchange of such Preferred
Securities into such other securities in accordance with their terms. The
holders of a majority in aggregate Liquidation Amount of the related Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in
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respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the related Guarantee
without first instituting a legal proceeding against the applicable Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified in an applicable Prospectus Supplement, in each
Guarantee, the Company will covenant, as long as any related Preferred
Securities are outstanding, that it will not, and will not permit any subsidiary
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock, (ii) make any payment of principal, interest or premium, if any,
on or repay or repurchase or redeem any debt securities of the Company
(including other series of Junior Subordinated Debentures) that rank pari passu
in all respects with or junior in interest to the Corresponding Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Company, (b) any declaration of a dividend in connection with the
implementation or extension of a stockholders' rights plan, or the issuance of
stock under any such plan in the future, or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under such Guarantee, (d) as a result
of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, and (f) acquisitions of common stock of the Company in connection
with the satisfaction by the Company or any of its subsidiaries of its
obligations under any benefit plan for its directors, officers or employees), if
at such time (i) there shall have occurred and be continuing any event of which
the Company has actual knowledge (a) that is, or with the giving of notice or
the lapse of time, or both, would constitute an Event of Default under the
Indenture with respect to the Corresponding Junior Subordinated Debentures with
respect to such series and (b) in respect of which the Company shall not have
taken reasonable steps to cure, (ii) the Company shall be in default with
respect to its payment of any obligations under such Guarantee or (iii) the
Company shall have given notice of its election of an Extension Period as
provided in the Indenture with respect to the Corresponding Junior Subordinated
Debentures and shall not have rescinded such notice, and such Extension Period,
or any extension thereof, shall be continuing.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in the performance of each Guarantee, undertakes to
perform only such duties as are specifically set forth in such Guarantee and,
after default with respect to such Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. The Guarantee Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if it reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no vote
will be required), no Guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of Preferred Securities -- Voting Rights;
Amendment of Each Declaration." All guarantees and agreements contained in each
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the related Preferred Securities then outstanding.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the Liquidation Amount payable upon liquidation of the related
Trust, upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the related Preferred Securities in accordance with their terms or,
if applicable, upon the conversion or exchange of the related Preferred
Securities into other securities in accordance with their terms. Each Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the Related Preferred Securities must restore payment of
any sums paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of laws principles
thereof.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE CORRESPONDING JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on any Preferred Securities
(to the extent the issuing Trust has funds available for the payment of such
Distributions) will be irrevocably guaranteed by the Company as and to the
extent set forth under "Description of Guarantees." Taken together, the
Company's obligations under each series of Corresponding Junior Subordinated
Debentures, the Indenture, the related Declaration and the related Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the Related Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of each Trust's obligations under its
Preferred Securities. If and to the extent that the Company does not make
payments on any series of Corresponding Junior Subordinated Debentures, the
Trust will not pay Distributions or other amounts due on such Preferred
Securities. The Guarantees do not cover payment of Distributions when the
related Trust does not have sufficient funds to pay such Distributions. In such
event, the remedy of a holder of Preferred Securities is to institute a legal
proceeding directly against the Company for the enforcement of payment of
amounts equal to such Distributions to such holder. The obligations of the
Company under each Guarantee are subordinate and junior in right of payment to
all Senior Indebtedness of the Company in the same manner as the Junior
Subordinated Debentures.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate
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principal amount of each series of Corresponding Junior Subordinated Debentures
will be equal to the sum of the aggregate stated Liquidation Amount of the
Related Preferred Securities and related Common Securities; (ii) the interest
rate and interest and other payment dates on each series of Corresponding Junior
Subordinated Debentures will match the Distribution rate and Distribution and
other payment dates for the Related Preferred Securities; (iii) the Company
shall pay for all and any costs, expenses and liabilities of the issuing Trust
except such Trust's obligations to holders of its Trust Securities under such
Trust Securities; and (iv) each Declaration further provides that the applicable
Trust will not engage in any activity that is not consistent with the limited
purposes of such Trust.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the related Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
related Trust or any other person or entity.
A default or event of default under any Senior Indebtedness of the Company
would not constitute a default or Event of Default under the Indenture. However,
in the event of payment defaults under, or acceleration of, Senior Indebtedness
of the Company, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated
Debentures until such Senior Indebtedness has been paid in full or any payment
default thereunder has been cured or waived. Such subordination provisions also
provide that payments on the Corresponding Junior Subordinated Debentures may be
blocked for up to 180 days in the event of a Senior Nonmonetary Default with
respect to any Senior Indebtedness. See "Description of Junior Subordinated
Debentures -- Subordination." Failure to make required payments on any series of
Corresponding Junior Subordinated Debentures would constitute an Event of
Default under the Indenture.
LIMITED PURPOSE OF TRUSTS
Each Trust's Preferred Securities evidence a preferred beneficial interest
in such Trust, and each Trust exists for the sole purpose of issuing and selling
the Trust Securities, using the proceeds from the sale of the Trust Securities
to acquire the Corresponding Junior Subordinated Debentures and engaging in only
those other activities necessary, advisable or incidental thereto. A principal
difference between the rights of a holder of a Preferred Security and a holder
of a Corresponding Junior Subordinated Debenture is that a holder of a
Corresponding Junior Subordinated Debenture will be entitled to receive from the
Company the principal amount of and premium, if any, and interest on
Corresponding Junior Subordinated Debentures held, while a holder of Preferred
Securities will be entitled to receive Distributions from such Trust (or, in
certain circumstances, from the Company under the applicable Guarantee) if and
to the extent such Trust has funds available for the payment of such
Distributions.
RIGHTS UPON DISSOLUTION
Unless the Corresponding Junior Subordinated Debentures are distributed to
holders of the Trust Securities, upon any voluntary or involuntary dissolution
and liquidation of any Trust after satisfaction of liabilities to creditors of
such Trust as required by applicable law, the holders of the related Trust
Securities will be entitled to receive, out of the assets held by such Trust,
the Liquidation Distribution in cash. See "Description of Preferred
Securities -- Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Corresponding Junior Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Indebtedness as and in the manner set forth in the Indenture, but
entitled to receive payment in full of principal (and premium, if any) and
interest, before any stockholders of the Company receive payments or
distributions. Since the Company will be the guarantor under each Guarantee and
will agree to pay for all costs, expenses and liabilities of each Trust (other
than the Trust's obligations to the holders of its Trust Securities), the
positions of a holder of such Preferred Securities and a holder of such
Corresponding Junior Subordinated Debentures relative
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to other creditors and to stockholders of the Company in the event of
liquidation or bankruptcy of the Company are expected to be substantially the
same.
DESCRIPTION OF COMMON STOCK
If specified in the applicable Prospectus Supplement, any series of Junior
Subordinated Debentures or the Preferred Securities of any Trust may be
convertible into or exchangeable for Common Stock, par value $.50 per share, of
the Company ("Common Stock"). The following summary does not purport to be
complete and is qualified in its entirety by reference to the Company's Restated
Articles of Incorporation, as amended (the "Articles"), and the Bylaws of the
Company, which are incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Company is authorized to issue 300,000,000 shares of Common Stock. As
of December 31, 1997, there were outstanding 243,206,215 shares of the Company's
Common Stock.
Holders of the Company's Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors of the Company out of any
funds legally available therefor, and are entitled upon liquidation, after
claims of creditors and preferences of any series of the Company's Preferred
Stock, to receive pro rata the net assets of the Company. See "Description of
Preferred Stock."
The holders of the Common Stock are entitled to one vote for each share
held and are vested with all of the voting power, except as the Board of
Directors of the Company or an authorized committee thereof may provide with
respect to any series of Preferred Stock. Directors of the Company are elected
for a one-year term expiring upon the annual meeting of stockholders of the
Company. The holders of the Common Stock do not have cumulative voting rights.
The holders of Common Stock do not have any preemptive rights to acquire
any shares or other securities of any class which may at any time be issued,
sold or offered for sale by the Company. The holders of Common Stock have no
conversion rights and the Common Stock is not subject to redemption by either
the Company or a stockholder.
The rights of holders of Common Stock are subject to the preferential
rights of the holders of outstanding shares of the Company's 7% Convertible
Preferred Stock and the preferential rights of any Preferred Stock that may be
issued in the future.
The Company's Common Stock is listed on the New York, Pacific, London and
Swiss Stock Exchanges. First Chicago Trust Company of New York is the transfer
agent, registrar and dividend disbursing agent for the Common Stock.
PREFERRED SHARE PURCHASE RIGHTS
On July 27, 1989, the Board of Directors of the Company authorized the
issuance of one preferred share purchase right (a "Right") for each share of
Common Stock outstanding on August 7, 1989 and for each share of Common Stock
issued thereafter but prior to the earlier of the Distribution Date and the
Termination Date (as each such term is defined below). A Right is attached to
each share of Common Stock and entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $1.50 per share, of the Company (the "Junior
Preferred Shares"), at a price of $120 per one one-hundredth of a Junior
Preferred Share, subject to certain adjustments.
The Rights will expire on August 7, 1999, unless the expiration date is
extended or the Rights are redeemed earlier (any such date being the
"Termination Date"). The Rights are not exercisable or transferable separately
from the shares of Common Stock until the "Distribution Date" which will occur
on the earlier of (i) 10 business days following the first public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or
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more of the outstanding Common Stock and any other shares of capital stock of
the Company entitled to vote generally in the election of directors or entitled
to vote in respect of any merger, consolidation, sale of all or substantially
all of the Company's assets, liquidation, dissolution or winding up of the
Company (the "Voting Stock") or (ii) 10 business days following the commencement
of, or the first public announcement of an intention to commence, a tender or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of affiliated or associated persons of 25% or
more of the then outstanding Voting Stock.
In the event the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earnings
power should be sold or otherwise transferred, each holder of a Right will have
the right to receive, upon payment of the Right's then current exercise price,
common stock of the acquiring company which has a market value of two times the
exercise price of the Right. In the event that any person becomes an Acquiring
Person, each holder of a Right will thereafter have the right to receive upon
exercise thereof that number of shares of Common Stock (or under certain
circumstances, Common Stock-equivalent Junior Preferred Shares) having a market
value of two times the exercise price of the Rights.
At any time 10 business days after a person or group of affiliated or
associated persons has become an Acquiring Person and prior to the acquisition
by any person or group of 50% or more of the outstanding Voting Stock, the Board
of Directors of the Company may exchange the Rights (other than Rights acquired
or beneficially owned by such Acquiring Person, which Rights held by such
Acquiring Person shall then be null and void), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
Junior Preferred Stock), appropriately adjusted to reflect any stock split,
stock dividend or similar transaction, for each two shares of Common Stock for
which the Right is then exercisable.
At any time prior to the close of business on the tenth day following the
first public announcement that a person or group of affiliated or associated
persons has become an Acquiring Person, the Board of Directors of the Company
may redeem the then outstanding Rights in whole, but not in part, at a price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction (the "Rights Redemption Price"). Any such
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors of the Company in its sole
discretion may establish.
The purchase price payable, and the number of Junior Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Junior
Preferred Shares.
The number of outstanding Rights and the number of one one-hundredths of a
Junior Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of reclassification of securities, or recapitalization
or reorganization of the Company or other transaction involving the Company
which has the effect, directly or indirectly, of increasing by more than one
percent the proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its subsidiaries beneficially owned by any
Acquiring Person, in any such case, prior to an exchange by the Company as
described above.
The terms of the Rights may be amended, including extending the expiration
date, by the Board of Directors of the Company without the consent of the
holders of the Rights, except in certain circumstances.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors of the Company. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors of the Company since the Rights may be redeemed by the
Company at the
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Rights Redemption Price prior to the time that a person or group has acquired
beneficial ownership of 50% or more of the Voting Stock.
The Junior Preferred Shares will be non-redeemable and rank junior to all
other series of the Company's Preferred Stock. Each whole Junior Preferred Share
will be entitled to receive a quarterly preferential dividend in an amount equal
to the greater of (i) $0.25 or (ii) subject to certain adjustments, 100 times
the dividend declared on each share of Common Stock. In the event of the
liquidation, dissolution or winding up of the Company, each whole Junior
Preferred Share will be entitled to receive a preferential liquidation payment
in an amount equal to the greater of (i) $1.50, or (ii) 100 times the aggregate
amount to be distributed per share to holders of Common Stock, plus, in either
case, an amount equal to all accrued and unpaid dividends thereon. In the event
of any merger, consolidation or other transaction in which Common Stock is
exchanged for or changed into other stock or securities, cash or other property,
each whole Junior Preferred Share will be entitled to receive 100 times the
amount received per each share of Common Stock. Each whole Junior Preferred
Share will be entitled to 100 votes on all matters submitted to a vote of the
shareholders of the Company, and Junior Preferred Shares will generally vote
together as one class with the Common Stock and any other voting capital stock
of the Company on all matters submitted to a vote of shareholders of the
Company.
If such registration is then required by applicable law, the Company will
use its best efforts to cause the offer and sale of Junior Preferred Shares
issuable upon exercise of the Rights to be registered pursuant to the Securities
Act at any such time as the Rights become exercisable.
The foregoing description of the Rights and the Junior Preferred Shares
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement, as amended, which is an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Statement of Resolution
Establishing Series of Shares of the Junior Preferred Shares.
BUSINESS COMBINATION LAW
The Company is subject to Part Thirteen of the Texas Business Corporation
Act, known as the "Business Combination Law," which became effective September
1, 1997. In general, the Business Combination Law prevents an "affiliated
shareholder" (or its affiliates or associates) from entering into or engaging in
a "business combination" with an "issuing public corporation" during the
three-year period immediately following the date on which the affiliated
shareholder became an affiliated shareholder, unless (a) before the date such
person became an affiliated shareholder, the board of directors of the issuing
public corporation approves the business combination or the acquisition of
shares that caused the affiliated shareholder to become an affiliated
shareholder, or (b) not less than six months after the date such person became
an affiliated shareholder, the business combination is approved by the
affirmative vote of holders of at least two-thirds of the issuing public
corporation's outstanding voting shares not beneficially owned by the affiliated
shareholder or its affiliates or associates. For the purposes of the foregoing,
"affiliated shareholder" is defined generally as a person that is or was within
the preceding three-year period the beneficial owner of 20% or more of a
corporation's outstanding voting shares; "business combination" is defined
generally to include (i) mergers, share exchanges or conversions involving the
affiliated shareholder, (ii) dispositions of assets involving the affiliated
shareholder having an aggregate value equal to 10% or more of the market value
of the assets or of the outstanding common stock or representing 10% or more of
the earning power or net income of the corporation, (iii) certain issuances or
transfers of securities by the corporation to the affiliated shareholder other
than on a pro rata basis, (iv) certain plans or agreements relating to a
liquidation or dissolution of the corporation involving an affiliated
shareholder, (v) certain reclassifications, recapitalizations, distributions or
other transactions that would have the effect of increasing the affiliated
shareholder's percentage ownership of the corporation and (vi) the receipt of
tax, guarantee, loan or other financial benefits by an affiliated shareholder
other than proportionately as a shareholder of the corporation; and "issuing
public corporation" is generally defined to include most publicly held Texas
corporations, including the Company.
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ADVANCE NOTICE OF SHAREHOLDER NOMINATIONS AND PROPOSALS
The Company's Bylaws provide that, subject to the rights of any class or
series of Preferred Stock to nominate and elect a specified number of directors
in certain circumstances, nominations of persons for election as directors of
the Company may be made by a shareholder only if the shareholder is a
shareholder of record and such shareholder gives timely written notice of such
shareholder's intent to make such nomination or nominations to the Secretary of
the Company in accordance with the Company's Bylaws. To be timely, the notice
must be given (a) in the case of an annual meeting, not less than 120 days nor
more than 150 days prior to the anniversary date of the immediately preceding
annual meeting of shareholders; provided, that in the event that such annual
meeting is called for a date that is not within 30 days before or after such
anniversary date, notice by the shareholder in order to be timely must be so
given not later than the close of business on the tenth day following the day on
which notice of the date of such annual meeting is mailed or public disclosure
of the date of such annual meeting is made, whichever first occurs, and (b) in
the case of a special meeting of shareholders called for the purpose of electing
directors, not later than the close of business on the tenth day following the
day on which notice of the date of such special meeting is mailed or public
disclosure of the date of such special meeting is made, whichever first occurs.
Each such notice must contain certain specified information with respect to the
shareholder making the proposal, and the nominee or nominees.
The Company's Bylaws also provide that no business may be brought before an
annual meeting of shareholders by a shareholder unless such shareholder is a
shareholder of record and such shareholder gives notice of such business to the
Secretary of the Company, in accordance with the Company's Bylaws, not less than
120 days nor more than 150 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, that in the event that such
annual meeting is called for a date that is not within 30 days before or after
such anniversary date, notice by the shareholder in order to be timely must be
so given not later than the close of business on the tenth day following the day
on which notice of the date of such annual meeting is mailed or public
disclosure of the date of such annual meeting is made, whichever first occurs.
Each such notice must set forth certain specified information and
representations concerning the proposal and the shareholder making the proposal.
DESCRIPTION OF PREFERRED STOCK
If specified in the applicable Prospectus Supplement, any series of Junior
Subordinated Debentures or the Preferred Securities of any Trust may be
convertible into or exchangeable for shares of the Company's Preferred Stock,
par value $1.50 per share. The following description of the terms of the
Preferred Stock sets forth certain general terms and provisions of the Preferred
Stock. Certain other terms of any series of Preferred Stock into or for which
any Junior Subordinated Debentures or Preferred Securities may be convertible or
exchangeable will be specified in the Prospectus Supplement relating to such
Junior Subordinated Debentures or Preferred Securities. If so specified in any
such Prospectus Supplement, the terms of any series of Preferred Stock may
differ from the terms set forth below. The description of the terms of the
Preferred Stock set forth below and in an applicable Prospectus Supplement does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Statement of Resolutions relating to the applicable series of
Preferred Stock, which will be filed as an exhibit to, or incorporated by
reference in, the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the Articles and Bylaws of the Company, and applicable Texas
law, the Board of Directors of the Company, or an authorized committee thereof,
has the authority, without further shareholder action, to issue up to 60,000,000
shares of Preferred Stock, $1.50 par value, in one or more series and in such
amounts and for such consideration, as may be determined from time to time by
resolution of the Board of Directors of the Company, or an authorized committee
thereof, and to fix
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before the issuance of any shares of Preferred Stock of a particular series, the
number of shares constituting that series and the distinctive designation of
that series; the dividend rate (or method of determining the same); the voting
rights; conversion privileges; redemption rights; repurchase obligations;
sinking fund availability; rights upon liquidation, dissolution or winding up
and the priority thereof; restrictions upon the Company with respect to the
creation of debt or the issuance of additional Preferred Stock or other stock
ranking prior to or on a parity therewith with respect to dividends or upon
liquidation; restrictions on the Company with respect to the issuance of,
payment of dividends upon, or the making of other distributions with respect to,
or the acquisition or redemption of, shares ranking junior to the Preferred
Stock; the priority of each series of Preferred Stock in relation to other
series of Preferred Stock; and any other designations, powers, preferences and
rights, including, without limitation, any qualifications, limitations or
restrictions thereof. The holders of any series of Preferred Stock shall not
have any preemptive rights to acquire any shares or securities of any class
which may at any time be issued, sold or offered for sale by the Company.
As of the date of this Prospectus, the Company had no Preferred Stock
outstanding other than the 7% Convertible Preferred Stock described below under
"-- 7% Convertible Preferred Stock." As of such date, the Company had Preferred
Share Purchase Rights outstanding. A description of these rights is provided
under "Description of Common Stock -- Preferred Share Purchase Rights."
DIVIDENDS
The holders of the Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company, out
of funds legally available therefor, dividends at such rates and on such dates
as will be specified in the applicable Prospectus Supplement. Such rates may be
fixed or variable or both. If variable, the formula used for determining the
dividend rate for each dividend period will be specified in the applicable
Prospectus Supplement. Dividends will be payable to the holders of record as
they appear on the stock books of the Company on such record dates as will be
fixed by the Board of Directors of the Company.
Unless otherwise indicated in an applicable Prospectus Supplement, all
series of Preferred Stock will be senior in right as to dividends and in
liquidation to the Common Stock and any other class of stock of the Company
ranking junior to the Preferred Stock.
VOTING RIGHTS
Except as indicated in the applicable Prospectus Supplement or as expressly
required by applicable law, the holders of the Preferred Stock will not be
entitled to vote. In the event the Company issues a series of Preferred Stock
with voting rights, unless otherwise specified in the Prospectus Supplement
relating to such series, each such share will be entitled to one vote on matters
on which holders of such series of the Preferred Stock are entitled to vote.
Since each full share of any series of Preferred Stock of the Company shall be
entitled to one vote, the voting power of such series, on matters on which
holders of such series and holders of other series of Preferred Stock are
entitled to vote as a single class, shall depend on the number of shares in such
series, not the aggregate stated value, liquidation preference or initial
offering price of the shares of such series of Preferred Stock.
CONVERSION AND EXCHANGE
The Prospectus Supplement relating to a series of the Preferred Stock will
set forth the conditions or terms, if any, upon which any such series will be
convertible or exchangeable, and the terms of the securities into which such
series will be convertible or exchangeable.
REDEMPTION RIGHTS
A series of the Preferred Stock may be redeemable, in whole or in part, at
the option of the Company or any holder thereof, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices specified in the
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applicable Prospectus Supplement and subject to the rights of holders of other
securities of the Company. Preferred Stock redeemed by the Company will be
restored to the status of authorized but unissued preferred shares.
REPURCHASE OBLIGATION
The Prospectus Supplement relating to a series of the Preferred Stock will
state the conditions and terms, if any, upon which such series shall be subject
to repurchase by the Company.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock shall
be entitled to receive out of the assets of the Company available for
distribution to shareholders, before any distribution of assets is made to
holders of Common Stock or any other class or series of shares ranking junior to
such Preferred Stock upon liquidation, a liquidating distribution in the amount
per share as set forth in the Prospectus Supplement relating to such series of
Preferred Stock plus accrued and unpaid dividends. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company the amounts
payable with respect to Preferred Stock of any series and any other shares of
the Company ranking as to any such distribution on a parity with such Preferred
Stock of such series are not paid in full, the holders of such Preferred Stock
of such series and of such other shares will share ratably in any such
distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. Neither the sale of all or
substantially all of the property or business of the Company nor the merger or
consolidation of the Company into or with any other corporation shall be deemed
to be a dissolution, liquidation or winding up, voluntary or involuntary, of the
Company. Except as indicated in the applicable Prospectus Supplement, after
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of Preferred Stock of any series will not be entitled to
any further participation in any distribution of assets by the Company.
CONDITIONS AND RESTRICTIONS UPON THE COMPANY
The Prospectus Supplement relating to a series of the Preferred Stock will
describe any conditions or restrictions upon the Company which are for the
benefit of such series, including restrictions upon the creation of debt or
other series of Preferred Stock; payment of dividends; or distributions,
acquisitions or redemptions of shares ranking junior to such series.
7% CONVERTIBLE PREFERRED STOCK
As of December 31, 1997, there were issued and outstanding 2,317,701 shares
of the Company's 7% Convertible Preferred Stock. The 7% Convertible Preferred
Stock is entitled to receive annual cumulative dividends at a rate per annum of
7% of the stated liquidation preference of $36.7625. On March 1, 2001 (the
"Mandatory Conversion Date"), unless previously redeemed or converted, each
share of 7% Convertible Preferred Stock will mandatorily convert into (i) one
share of the Company's Common Stock, subject to adjustment in certain events,
and (ii) the right to receive cash in an amount equal to all accrued and unpaid
dividends thereon. Shares of 7% Convertible Preferred Stock are not redeemable
prior to March 1, 2000 (the "Initial Redemption Date"). At any time and from
time to time on and after the Initial Redemption Date, the Company may redeem
any or all of the outstanding shares of 7% Convertible Preferred Stock in
exchange for a number of shares of Common Stock equal to the quotient obtained
by dividing (i) 101.75% of the stated liquidation preference, declining
quarterly to 100% of the stated liquidation preference on the Mandatory
Conversion Date, plus all accrued and unpaid dividends thereon by (ii) the
Current Market Price (as defined) of the Common Stock on the applicable date of
determination, but in no event less than .8264 of a share of Common Stock. At
any time prior to the Mandatory Conversion Date, unless previously redeemed,
each share of 7% Convertible Preferred Stock is convertible at the option of the
holder into .8264 of a share of Common Stock subject to certain adjustments.
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The holders of shares of 7% Convertible Preferred Stock have the right to
vote in the election of Directors of the Company and upon each other matter
coming before any meeting of the holders of Common Stock on the basis of 4/5 of
one vote for each share of 7% Convertible Preferred Stock. On such matters, the
holders of shares of 7% Convertible Preferred Stock and the holders of Common
Stock will vote together as one class except as otherwise provided by law or the
Articles. In addition, holders of shares of 7% Convertible Preferred Stock have
additional voting rights with respect to certain other matters, including
certain rights to elect two directors in the event of specified dividend
arrearages. The shares of 7% Convertible Preferred Stock rank prior to the
Common Stock as to the payment of dividends and distribution of assets upon
liquidation.
6% CONVERTIBLE MONTHLY INCOME PREFERRED SECURITIES AND SERIES A PREFERRED STOCK
The Company has established a series of Preferred Stock designated as the
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock"), no shares of which have been issued. The Series A Preferred Stock has
been established in connection with the issuance by American General Delaware,
L.L.C. ("American General Delaware"), a Delaware limited liability company and
an affiliate of the Company, of 5,000,000 of its 6% Convertible Monthly Income
Preferred Securities, Series A (the "Series A Preferred Securities"),
representing preferred limited liability company interests in American General
Delaware. The Series A Preferred Securities are subject to exchange, in whole
but not in part, for shares of Series A Preferred Stock, at the rate of one
share of Series A Preferred Stock for each Series A Preferred Security, upon a
vote of the holders of a majority of the aggregate liquidation preference of all
outstanding Series A Preferred Securities following the failure of holders of
Series A Preferred Securities to receive dividends in full (including
arrearages) for 15 consecutive months.
Holders of the Series A Preferred Securities are entitled to receive
cumulative cash distributions from American General Delaware at the annual rate
of 6% of the liquidation preference of $50 per Series A Preferred Security,
accruing from the date of original issuance and payable monthly in arrears on
the last day of each calendar month of each year. In the event of the
liquidation, dissolution or winding-up of American General Delaware, holders of
Series A Preferred Securities are entitled to receive for each Series A
Preferred Security a liquidation preference of $50 plus an amount equal to any
accumulated and unpaid dividends (whether or not earned or declared), to the
date of payment, subject to certain limitations. Each Series A Preferred
Security is convertible at the option of the holder, at any time prior to the
expiration of such conversion rights as discussed below, into shares of Common
Stock, at the rate of 1.2288 shares of Common Stock for each Series A Preferred
Security (equivalent to a conversion price of $40.69 per share of Common Stock),
subject to adjustment in certain circumstances. On any date on or after May 31,
2000, American General Delaware may, at its option, cause the conversion rights
of holders of the Series A Preferred Securities to expire if certain conditions
are then satisfied (the "Conversion Expiration Date"). The Series A Preferred
Securities are redeemable at the option of American General Delaware, in whole
or in part, from time to time, on or after May 31, 2003, at a cash redemption
price equal to the liquidation preference for such Series A Preferred Securities
plus accumulated and unpaid dividends (whether or not earned or declared) to the
date fixed for redemption (the "Redemption Price"). The Series A Preferred
Securities are also redeemable at the option of American General Delaware, in
whole but not in part, at the Redemption Price if, at any time after the
Conversion Expiration Date, less than 10% of the Series A Preferred Securities
that were originally issued remains outstanding. The Series A Preferred
Securities will be subject to mandatory redemption on May 31, 2025, or earlier
in certain circumstances.
The Series A Preferred Stock will have dividend, liquidation, optional
redemption and conversion provisions and certain other terms substantially
similar to those of the Series A Preferred Securities, except that, among other
things, the holders of Series A Preferred Stock will have the right (voting
together with holders of certain other series of capital stock of the Company
including, under certain circumstances, the holders of 7% Convertible Preferred
Stock) to elect two additional directors of the Company whenever dividends on
the Series A Preferred Stock are in arrears for 18 or more consecutive months,
no interest will accumulate or be payable on any dividend arrearages on the
Series A Preferred
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Stock and the Series A Preferred Stock will not be subject to mandatory
redemption. The Series A Preferred Stock, if issued, would be pari passu with
the 7% Convertible Preferred Stock as to the payment of dividends and
distributions of assets upon liquidation of the Company.
PLAN OF DISTRIBUTION
The Company may sell the Junior Subordinated Debentures and any Trust may
sell Preferred Securities (such Junior Subordinated Debentures and Preferred
Securities, the "Offered Securities") in any of, or any combination of, the
following ways: (i) directly to purchasers, (ii) through agents and (iii)
through underwriters or dealers.
If an underwriter or underwriters are utilized in the sale, the Company
will execute an underwriting agreement with such underwriters at the time of
sale to them and the names of the underwriters and the terms of the transaction
will be set forth in the applicable Prospectus Supplement, which will be used by
the underwriters to make resales of the Offered Securities in respect of which
this Prospectus is delivered to the public.
Unless otherwise set forth in the Prospectus Supplement relating thereto,
the obligations of the underwriters to purchase the Offered Securities will be
subject to conditions precedent and the underwriters will be obligated to
purchase all such Offered Securities if any are purchased. The initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, the Company and/or any Trust, as the case
may be, will sell such Offered Securities to the dealer, as principal. The
dealer may then resell such Offered Securities to the public at varying prices
to be determined by such dealer at the time of resale. The name of the dealer
and the terms of the transaction will be set forth in the Prospectus Supplement.
Agents, underwriters, and dealers may be entitled under the relevant agreements
to indemnification by the Company and/or any Trust, as the case may be, against
certain liabilities, including liabilities under the Securities Act.
In connection with the offering of the Preferred Securities of any Trust,
such Trust may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set forth
in the accompanying Prospectus Supplement. If such Trust grants any
over-allotment option, the terms of such over-allotment option will be set forth
in the Prospectus Supplement for such Preferred Securities.
Underwriters, agents and dealers may engage in transactions with, or
perform services for, the Company and/or the applicable Trust and/or any of
their affiliates in the ordinary course of business.
The Offered Securities will be new issues of securities and will have no
established trading market. Any underwriters to whom Offered Securities are sold
for public offering and sale may make a market in such Offered Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. Such Offered Securities may or may not be
listed on a national securities exchange or the Nasdaq National Market. No
assurance can be given as to the liquidity of or the existence of trading
markets for any Offered Securities.
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LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters will be passed upon for the Company by Vinson & Elkins L.L.P., and
for the Trusts by Richards, Layton & Finger, P.A., special Delaware counsel to
the Trusts and the Company. Unless otherwise indicated in the applicable
Prospectus Supplement, the validity of the Guarantees and the Junior
Subordinated Debentures will be passed upon for the Underwriters by Brown & Wood
LLP. Vinson & Elkins L.L.P. and Brown & Wood LLP will rely on the opinion of
Richards, Layton & Finger, P.A. as to certain matters of Delaware law.
EXPERTS
The consolidated financial statements and schedules of the Company and its
subsidiaries appearing in the Company's Current Report on Form 8-K dated October
10, 1997 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 and schedules 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.
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$300,000,000
AMERICAN GENERAL CAPITAL II
8 1/2% CAPITAL TRUST PASS-THROUGH SECURITIES(R) (TRUPS(R))
FULLY AND UNCONDITIONALLY
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
AMERICAN GENERAL CORPORATION
------------
PROSPECTUS SUPPLEMENT
JUNE 22, 2000
------------
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
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