<PAGE> 1
As filed with the Securities and Exchange Commission on September 24, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICAN ANNUITY GROUP, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 06-1356481
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 333-5300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
AMERICAN ANNUITY GROUP CAPITAL TRUST I
(Exact name of Registrant as specified in its charter)
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DELAWARE 31-6538556
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 333-5300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
AAG HOLDING COMPANY, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C>
OHIO 31-1475936
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 333-5300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
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with copies to: MARK F. MUETHING, ESQ. with copies to:
Gary P. Kreider, Esq. Senior Vice President, General Timothy E. Hoberg, Esq.
Keating, Muething & Klekamp, Counsel and Secretary Taft, Stettinius & Hollister
P.L.L.
1800 Provident Tower American Annuity Group, Inc. 1800 Star Bank Center
One East Fourth Street 250 East Fifth Street 425 Walnut Street
Cincinnati, Ohio 45202 Cincinnati, Ohio 45202 Cincinnati, Ohio 45202
(513) 579-6411 (513) 333-5515 (513) 381-2838
</TABLE>
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Approximate date of commencement of proposed sale to public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AGGREGATE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SECURITY(2) PRICE(2) FEE(2)
<S> <C> <C> <C> <C>
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% Trust Originated Preferred
Securities of American
Annuity Group Capital Trust I (3)...... 3,450,000 $25.00 $86,250,000 $29,742
% Subordinated Debentures due
, 2026, of AAG Holding
Company, Inc. (3)......................
Guarantee of Preferred Securities of
American Annuity Group Capital Trust I
by American Annuity Group, Inc. (4)....
Guarantee of Subordinated Debentures of
AAG Holding Company, Inc. by
American Annuity Group, Inc. (5).......
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<FN>
(1) Includes 450,000 Preferred Securities subject to an Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) The % Subordinated Debentures will be purchased by American Annuity Group
Capital Trust I with the proceeds of the sale of the % Trust Originated
Preferred Securities. No separate consideration will be received for the
issuance of the % Subordinated Debentures. Pursuant to Rule 457(a), no
separate fee is payable with respect to the % Subordinated Debentures.
(4) Includes back-up undertakings, consisting of obligations of American Annuity
Group, Inc. to provide certain indemnities in respect of, and pay and be
responsible for certain expenses and debts of American Annuity Group Capital
Trust I. No separate consideration will be received for the Guarantee or any
back-up undertakings.
(5) No separate consideration will be received for the American Annuity Group,
Inc. Guarantee. Pursuant to Rule 457(a), no separate fee is payable with
respect to the American Annuity Group, Inc. Guarantee.
</TABLE>
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1996
PROSPECTUS
3,000,000 PREFERRED SECURITIES
AMERICAN ANNUITY GROUP CAPITAL TRUST I
% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRSSM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AMERICAN ANNUITY GROUP, INC.
------------------------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby (the "Offering") represent preferred undivided beneficial
interests in the assets of American Annuity Group Capital Trust I, a statutory
business trust formed under the laws of the State of Delaware (the "Trust").
American Annuity Group, Inc., a Delaware corporation ("AAG" or the "Company"),
will indirectly own all the common securities (the "Common Securities" and,
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. ("NYSE"). If approved, trading of the Preferred Securities
on the NYSE is expected to commence within a 30-day period after the initial
delivery of the Preferred Securities. See "Underwriting."
------------------------
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.
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INITIAL PUBLIC UNDERWRITING PROCEEDS
OFFERING PRICE(1) COMMISSIONS(2) TO TRUST(3)(4)
<S> <C> <C> <C>
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Per Preferred Security.................................. $25.00 (3) $25.00
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Total (5)............................................... $75,000,000 (3) $75,000,000
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(1) Plus accrued distributions, if any, from , 1996.
(2) The Trust, the Company and AAG Holding have each agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in Subordinated Debentures, AAG Holding will pay to the
Underwriters as compensation ("Underwriters' Compensation") for arranging
the investment therein of such proceeds, $
per Preferred Security (or $ in the aggregate); provided, that such
compensation for sales of 10,000 or more Preferred Securities to a single
purchaser will be $ per Preferred Security. Therefore, to the extent of
such sales, the actual amount of Underwriters' Compensation will be less
than the aggregate amount specified in the preceding sentence. See
"Underwriting."
(4) Expenses of the Offering, which are payable by AAG Holding, are estimated to
be $ .
(5) The Trust and the Company have granted to the Underwriters an option
exercisable for 30 days to purchase up to an additional 450,000 Preferred
Securities at the initial public offering price per Preferred Security
solely to cover over-allotments, if any. AAG Holding will pay to the
Underwriters, as Underwriters' Compensation, the commission set forth above
in footnote (3) with respect to such additional Preferred Securities. If
such option is exercised in full, the Initial Public Offering Price,
Underwriters' Compensation, and Proceeds to the Trust will be $86,250,000,
and $86,250,000, respectively. See "Underwriting."
------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about
, 1996.
------------------------
MERRILL LYNCH & CO.
------------------------
The date of this Prospectus is , 1996.
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE> 4
(continued from previous page)
together with the Preferred Securities, the "Trust Securities") representing
undivided beneficial interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in an equivalent amount of % Subordinated
Debentures due , 2026 ("Subordinated Debentures") of AAG Holding
Company, Inc. ("AAG Holding"), an Ohio corporation and wholly-owned subsidiary
of the Company. The Subordinated Debentures are fully and unconditionally
guaranteed (the "Debt Guarantee") on a subordinated basis as to payment of
principal, premium, if any, and interest by the Company. Upon a Declaration
Event of Default (as defined herein), the holders of the Preferred Securities
will have a preference over the holders of the Common Securities with respect to
payments in respect of distributions and payments upon redemption, liquidation
and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on January 15, April 15, July 15 and October 15 of each
year, commencing January 15, 1997 ("distributions"). The distribution rate and
the distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debentures, which, together with the Debt Guarantee and interest
and principal payments received on the Subordinated Debentures, will be the only
assets of the Trust. As a result, if principal or interest is not paid on the
Subordinated Debentures, no amounts will be paid on the Preferred Securities.
The payment of distributions out of moneys held by the Trust and payments on
liquidation of the Trust or the redemption of Preferred Securities, as set forth
below, are guaranteed by the Company (the "Trust Guarantee") if and to the
extent the Trust has funds available therefor. The Company's obligations under
the Trust Guarantee, taken together with its back-up undertakings, consisting of
obligations of AAG Holding as set forth in the Declaration of Trust (including
the obligation to pay expenses of the Trust), the Indenture and any applicable
supplemental indentures, and the Debt Guarantee, provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities. See "Effect of Obligations Under the Subordinated Debentures, the
Debt Guarantee and the Trust Guarantee" herein and "Description of Trust
Guarantee." If AAG Holding does not make principal or interest payments on the
Subordinated Debentures, as a result of the election to extend the interest
payment period on the Subordinated Debentures as described below, or otherwise,
and the Company does not make such payments under the Debt Guarantee, the Trust
will not have sufficient funds to make distributions on the Preferred
Securities, in which event the Trust Guarantee will not apply to such
distributions until the Company or AAG Holding has made such principal or
interest payments. The obligations of AAG Holding under the Subordinated
Debentures are unsecured and will be subordinate and junior in right of payment,
to the extent set forth herein, to all existing and future Senior Indebtedness
(as defined herein) of AAG Holding and will be structurally subordinated to all
existing and future liabilities and obligations of AAG Holding's subsidiaries.
The obligations of the Company under the Debt Guarantee are subordinate and
junior in right of payment to all present and future Senior Indebtedness of the
Company. At June 30, 1996, the aggregate amount of Senior Indebtedness and
liabilities and obligations of AAG Holding's subsidiaries that would have
effectively ranked senior to the Subordinated Debentures was approximately $6.2
billion.
AAG Holding has the right to defer payments of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures from time to time for up to 20 consecutive quarters (each, an
"Extension Period") provided that no Extension Period may extend beyond the
Maturity Date (as defined herein). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During any
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of % per annum
compounded quarterly, and during any Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash distributions with respect to such deferred interest payments. There
could be multiple Extension Periods of varying lengths throughout the term of
the Subordinated Debentures. See "Risk Factors--Option to Extend Interest
Payment Period or Change Maturity Date," "Risk Factors--Tax Consequences of
Extension of Interest Payment Period," "Description of the Subordinated
Debentures and Debt Guarantee--Option to Extend Interest Payment Period," and
"United States Federal Income Taxation--Interest Income and Original Issue
Discount."
The Subordinated Debentures are redeemable prior to maturity at the option
of AAG Holding (i) in whole or in part, from time to time, on or after
, 2001, or (ii) at any time in whole (but not in part) upon the occurrence and
continuation of a Special Event (as defined herein). If AAG Holding redeems
Subordinated Debentures, the Trust must redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so redeemed at $25 per Preferred Security plus accrued
and unpaid distributions thereon to the date fixed for redemption (the
"Redemption Price"). See "Description of the Preferred Securities--Mandatory
Redemption." The outstanding Preferred Securities will be redeemed upon maturity
of the Subordinated Debentures. The Subordinated Debentures mature on
, 2026, which date may be extended at any time at the election of AAG Holding,
but in no event later than the earlier of (i) , 2045 or (ii) the
"Interest Deduction Date" (as hereinafter defined under "Description of the
Subordinated Debentures and Debt Guarantee--Option to Change Scheduled Maturity
Date"), provided certain financial conditions are met, and may be shortened to a
date not earlier than , 2001 if AAG Holding exercises its right to
liquidate the Trust and distribute the Subordinated Debentures. See "Description
of the Subordinated Debentures and Debt Guarantee--Option to Change Scheduled
Maturity Date."
At any time, AAG Holding will have the right to liquidate the Trust and
cause the Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. If AAG Holding elects to liquidate the
Trust and thereby causes the Subordinated Debentures to be distributed to
holders of the Trust Securities in liquidation of the Trust, AAG Holding shall
have the right to shorten the maturity of such Subordinated Debentures, to a
date not earlier than , 2001, or extend the maturity of such
Subordinated Debentures to a date not later than the earlier of (i) ,
2045 or (ii) the Interest Deduction Date, provided that it can extend the
maturity only if certain conditions are met. If the Subordinated Debentures are
distributed to the holders of the Preferred Securities, AAG Holding will use its
best efforts to have the Subordinated Debentures listed on the NYSE or on such
other exchange as the Preferred Securities are then listed. See "Description of
the Preferred Securities--Distribution of the Subordinated Debentures."
In the event of the involuntary or voluntary liquidation, dissolution,
winding up or termination of the Trust, the holders of the Preferred Securities
will be entitled to receive for each Preferred Security a liquidation amount of
$25 plus accrued and unpaid distributions thereon (including interest thereon)
to the date of payment, unless, in connection with such dissolution, the
Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
------------------------
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
(THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH CAROLINA
INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS
INCORPORATED OR DEEMED INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR
REPRESENTATIONS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, AAG HOLDING OR THE TRUST OR BY ANY AGENT,
DEALER OR UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
periodic reports, proxy and information statements and other information with
the Securities and Exchange Commission (the "Commission"). The Company, AAG
Holding and the Trust have filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act of 1933
(the "Securities Act") with respect to the Securities. This Prospectus does not
contain all the information, exhibits and undertakings contained in the
Registration Statement, to which reference is hereby made. Statements contained
in this Prospectus as to the terms of any contract or other document are not
necessarily complete with respect to each such contract or other document filed
as an exhibit to the Registration Statement. Reference is made to the exhibits
for a more complete description of the matter involved. Such reports, proxy and
information statements, the Registration Statement and other information filed
with the Commission by the Company may be inspected at and obtained from the
Commission at its public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Suite 1400, 500 West Madison Avenue, Chicago, Illinois, and at 7 World Trade
Center, 13th Floor, New York, New York. Copies of such material can also be
obtained, at prescribed rates, by mail from the Public Reference Section of the
Commission at its Washington, D.C. address set forth above. In addition,
material filed by the Company can be obtained and inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005 on which AAG's Common Stock
is listed. Such material may also be accessed electronically by means of the
Commission's home page on the World Wide Web located at http://www.sec.gov.
No separate financial statements of the Trust have been included or
incorporated by reference herein. The Company and AAG Holding do not believe
that such financial statements would be material to holders of the Preferred
Securities because (i) all of the voting securities of the Trust will be owned,
directly or indirectly, by AAG Holding, a wholly-owned subsidiary of the
Company, (ii) the Trust has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in its
assets and investing the proceeds thereof in Subordinated Debentures issued by
AAG Holding, and (iii) the obligations of the Trust under the Preferred
Securities are, to the extent that the Trust shall have funds available to meet
such obligations, fully and unconditionally guaranteed by AAG Holding. See
"Description of Preferred Securities."
No separate financial statements of AAG Holding have been included or
incorporated by reference herein. The Company does not believe that such
financial statements would be material to holders of the Preferred Securities
because (i) all of the common stock of AAG Holding will be owned, directly or
indirectly, by the Company, a reporting company under the Exchange Act and (ii)
the obligations of AAG Holding under the Subordinated Debentures are fully and
unconditionally guaranteed by the Company. See "Description of the Subordinated
Debentures and Debt Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference certain documents relating to the
Company which are not delivered herewith. These documents (other than the
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) are available, without charge, on oral or
written request by any person to whom this Prospectus is delivered. Written or
telephone requests should be directed to Mark F. Muething, Senior Vice President
and General Counsel, 250 East Fifth Street, Cincinnati, Ohio 45202, telephone
(513) 333-5515. The following documents, which have been filed by the Company
with the Commission, are hereby incorporated by reference in this Prospectus:
American Annuity Group, Inc. (File No. 1-11632):
(i) Annual Report on Form 10-K for the fiscal year ended December 31, 1995;
and
(ii) Quarterly Reports on Form 10-Q for the periods ended March 31, 1996 and
June 30, 1996.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this Offering
shall be deemed to be incorporated by reference in this Prospectus and to be a
part of this Prospectus from the date of filing thereof. Any statement contained
in a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
2
<PAGE> 6
PROSPECTUS SUMMARY
This summary is qualified by the more detailed information and financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Unless otherwise noted, the material set forth herein does not give
effect to the exercise of the Underwriters' over-allotment option.
THE COMPANY
American Annuity Group, Inc. ("AAG" or the "Company") is a holding company
which, through its subsidiaries, is engaged in the life insurance business,
principally the sale of tax-deferred annuities and life and health insurance.
AAG's primary operating subsidiary is Great American Life Insurance Company
("GALIC"). GALIC sells annuities primarily to employees of qualified
not-for-profit organizations under Section 403(b) of the Internal Revenue Code.
AAG acquired GALIC in December 1992. At December 31, 1995, GALIC had statutory
assets in excess of $5.4 billion, representing a 30% compounded annual growth in
assets since 1976.
GALIC has several life insurance subsidiaries including (i) American
Memorial Life Insurance Company ("American Memorial"), which markets individual
life insurance and annuity policies with the sponsorship of state associations
of funeral directors as well as individual funeral directors across the country,
(ii) Annuity Investors Life Insurance Company ("AILIC"), which markets group and
individual variable annuities, and (iii) Loyal American Life Insurance Company
("Loyal"), which specializes in life and health insurance sold through payroll
deduction plans and credit unions.
American Financial Group, Inc. and its subsidiaries ("AFG") collectively
own approximately 81% of the Company's outstanding Common Stock.
AAG HOLDING COMPANY, INC.
AAG Holding Company, Inc. ("AAG Holding") is a wholly-owned subsidiary of
the Company that owns all of the stock of GALIC. AAG Holding will own, directly
or indirectly, all of the Common Securities and will issue the Subordinated
Debentures to the Trust.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, as amended (the "Declaration"), executed by AAG
Holding as sponsor for such trust (the "Sponsor"), and the Trustees (as defined
herein) of such trust and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on September 13, 1996. The Trust
exists for the exclusive purposes of (i) issuing and selling the Preferred
Securities and Common Securities, (ii) using the gross proceeds from the sale of
the Trust Securities to acquire the Subordinated Debentures and the Debt
Guarantee, and (iii) engaging in only those other activities necessary or
incidental thereto. All of the Common Securities will be directly or indirectly
owned by AAG Holding. The Common Securities will rank pari passu, and payments
will be made thereon pro rata, with the Preferred Securities, except that, if a
Declaration Event of Default (as defined herein) has occurred and is continuing,
the rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Preferred Securities. AAG
Holding will directly or indirectly acquire Common Securities in an aggregate
liquidation amount equal to at least 3% of the total capital of the Trust.
The Trust's affairs will be conducted by the trustees (the "Trustees")
appointed by AAG Holding as the direct or indirect holder of all of the Common
Securities. The holder of the Common Securities will be entitled to appoint,
remove or replace any of, or increase or reduce the number of, the Trustees (as
defined herein). The duties and obligations of the Trustees shall be governed by
the Declaration. The Trust will initially have four Trustees. Two Trustees (the
"Regular Trustees") will be employees or officers of or otherwise affiliated
with AAG or AAG Holding. A third Trustee (the "Property Trustee") of the Trust
will be a financial institution that is not affiliated with AAG Holding and has
a minimum amount of combined capital
3
<PAGE> 7
and surplus of not less than $50,000,000, which shall act as property trustee
and as indenture trustee for the purposes of compliance with the provisions of
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The fourth
Trustee of the Trust will be an entity having a principal place of business in,
or a natural person resident of, the State of Delaware (the "Delaware Trustee").
AAG Holding will pay all fees and expenses related to the Trust and the offering
of the Trust Securities.
The Property Trustee for the Trust is The Bank of New York and its
principal corporate trust office is at 101 Barclay Street, 21st Floor, New York,
New York 10286, Attention: Corporate Trust Trustee Administration. The Delaware
Trustee for the Trust is The Bank of New York (Delaware) and its address in the
State of Delaware is 23 White Clay Center, Route 273, Newark, Delaware 19711.
The Delaware Trustee is an affiliate of the Property Trustee. The address for
the Trust is c/o American Annuity Group, Inc., at the Company's corporate
headquarters located at 250 East Fifth Street, Cincinnati, Ohio 45202, telephone
(513) 333-5300.
THE OFFERING
Preferred Securities Offered. 3,000,000 % Trust Originated Preferred
Securities evidencing preferred undivided beneficial interests in the assets of
the Trust. Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions at an annual rate of % of the liquidation
amount of $25 per Preferred Security, accruing from the date of original
issuance and payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year commencing on January 15, 1997. The distribution rate
and the distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debentures, which, together with the Debt Guarantee and interest
and principal payments received on the Subordinated Debentures, will be the only
assets of the Trust. As a result, if principal or interest is not paid on the
Subordinated Debentures, no amounts will be paid on the Preferred Securities.
See "Risk Factors--Ranking of Subordinate Obligations Under the Trust Guarantee,
Debt Guarantee and Subordinated Debentures" and "Description of the Preferred
Securities."
Subordinated Debentures. The Trust will invest the proceeds from the
issuance of the Preferred Securities and Common Securities in an equivalent
amount of % Subordinated Debentures of AAG Holding. The Subordinated
Debentures will rank subordinate and junior in right of payment to all Senior
Indebtedness of AAG Holding. In addition, AAG Holding's obligations under the
Subordinated Debentures will be structurally subordinated to all existing and
future liabilities and preferred stock obligations of its subsidiaries. See
"Description of the Subordinated Debentures and Debt Guarantee--Subordination."
Debt Guarantee. The Subordinated Debentures are fully and unconditionally
guaranteed on a subordinated basis as to payment and interest by the Company.
See "Risk Factors--Holding Company Structure; Ranking of Subordinate Obligations
Under the Trust Guarantee, Subordinated Debenture Guarantee and Subordinated
Debentures" and "Description of Subordinated Debentures and Debt Guarantee."
Trust Guarantee. Payment of distributions out of moneys held by the Trust,
and payments on liquidation of the Trust or the redemption of Preferred
Securities, are guaranteed by the Company to the extent the Trust has funds
available therefor. If AAG Holding does not make principal or interest payments
on the Subordinated Debentures and AAG does not make payment under the Debt
Guarantee, the Trust will not have sufficient funds to make distributions on the
Preferred Securities, in which event the guarantee shall not apply to such
distribution until the Trust has sufficient funds available therefor. See
"Description of Trust Guarantee" and "Effect of Obligations Under the
Subordinated Debentures, the Debt Guarantee and the Trust Guarantee." The
obligations of AAG under the Guarantee are subordinate and junior in right of
payment to all other liabilities of AAG including the Debt Guarantee. See "Risk
Factors--Holding Company Structure; Ranking of Subordinate Obligations Under the
Trust Guarantee, Debt and Subordinated Debentures."
Right to Defer Interest. AAG Holding has the right to defer payments of
interest on the Subordinated Debentures by extending the interest payment period
on the Subordinated Debentures, from time to time, for up to 20 consecutive
quarters. If interest payments on the Subordinated Debentures are so deferred,
distributions on the Preferred Securities will also be deferred. During any
Extension Period, distributions will
4
<PAGE> 8
continue to accrue with interest thereon (to the extent permitted by the
applicable law) as described herein. There could be multiple Extension Periods
of varying lengths throughout the term of the Subordinated Debentures. During an
Extension Period, holders of Preferred Securities will be required to include
deferred interest income allocated to their Preferred Securities in their gross
income (as Original Issue Discount ("OID")) even though the cash payments
attributable thereto have not been made. See "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period" and "United States Federal
Income Taxation--Interest Income and Original Issue Discount."
Redemption. The Subordinated Debentures are redeemable by AAG Holding (in
whole, or from time to time in part) on or after , 2001, or at any
time, in whole but not in part, upon the occurrence of a Special Event. If the
Subordinated Debentures are redeemed, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debentures so redeemed. The Trust Securities will be
redeemed upon maturity of the Subordinated Debentures. See "Description of the
Preferred Securities--Mandatory Redemption" and "-- Special Event Redemption."
Option to Extend Maturity. The Subordinated Debentures mature on
, 2026, but the maturity may be extended once only for up to an
additional 19 years, provided certain financial covenants and conditions are
met. If the maturity of the Subordinated Debentures is extended, the Preferred
Securities will remain outstanding for the same time period. See "Description of
the Subordinated Debentures and Debt Guarantee--Option to Change Scheduled
Maturity Date."
Right to Liquidate Trust. At any time, AAG Holding will have the right to
liquidate the Trust and cause the Subordinated Debentures (including the Debt
Guarantee) to be distributed to the holders of the Trust Securities in
liquidation of the Trust. If AAG Holding elects to liquidate the Trust and
thereby causes the Subordinated Debentures to be distributed to holders of the
Trust Securities in liquidation of the Trust, AAG Holding shall have the right
to shorten the maturity of such Subordinated Debentures, to a date not earlier
than , 2001, or extend the maturity of such Subordinated Debentures
to a date not later than the earlier of (i) , 2045 or (ii) the
Interest Deduction Date, provided that it can extend the maturity only if
certain conditions are met. If the Subordinated Debentures (including the Debt
Guarantee) are distributed to the holders of the Preferred Securities, AAG
Holding will use its best efforts to have the Subordinated Debentures listed on
the NYSE or on such other exchange as the Preferred Securities are then listed.
See "Description of the Preferred Securities--Distribution of the Subordinated
Debentures."
Use Of Proceeds. The net proceeds from the sale of Preferred Securities by
the Trust will be invested in the Subordinated Debentures of AAG Holding. AAG
Holding expects to use the net proceeds from the sale of the Subordinated
Debentures to repay outstanding debt and for general corporate purposes. Until
the net proceeds are used for these purposes, AAG Holding will deposit them in
interest-bearing accounts or invest them in short-term marketable securities.
Ratings of Securities. The Preferred Securities have been assigned a
rating of "BBB-" by Standard & Poor's Ratings Group, a division of McGraw-Hill
("S&P"). The Company has also sought a rating from Moody's Investors Service,
Inc. ("Moody's").
An explanation of the significance of ratings may be obtained from S&P and
Moody's. Generally, rating agencies base their ratings on such material and
information, and such of their own investigations, studies and assumptions, as
they deem appropriate. A credit rating of a security is not a recommendation to
buy, sell or hold securities. There is no assurance that any rating will apply
for any given period of time or that a rating may not be adjusted or withdrawn.
5
<PAGE> 9
SUMMARY FINANCIAL INFORMATION
The summary financial data for the six months ended June 30, 1996 and 1995
and three-year period ended December 31, 1995 are derived from the Company's
consolidated financial statements. The summary financial data should be read in
conjunction with the financial statements and notes thereto in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 and the
Company's Quarterly Report on Form 10-Q for the six months ended June 30, 1996,
which are incorporated by reference herein. See "Incorporation of Certain
Documents by Reference.".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................................. $ 289.9 $ 199.8 $ 439.6 $ 372.7 $ 388.9
======= ======= ======= ======= =======
Income from continuing operations(1)........... $ 31.0 $ 23.6 $ 58.7 $ 40.9 $ 53.0
Loss from discontinued operations.............. -- -- (3.2) (2.6) (9.6)
Extraordinary items............................ (4.3) -- (0.2) (1.7) (3.4)
Change in accounting principle................. -- -- -- (0.5) --
-------- -------- -------- -------- --------
Net income..................................... $ 26.7 $ 23.6 $ 55.3 $ 36.1 $ 40.0
Earnings (loss) per common share:
Continuing operations(1)..................... $ 0.70 $ 0.60 $ 1.45 $ 1.05 $ 1.41
Discontinued operations...................... -- -- (0.08) (0.07) (0.27)
Extraordinary items.......................... (0.10) -- -- (0.05) (0.10)
Change in accounting principle............... -- -- -- (0.01) --
-------- -------- -------- -------- --------
Net income................................... $ 0.60 $ 0.60 $ 1.37 $ 0.92 $ 1.04
Cash dividends per common share................ -- -- $ 0.07 $ 0.06 $ 0.05
BALANCE SHEET DATA:
Total assets................................... $6,711.9 $5,393.2 $6,611.0 $5,089.9 $4,913.8
Notes payable.................................. 170.4 168.1 167.7 183.3 225.9
Net unrealized gains (losses) included in
stockholders' equity......................... 13.8 37.7 89.3 (29.0) 56.9
Total stockholders' equity..................... 380.3 294.7 429.3 204.4 250.3
<FN>
- ---------------
(1) Reported amounts include realized gains and losses on sales of investments
and, in 1993, certain non-recurring relocation expenses. Management believes
that reported results which include these items are not indicative of future
results of operations. Results excluding these items were as follows:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Income from continuing operations.............. $ 30.4 $ 23.5 $ 48.5 $ 41.0 $ 35.1
Earnings per common share from continuing
operations................................... $ 0.69 $ 0.60 $ 1.20 $ 1.05 $ 0.90
</TABLE>
6
<PAGE> 10
RISK FACTORS
Prospective purchasers of Preferred Securities should consider carefully
all of the information contained in this Prospectus including the information in
the documents incorporated by reference and, in particular, should evaluate the
specific factors set forth below for risks involved with an investment of the
Preferred Securities.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE TRUST GUARANTEE, DEBT GUARANTEE AND
SUBORDINATED DEBENTURES
The Company's obligations under the Trust Guarantee are unsecured and will
rank (i) subordinate and junior in right of payment to all other liabilities of
the Company, including the Debt Guarantee, except those made pari passu or
subordinate by their terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company, and with any guarantee
now or hereafter issued by the Company in respect of any preferred stock or
preference stock of any affiliate of the Company, and (iii) senior to the
Company's common stock.
The obligations of AAG Holding under the Subordinated Debentures are
unsecured and will rank subordinate and junior in right of payment, to the
extent set forth herein, to all present and future Senior Indebtedness of AAG
Holding and will be structurally subordinated to all existing and future
liabilities and obligations of AAG Holding's subsidiaries.
The obligations of the Company under the Debt Guarantee are subordinate and
junior in right of payment to all present and future Senior Indebtedness of the
Company but will at all times be senior to common and preferred equity of the
Company. At June 30, 1996, the aggregate amount of Senior Indebtedness and
liabilities and obligations of AAG Holding's subsidiaries that would have
structurally ranked senior to the Subordinated Debentures was approximately $6.2
billion. There are no terms in the Preferred Securities, the Subordinated
Debentures, the Debt Guarantee or the Trust Guarantee that limit the ability of
the Company, AAG Holding or any of their subsidiaries to incur additional
indebtedness, liabilities or obligations, including indebtedness, liabilities or
obligations that rank senior to the Subordinated Debentures, the Debt Guarantee
and the Trust Guarantee. See "Description of Trust Guarantee--Status of the
Trust Guarantee" and "Description of the Subordinated Debentures and Debt
Guarantee--Subordination."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Subordinated Debentures and Debt Guarantee against AAG Holding and the Company.
The holders of a majority in liquidation amount of the Preferred Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee or to direct the exercise of
any trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Subordinated Debentures and the Debt
Guarantee. If the Property Trustee fails to enforce its rights with respect to
the Subordinated Debentures or under the Debt Guarantee, any record holder of
Preferred Securities may institute legal proceedings directly against AAG
Holding to enforce the Property Trustee's rights under such Subordinated
Debentures or against the Company under the Debt Guarantee without first
instituting any legal proceedings against such Property Trustee or any other
person or entity, including, in the case of the Debt Guarantee, against the
Company. In addition, if a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of AAG Holding to pay
interest, principal or other required payments on the Subordinated Debentures
issued to the Trust on the date such interest, principal or other payments are
otherwise payable, then a record holder of Preferred Securities may institute a
proceeding directly against AAG Holding for enforcement of payment on the
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities held by such holder (a "Direct
Action") on or after the respective due dates specified in the Subordinated
Debentures. In connection with such Direct Action, the Company will be
subrogated to the rights of such record holder of Preferred Securities to the
extent of any payment made by the Company to such record holder of Preferred
Securities pursuant to the
7
<PAGE> 11
Debt Guarantee. The record holder in the case of the issuance of one or more
global Preferred Securities certificates will be The Depository Trust Company
acting at the direction of the beneficial owners of the Preferred Securities.
The holders of Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Subordinated Debentures unless the
Property Trustee fails to do so. See "Description of the Preferred
Securities--Declaration Events of Default" and "Description of the Subordinated
Debentures and Debt Guarantee--Indenture Events of Default."
TRUST DISTRIBUTIONS DEPENDENT ON AAG HOLDING'S PAYMENTS ON SUBORDINATED
DEBENTURES
The Trust's ability to make distributions and other payments on the
Preferred Securities is dependent upon AAG Holding making interest and other
payments on the Subordinated Debentures or upon the Company making such payments
pursuant to the Debt Guarantee. If AAG Holding were not to make payments on the
Subordinated Debentures for any reason, including as a result of AAG Holding's
election to defer the payment of interest on the Subordinated Debentures by
extending the interest payment period on the Subordinated Debentures and the
Company does not make such payments under the Debt Guarantee, the Trust will not
make payments on the Trust Securities. In such an event, holders of the
Preferred Securities would not be able to rely on the Trust Guarantee because
distributions and other payments on the Preferred Securities are subject to such
Trust Guarantee only if and to the extent that the Trust has funds available
therefor. See "Description of Trust Guarantee--General" and "Effect of
Obligations Under the Subordinated Debentures, the Debt Guarantee and the Trust
Guarantee."
OPTION TO EXTEND INTEREST PAYMENT PERIOD OR CHANGE MATURITY DATE
AAG Holding has the right under the Indenture to (a) defer payments of
interest on the Subordinated Debentures by extending the interest payment period
at any time, and from time to time, on the Subordinated Debentures or (b) extend
or shorten the maturity date of the Subordinated Debentures. See "Description of
the Subordinated Debentures and Debt Guarantee--Option to Change Scheduled
Maturity Date" and "Description of the Subordinated Debentures and Debt
Guarantee--Option to Extend Interest Payment Period." As a consequence of an
extension of the interest payment period, quarterly distributions on the
Preferred Securities would be deferred (but despite such deferral, to the extent
permitted by law, would continue to accrue with interest thereon compounded
quarterly) by the Trust during any such Extension Period. AAG Holding has the
right to defer payments of interest on the Subordinated Debentures, from time to
time, for up to 20 consecutive quarters, provided that no Extension Period may
extend beyond the Maturity Date (as defined herein) of the Subordinated
Debentures. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debentures. In the event that AAG
Holding exercises this right to defer interest payments, then, prior to the
payment of all accrued interest on outstanding Subordinated Debentures, (a) the
Company and AAG Holding shall not declare or pay dividends on, or make a
distribution with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock and (b) the
Company and AAG Holding shall not, directly or indirectly, and will not allow
any of their subsidiaries to, make any payment of interest, principal or
premium, if any, on, or repay, repurchase or redeem any debt securities issued
by the Company or AAG Holding that rank pari passu with or junior to the
Subordinated Debentures; provided, however, that the restriction in clause (a)
above does not apply (i) to repurchases or acquisitions of shares of the common
stock of the Company or AAG Holding as contemplated by any employment
arrangement, benefit plan or other similar contract with or for the benefit of
employees, officers or directors entered into in the ordinary course of
business, (ii) as a result of an exchange or conversion of any class or series
of the Company's or AAG Holding's capital stock for common stock, (iii) to the
purchase of fractional interests in shares of the Company's or AAG Holding's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged or (iv) to the payment of any
stock dividend by the Company or AAG Holding payable in common stock of such
company. AAG Holding may further extend the interest payment period; provided
that each Extension Period, if any, may not exceed 20 consecutive quarters and
may not extend beyond the Maturity Date of the Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due, AAG
Holding may commence a new Extension Period, subject to the above requirements.
Consequently, there could be multiple Extension Periods of varying lengths prior
to the Maturity Date of the Subordinated Debentures. AAG Holding has no current
intention of exercising its right to defer payments of interest by
8
<PAGE> 12
extending the interest payment period on the Subordinated Debentures. However,
should AAG Holding determine to exercise such right in the future, the market
price of the Preferred Securities is likely to be adversely affected. See
"Description of the Preferred Securities--Distributions" and "Description of the
Subordinated Debentures and Debt Guarantee--Option to Extend Interest Payment
Period."
TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIOD
Should AAG Holding exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
accrue income (as original issue discount ("OID")) in respect of the deferred
interest allocable to its Preferred Securities for United States federal income
tax purposes. Such income will be allocated but not distributed to holders of
the Preferred Securities. As a result, each such holder of the Preferred
Securities will recognize income for United States federal income tax purposes
in advance of the receipt of cash and will not receive the cash from the Trust
related to such income if such holder disposes of its Preferred Securities prior
to the record date for the date on which distributions of such amounts are made.
A holder that disposes of its Preferred Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Preferred Securities. In addition, as a result of the
existence of AAG Holding's right to defer interest payments, the market price of
the Preferred Securities (which represent an undivided beneficial interest in
the Subordinated Debentures) may be more volatile than other securities that do
not have such feature. See "United States Federal Income Taxation--Interest
Income and Original Issue Discount."
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event, AAG Holding will have the right to
redeem the Subordinated Debentures, in whole (but not in part), in which event
the Trust will redeem all outstanding Trust Securities. See "Description of the
Preferred Securities--Special Event Redemption."
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
At any time, AAG Holding will have the right to terminate the Trust and,
after satisfaction of the liabilities to creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Preferred Securities in liquidation of the Trust. Under current
United States federal income tax law and interpretation and assuming, as
expected, the Trust is treated as a grantor trust, a distribution of the
Subordinated Debentures should not be a taxable event to holders of the
Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Special Event or other circumstances, however, the
distribution could be a taxable event to the holders of the Preferred
Securities. In addition, a dissolution of the Trust in which holders of the
Preferred Securities receive cash would be a taxable event to such holders. See
"United States Federal Income Taxation--Receipt of Subordinated Debentures or
Cash Upon Liquidation of the Trust."
If AAG Holding elects to liquidate the Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Preferred Securities
in liquidation of the Trust, AAG Holding shall have the right to shorten the
maturity of such Subordinated Debentures to a date not earlier than
, 2001 or extend the maturity of such Subordinated Debentures to a date which
is not later than the earlier of (i) , 2045 or (ii) the Interest
Deduction Date, provided that it can extend the maturity only if certain
conditions are met. See "Description of the Subordinated Debentures and Debt
Guarantee--Option to Change Scheduled Maturity Date."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Debentures that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby. In
addition, because AAG Holding has the right to shorten or extend the maturity of
the Subordinated Debentures upon the termination of the Trust and the
distribution of the Subordinated Debentures to the holders of the Preferred
Securities, there can be no assurance that AAG Holding will not exercise its
option to change the maturity of the Subordinated Debentures upon such an event.
Because holders of Preferred Securities may receive Subordinated Deben-
9
<PAGE> 13
tures upon any election by AAG Holding to liquidate the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Preferred
Securities, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Subordinated Debentures and should review
carefully all the information regarding the Subordinated Debentures, the Company
and AAG Holding contained herein. See "Description of the Preferred
Securities--Distribution of the Subordinated Debentures" and "Description of the
Subordinated Debentures and Debt Guarantee."
PROPOSED TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"),
the revenue portion of President Clinton's fiscal 1997 budget proposal, was
released. The Bill would, among other things, generally deny interest deductions
for interest or OID on an instrument issued by a corporation that has a maximum
weighted average maturity of more than 40 years. The Bill would also treat as
equity instruments issued by a corporation that have a maximum term of more than
20 years and that are not shown as indebtedness on the consolidated balance
sheet of the issuer. For purposes of determining the weighted average maturity
or the term of an instrument, any right to extend would be treated as exercised.
The above-described provisions of the Bill were proposed to be effective
generally for instruments issued on or after December 7, 1995. However, on March
29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees
issued a joint statement (the "Joint Statement") to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, would be no earlier than the date of appropriate Congressional action.
In addition, subsequent to the publication of the Joint Statement, Senator
Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel
wrote letters to the Treasury Department officials concurring with the views
expressed in the Joint Statement. Under current law, it is likely that the
Subordinated Debentures will be treated as indebtedness of AAG Holding, and AAG
Holding will be able to deduct interest on the Subordinated Debentures
beneficially held by the holders of the Preferred Securities. The terms of the
Subordinated Debentures limit AAG Holding's right to extend the maturity of the
Subordinated Debentures to a date which is six months shorter than any
legislative limit on the length of debt securities for which interest is
deductible. Based on the advice of tax counsel, the Company believes this will
allow AAG Holding an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, AAG Holding will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no assurance
that current or future legislative proposals, adverse judicial decisions, final
legislation or official administrative pronouncements will not affect the
ability of AAG Holding to deduct interest on the Subordinated Debentures, giving
rise to a Tax Event (as defined below) which would permit AAG Holding to cause
the redemption of the Preferred Securities prior to , 2001 (the
first date on which AAG Holding would otherwise be able to cause a redemption of
the Preferred Securities). See "Description of the Preferred Securities--Special
Event Redemption" and "United States Federal Income Taxation."
PREPAYMENT CONSIDERATIONS; OPTION TO CHANGE SCHEDULED MATURITY DATE
At the option of AAG Holding, the Subordinated Debentures may be redeemed,
in whole or in part, at any time on or after , 2001, at a redemption
price equal to 100% of the principal amount to be redeemed plus any accrued and
unpaid interest to the redemption date. See "Description of the Subordinated
Debentures and Debt Guarantee--Optional Redemption." Investors in the Preferred
Securities should assume that AAG Holding will exercise its redemption option if
AAG Holding is able to refinance at a lower interest rate or it is otherwise in
the interest of the Company or AAG Holding to redeem the Subordinated
Debentures. If Subordinated Debentures are redeemed, the Trust must redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of Subordinated Debentures so redeemed. See "Description of the
Preferred Securities--Mandatory Redemption."
AAG Holding also has the option to extend the maturity date of the
Subordinated Debentures for one or more periods, but in no event to a date later
than the earlier of (i) , 2045 or (ii) the Interest Deduction Date,
provided certain financial conditions are met. See "Description of the
Subordinated Debentures and Debt Guarantee--Option to Change Scheduled Maturity
Date." Investors in the Preferred Securities should assume that AAG Holding will
exercise its option to extend the term if AAG Holding is
10
<PAGE> 14
unable to refinance at a lower interest rate or it is otherwise in the interest
of AAG Holding to defer the maturity of the Subordinated Debentures. The
Preferred Securities will not be redeemed until the Subordinated Debentures have
been repaid or redeemed. See "Description of the Preferred Securities--Mandatory
Redemption."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have only limited voting rights,
primarily in connection with directing the activities of the Property Trustee as
the holder of the Subordinated Debentures. Such holders will not be entitled to
vote to appoint, remove or replace, or to increase or decrease the number of,
the Trustees (as defined herein). Voting rights with respect to Trustee matters
are vested exclusively in the holder of the Common Securities. See "Description
of the Preferred Securities--Voting Rights."
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. If AAG Holding exercises its right to defer payments of
interest, a holder who disposes of Preferred Securities between record dates for
payments of distributions thereon will be required to include as ordinary income
OID on the Subordinated Debentures accrued through the date of disposition, and
to add such amount to its adjusted tax basis in its pro rata share of the
underlying Subordinated Debentures deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which will include, in the
form of OID, all accrued but unpaid interest), a holder 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. Accrual
basis taxpayers would be subjected to similar treatment without regard to AAG
Holding's election to defer. See "United States Federal Income
Taxation--Interest Income and Original Issue Discount" and "United States
Federal Income Taxation-- Sales of Preferred Securities."
ABSENCE OF PUBLIC MARKET FOR SECURITIES
Since the Preferred Securities will be newly issued, there is no current
market for them. AAG Holding will apply for listing of the Preferred Securities
on the NYSE, but there can be no assurance that the applicable listing
requirements of any such exchange will be met. There can be no assurance that
there will be an active trading market for the Preferred Securities.
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
The Company and AAG Holding are insurance holding companies whose
operations are conducted through GALIC, their principal subsidiary. AAG
Holding's cash flow is derived principally from dividends on the capital stock
of GALIC and tax allocation payments by GALIC. Accordingly, the ability of the
Company and AAG Holding to generate cash flow is dependent primarily on such tax
allocation payments and, subject to regulation and limitations by the insurance
laws and insurance departments of Ohio and California, dividends from GALIC.
Claims of creditors of GALIC and the other subsidiaries of AAG Holding,
including policyholders, will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of AAG Holding, even
though such subsidiary obligations do not constitute Senior Indebtedness. In
addition, in the event of a default on AAG Holding's debt or an insolvency,
liquidation or other reorganization of AAG Holding, the creditors and
stockholders of AAG Holding will have no right to proceed against the assets of
GALIC or to cause it to be liquidated, rehabilitated or placed in receivership
or conservatorship. If GALIC were to be liquidated, such liquidation would be
conducted by or under the supervision of the Ohio Insurance Commissioner as the
receiver with respect to GALIC's property and business.
REGULATION
The life insurance business is subject to extensive regulation and
supervision by state insurance departments. Such regulation is primarily for the
benefit and protection of policyholders and not investors. Such regulations,
among other things, limit the amount of dividends and other payments that can be
made by insurance companies without prior regulatory approval and impose
restrictions on the amount and type of investments that such companies may have.
In addition, AAG and AAG Holding may be regulated in various states as insurance
holding companies. Generally, under insurance holding company statutes, a state
insurance
11
<PAGE> 15
authority must approve in advance the direct or indirect acquisition of 10% or
more of the voting securities of an insurance company or its parent domiciled in
its state.
The National Association of Insurance Commissioners has adopted the Risk
Based Capital ("RBC") For Insurers Model Act which applies to both life and
property and casualty companies. The Model Act provides for increasing levels of
regulatory intervention as the ratio of an insurer's total adjusted capital and
surplus decreases relative to risk-based capital, culminating with mandatory
control of the operations of the insurer by the domiciliary insurance department
at the so-called "mandatory control level."
It is not possible to predict the future impact of any of these regulations
on the operations of AAG's insurance subsidiaries.
Recently, several legislative proposals and administrative actions have
been advanced which, if adopted, would result in substantial relaxation of the
restrictions which have limited the affiliation between, and activities of,
banks and insurance companies. It is impossible to predict whether any of these
proposals will be adopted. It is also impossible to predict the impact of the
adoption of any of these proposals on the insurance industry in general or
individual insurance companies.
CERTAIN FACTORS AFFECTING THE INSURANCE BUSINESS
The operating results of companies in the insurance industry have
historically been subject to significant fluctuations due to competition,
economic conditions, interest rates, maintenance of insurance ratings and other
factors. GALIC competes with other annuity companies in the sale of tax-deferred
annuities based on a number of factors, including the ratings assigned by A.M.
Best Company, Inc. ("A.M. Best") and other independent insurance industry rating
organizations. A.M. Best's ratings range from "A++" (Superior) to "F" (In
Liquidation) and some companies are not rated. GALIC is rated "A" (Excellent).
Management of GALIC believes that a rating in the "A" category is necessary to
successfully market tax-deferred annuities to public education employees and
other not-for-profit groups, the markets in which GALIC competes. Although
management of AAG does not believe that GALIC's rating will be downgraded by
A.M. Best, that company's operations could be materially adversely affected by
such downgrading.
American Memorial and Loyal compete in markets other than the sale of
tax-deferred annuities. Loyal markets various forms of life, accident and health
insurance and annuities, principally with the sponsorship of credit unions and
banks that endorse Loyal's products to their members and customers. It also
writes life and health insurance through independent brokers. American Memorial
markets individual life insurance and annuity policies with the sponsorship of
state associations of funeral directors as well as individual funeral directors
across the country. American Memorial and Loyal are rated "B+" (Very Good) and
"A-" (Excellent) by A.M. Best, respectively. While ratings are an important
factor in competition between insurers in American Memorial's and Loyal's
markets, management believes that insurers can successfully compete in these
markets with ratings of "B+" (Very Good) or better. Although management of AAG
does not believe the American Memorial's or Loyal's ratings will be downgraded
by A.M. Best, AAG's business could be materially adversely affected by any such
downgrading.
AILIC is rated "A" (Excellent). Management believes that the rating of the
issuing company is not as important a factor in the variable annuity market as
in the fixed annuity market.
COMPETITION
The various markets in which life insurance companies compete are highly
competitive. GALIC, American Memorial, AILIC and Loyal compete with individual
insurers and insurance groups and other financial institutions of varying size,
many of which possess financial resources in excess of those available to these
companies.
AAG believes the ability to compete with other insurance companies is
dependent in part upon its ability to attract and retain agents to market its
products and its ability to develop competitive and profitable products. In
addition, in connection with the development and sale of its products, GALIC
encounters
12
<PAGE> 16
significant competition from other insurance companies, as well as from other
investment alternatives available to its customers.
AAG'S INVESTMENT PORTFOLIO
AAG's investment portfolio consists primarily of fixed income securities
such as investment grade, publicly traded debt securities and mortgage-backed
securities ("MBSs"). At June 30, 1996, fixed income securities (including policy
loans, mortgage loans and short-term investments) comprised over 98% of AAG's
investment portfolio. Approximately 32% was invested in MBSs. Certain risks are
inherent in connection with fixed income securities, including loss upon default
and price volatility in reaction to changes in interest rates and general market
factors. Certain additional risks are inherent in connection with MBSs,
including the risks associated with reinvestment of proceeds due to prepayment
of such obligations. AAG has sought to reduce the risks associated with MBSs by
investing in tranches of collateralized mortgage obligations which have a
reduced risk of prepayment. AAG's investment portfolio also contains certain
non-investment grade bonds, real estate and mortgage loans, with an aggregate
carrying value of approximately $447 million as of June 30, 1996, representing
less than 8% of its investment portfolio.
SIGNIFICANT STOCKHOLDER; TRADING MARKET RISKS
As the beneficial owner of approximately 81% of the outstanding AAG Common
Stock, AFG is a "controlling person" of AAG and has the ability to approve any
corporate action requiring stockholder approval, including the election of the
entire Board of Directors of AAG, amendments to the Certificate of Incorporation
and extraordinary corporate transactions such as mergers, consolidations and
sale of all or substantially all of AAG's assets. Accordingly, AFG controls
AAG's policy decisions.
FEDERAL INCOME TAX TREATMENT OF ANNUITY PRODUCTS
Current federal income tax law generally permits the tax deferred
accumulation of earnings on the premiums paid by an annuitant. Taxes, if any,
are payable by the annuitant on the accumulated tax-deferred earnings when these
earnings are paid to the annuitant. From time to time, there have been proposed
changes to the federal income tax laws that would eliminate this tax deferral
for certain types of annuity products, although historically such proposals have
not included the annuity products marketed by GALIC. In the event that the
federal income tax laws are changed such that accumulated earnings on annuity
products sold by GALIC no longer enjoy the tax-deferral described above, demand
for the affected annuity products could decline substantially or be eliminated.
The operations and business prospects of GALIC would be materially and adversely
affected by any material decrease in the demand for its annuity products. No
assurance can be given that such a tax law change will not occur in the future.
RECENT TAX LAW CHANGES
In August 1996, a new federal law was enacted which will expand the ability
of not-for-profit organizations to offer deferred compensation plans to their
employees. The full impact of this change is impossible to predict. However, if
the increased availability of these plans reduces the demand for annuities
qualified under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company's business could be adversely affected.
ENVIRONMENTAL MATTERS INVOLVING AAG
AAG has certain continuing obligations with respect to the investigation
and cleanup of hazardous substances resulting from former electronic component
manufacturing facilities still owned by AAG and facilities transferred in
connection with sales of certain operations, as well as at disposal sites
operated by third parties. In addition, AAG has indemnified certain purchasers
of its former operations for the cost of such activities. Based on the annual
costs incurred by AAG over the past several years and discussions with its
independent environmental consultants, management believes that reserves for
such cleanup activities are sufficient in all material respects to satisfy
anticipated liabilities.
13
<PAGE> 17
LIABILITIES RELATED TO FORMER OPERATIONS
In 1991, AAG identified possible deficiencies in procedures for reporting
quality assurance information to the Defense Electronics Supply Center ("DESC")
with respect to AAG's former manufacturing operations. Over the last several
years, AAG has been engaged in negotiations with the United States Government
with respect to settlement of claims the Government might have arising out of
the reporting deficiencies. Based on these negotiations, AAG believed it has
sufficient reserves to cover the estimated settlement amount. In March 1995, AAG
received notification from the Government indicating additional reporting
deficiencies. AAG believes that it has sufficient reserves to cover the
estimated settlement amounts.
14
<PAGE> 18
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, as amended, executed by AAG Holding, as sponsor
(the "Sponsor"), and the trustees of the Trust (the "Trustees"), (the
"Declaration") and (ii) the filing of a certificate of trust with the Secretary
of State of Delaware on September 13, 1996. The Declaration will be qualified as
an indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, AAG Holding will
directly or indirectly acquire all of the issued and outstanding Common
Securities of the Trust which will represent at least 3% of the total capital of
the Trust. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the gross proceeds from the sale of the
Trust Securities to acquire the Subordinated Debentures and the Debt Guarantee
and (iii) engaging in only those other activities necessary or incidental
thereto.
Pursuant to the Declaration, the number of the Trustees will initially be
four. Two of the Trustees (the "Regular Trustees") will be persons who are
employees or officers of, or who are affiliated with, AAG Holding. The third
trustee will be a financial institution that is not affiliated with AAG Holding
that will serve as property trustee under the Declaration and as indenture
trustee for the purposes of the Trust Indenture Act (the "Property Trustee").
The fourth trustee will be a natural person who is a resident of the State of
Delaware or a legal entity which maintains its principal place of business in
the State of Delaware (the "Delaware Trustee"). The Bank of New York will act as
the Property Trustee and The Bank of New York (Delaware), an affiliate of the
Property Trustee, will act as the Delaware Trustee, in each case until removed
or replaced by the holder of the Common Securities. The Bank of New York will
also act as indenture trustee under the Trust Guarantee (the "Preferred
Securities Guarantee Trustee"). See "Description of Trust Guarantee."
The Property Trustee will hold title to the Subordinated Debentures and the
Debt Guarantee for the benefit of the Trust and the holders of the Trust
Securities and, so long as the Subordinated Debentures and Debt Guarantee are
held by the Trust, the Property Trustee will have the power to exercise all
rights, powers, and privileges of a holder of Subordinated Debentures under the
Indenture (as defined in "Description of the Subordinated Debentures and Debt
Guarantee" herein) and Debt Guarantee. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Preferred Securities Guarantee Trustee
will hold the Trust Guarantee for the benefit of the holders of the Preferred
Securities.
AAG Holding, 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 the Trustees. AAG Holding will pay all fees, expenses, debts and obligations
(other than with respect to the Trust Securities) related to the Trust and the
offering of the Trust Securities. See "Description 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 "Trust Act"), the
Indenture and the Trust Indenture Act. See "Description of the Preferred
Securities."
THE COMPANY
OVERVIEW
American Annuity Group, Inc. ("AAG" or the "Company") and AAG Holding
Company, Inc. ("AAG Holding") are holding companies which, through their
subsidiaries, are engaged in the life insurance business, principally the sale
of tax-deferred annuities and life and health insurance. AAG's primary operating
subsidiary is Great American Life Insurance Company ("GALIC"). GALIC sells
annuities primarily to employees of qualified not-for-profit organizations under
Section 403(b) of the Internal Revenue Code. At
15
<PAGE> 19
December 31, 1995, GALIC had statutory assets of approximately $5.4 billion,
representing a 30% compounded annual growth in assets since 1976. AAG acquired
GALIC in December 1992.
GALIC has several direct and indirect life insurance subsidiaries including
(i) American Memorial Life Insurance Company ("American Memorial"), which
markets individual life insurance and annuity policies with the sponsorship of
state associations of funeral directors as well as individual funeral directors
across the country, (ii) Annuity Investors Life Insurance Company ("AILIC"),
which markets group and individual variable annuities, and (iii) Loyal American
Life Insurance Company, which specializes in life and health insurance sold
through payroll deduction plans and credit unions.
AAG Holding is a wholly-owned subsidiary of the Company which owns all of
the stock of GALIC. AAG Holding will own, directly or indirectly, all of the
Common Securities and will issue the Subordinated Debentures to the Trust.
American Financial Group, Inc. and its subsidiaries ("AFG"), collectively
own approximately 81% of the Company's outstanding common stock.
GREAT AMERICAN LIFE INSURANCE COMPANY
GALIC, located in Cincinnati, Ohio, entered the tax-deferred annuity
business in 1976; prior to that time, it wrote primarily whole-life, term-life,
and accident and health insurance policies. GALIC is currently rated "A"
(Excellent) by A.M. Best.
Annuities are long-term retirement savings plans that benefit from interest
accruing on a tax-deferred basis. The issuer of the annuity collects premiums,
credits interest on the policy and pays out a benefit upon death, surrender or
annuitization.
Annuity contracts are generally classified as either fixed rate or
variable. With a fixed rate annuity, the interest crediting rate is initially
set by the issuer and thereafter may be changed from time to time by the issuer
based on market conditions, subject to any guaranteed interest crediting rates
in the policy. With a variable annuity, the value of the policy is tied to an
underlying securities portfolio. All annuities issued by GALIC itself have been
fixed rate annuities. A GALIC subsidiary began marketing variable annuities in
the fourth quarter of 1995. See "--Annuity Investors Life Insurance Company."
Employees of qualified not-for-profit organizations are eligible to save
for retirement through contributions made on a before-tax basis. Contributions
are made at the discretion of the participants through payroll deductions or
through tax-free "rollovers" of funds. Federal income taxes are not payable on
contributions or earnings until amounts are withdrawn.
16
<PAGE> 20
The following table (in millions) presents information concerning GALIC.
STATUTORY ACCOUNTING PRINCIPLES BASIS
<TABLE>
<CAPTION>
JUNE 30
---------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets (a)........................ $5,590 $5,234 $5,414 $5,057 $4,758 $4,377 $4,541
Insurance Reserves:
Annuities............................. $5,134 $4,812 $4,974 $4,655 $4,299 $4,011 $3,756
Life.................................. 21 22 22 21 22 23 21
Accident and Health................... 1 1 -- 1 1 1 1
------ ------ ------ ------ ------ ------ ------
$5,156 $4,835 $4,996 $4,677 $4,322 $4,035 $3,778
====== ====== ====== ====== ====== ====== ======
Capital and Surplus..................... $ 279 $ 264 $ 273 $ 256 $ 251 $ 216 $ 219
Asset Valuation Reserve (b)(c).......... 88 81 90 80 70 71 112
Interest Maintenance Reserve (c)........ 28 24 32 28 36 17 --
Annuity Receipts:
Flexible Premium:
First Year......................... $ 19 $ 24 $ 42 $ 39 $ 47 $ 48 $ 67
Renewal............................ 101 108 196 208 223 232 240
------ ------ ------ ------ ------ ------ ------
120 132 238 247 270 280 307
Single Premium........................ 142 113 219 196 130 80 153
------ ------ ------ ------ ------ ------ ------
Total Annuity Receipts............. $ 262 245 $ 457 $ 443 $ 400 $ 360 $ 460
====== ====== ====== ====== ====== ====== ======
</TABLE>
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BASIS
<TABLE>
<CAPTION>
JUNE 30
---------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets (a)................... $5,688 $5,351 $5,631 $5,044 $4,883 $4,436 $4,686
Annuity Benefits Accumulated....... 5,065 4,767 4,917 4,596 4,257 3,974 3,727
Net Unrealized Gains (Losses)
Included in Stockholder's
Equity........................... 14 38 89 (28) 57 28 (6)
Stockholder's Equity............... 566 533 645 449 520 418 358
</TABLE>
- ------------------
(a) Includes $557 million for securities purchased in December 1991 and paid for
in 1992.
(b) For 1991, amount represents the Mandatory Securities Valuation Reserve.
(c) Allocation of surplus.
Tax-qualified premiums represented the majority of GALIC's total premiums
in 1995. Over the last several years, sales of non-qualified annuities have
represented an increasing percentage of premiums as GALIC has developed products
and distribution channels targeted to non-qualified markets. Single premium
annuity receipts have increased each year since 1992 due primarily to sales of
newly introduced products and, in 1995, the development of new distribution
channels.
At December 31, 1995, approximately 95% of GALIC's annuity policyholder
benefit reserves were attributable to fixed rate annuities which provided a
minimum interest rate guarantee of 4%. The balance of the annuities had a
minimum guaranteed rate of 3%. All of GALIC's annuity policies permit GALIC to
change the crediting rate at any time (subject to the minimum guaranteed
interest rate). In determining the frequency and extent of changes in the
crediting rate, GALIC takes into account the profitability of its annuity
business and the relative competitive position of its products.
GALIC seeks to maintain a desired spread between the yield on its
investment portfolio and the rate it credits to its policies. GALIC accomplishes
this by (i) offering crediting rates which it has the option to change, (ii)
designing annuity products that encourage persistency and (iii) maintaining an
appropriate
17
<PAGE> 21
matching of assets and liabilities. Tax-qualified annuity policyholders maintain
access to their funds without incurring penalties through provisions in the
contracts which allow policy loans.
In addition to its use of two-tier structures explained below, GALIC
imposes certain surrender charges and front-end fees during the first five to
ten years after issuance of a policy to discourage policyholders from
surrendering or withdrawing funds in those early years. Partly due to these
features, GALIC's annuity surrenders have averaged approximately 8% of statutory
reserves over the past five years.
Management believes that the favorable persistency rate has been enhanced
by GALIC's interest crediting policy and the high level of service offered to
agents and policyholders. GALIC's persistency rates, as well as the
policyholders' higher accumulation value, have been helped by the two-tier
design of many of GALIC's products. Two account values are maintained for
two-tier annuities--the annuitization (or upper-tier) value and the surrender
(or lower-tier) value.
GALIC's two-tier annuities are particularly attractive to policyholders who
intend to accumulate funds to provide retirement income since the annuitization
value is accumulated at a competitive long-term interest rate.
GALIC also offers single-tier products. After the initial surrender charges
have been reduced to zero, single-tier annuities have only one value which is
available whether the policy is surrendered or annuitized. In 1995, nearly 70%
of first year FPDA premiums and SPDA premiums received were on single-tier
policies compared to 7% in 1991.
Sales of annuities are affected by many factors, including (i) competitive
rates and products, (ii) the general level of interest rates, (iii) the
favorable tax treatment of annuities, (iv) commissions paid to agents, (v)
services offered, (vi) ratings from independent insurance rating agencies, (vii)
alternative investment products and (viii) general economic conditions.
GALIC markets its tax-deferred annuities principally to employees of
educational institutions in the kindergarten through high school ("K-12")
segment. Written premiums from the K-12 segment represented approximately
three-fourths of GALIC's total tax-qualified premiums in 1995. Management
believes that the K-12 segment is attractive because of its size and growth
potential, and the persistency rate it has demonstrated.
GALIC distributes its annuity products through over 80 managing general
agents ("MGAs") who, in turn, direct approximately 1,000 actively producing
independent agents. GALIC has developed its business on the basis of its
relationships with MGAs and independent agents primarily through a consistent
marketing approach and responsive service.
AMERICAN MEMORIAL LIFE INSURANCE COMPANY
American Memorial, located in Rapid City, South Dakota, offers a variety of
life insurance and annuity products to finance pre-arranged funerals. In a
typical arrangement, a consumer pays in advance for certain goods and services
to be provided by a funeral director. These payments must be used to purchase a
life insurance or annuity contract or to invest in a trust fund. Approximately
half of the premiums received by American Memorial are from single payment
funding and half are from payment plans of three to ten years. Policy values
increase at a rate geared to offset effects of inflation and thus provide for
funeral costs at time of death.
18
<PAGE> 22
The following table (in millions) presents information concerning American
Memorial in accordance with statutory accounting principles.
<TABLE>
<CAPTION>
JUNE 30,
-----------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets....................................... $395 $346 $359 $325 $305 $293 $285
Insurance Reserves:
Life............................................. $264 $240 $248 $228 $211 $201 $193
Annuities........................................ 81 63 72 58 55 57 56
---- ---- ---- ---- ---- ---- ----
$345 $303 $320 $286 $266 $258 $249
==== ==== ==== ==== ==== ==== ====
Capital and Surplus (a)............................ $ 26 $ 24 $ 24 $ 24 $ 23 $ 22 $ 21
Asset Valuation Reserve (b)(c)..................... 3 3 3 2 3 2 3
Interest Maintenance Reserve (c)................... 3 3 3 2 2 1 --
Premiums Written:
Life............................................. $ 32 $ 26 $ 52 $ 40 $ 35 $ 32 $ 32
Annuities........................................ 19 12 28 13 9 11 10
---- ---- ---- ---- ---- ---- ----
Total Premiums................................ $ 51 $ 38 $ 80 $ 53 $ 44 $ 43 $ 42
==== ==== ==== ==== ==== ==== ====
<FN>
- ------------------
(a) Represents capital and surplus of consolidated American Memorial group of
companies.
(b) For 1991, amount represents the Mandatory Securities Valuation Reserve.
(c) Allocation of surplus.
</TABLE>
At December 31, 1995, American Memorial and its subsidiaries had
approximately $800 million of life insurance in force.
American Memorial has approximately 875 actively producing agents and
relationships with approximately 2,000 funeral homes nationwide. More than
two-thirds of American Memorial's new sales of life insurance and annuities in
1995 came from sales resulting from large corporate accounts. As the funeral
home industry continues to consolidate reliance on these corporate accounts will
likely increase.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
AILIC, located in Cincinnati, Ohio, was acquired by the Company in 1994 to
facilitate its entrance into the variable annuity market. Industry sales of
variable annuities have increased substantially over the last ten years as
investors have sought to obtain the returns available in the tax-deferred status
of annuities. With a variable annuity, the earnings credited to the policy
varies based on the investment results of the underlying investment options
chosen by the policyholder. Policyholders may also choose to direct all or a
portion of their premiums to various fixed rate options. Premiums directed to
the variable options in policies issued by AILIC are invested in funds managed
by independent investment managers, including Dreyfus, Janus and Merrill Lynch.
Variable annuities can be either tax-qualified or non-qualified and be funded
with a single premium payment or flexible premiums.
In December 1995, AILIC obtained all approvals necessary to begin offering
a group variable annuity. This product is designed for sale to employees of
school districts, hospitals and other not-for-profit organizations. In August
1996, AILIC received the necessary approvals to begin marketing qualified and
non-qualified individual variable annuities.
Under federal law and the laws of many states, variable annuities are
considered securities. As a result, variable annuities can be sold only by
agents who possess the requisite securities licenses and are affiliated with a
broker-dealer. Accordingly, not all agents who market fixed annuities also
market variable annuities. AILIC markets its products through those members of
the GALIC agency force who possess the requisite licenses as well as through new
agents not currently licensed with GALIC. AILIC also intends to market its
products through other distribution channels including broker-dealers and
financial institutions.
19
<PAGE> 23
LOYAL AMERICAN LIFE INSURANCE COMPANY
Loyal, located in Mobile, Alabama, offers a variety of life and
supplemental health insurance products that are normally sold on a fixed dollar
amount per pay period program. For products sold through payroll deduction
plans, the premiums are deducted from the individual's paycheck and remitted to
Loyal on a monthly basis. For products sold through credit unions, the premiums
are normally paid on a monthly or quarterly basis through deductions from the
member's credit union account. The products currently being offered include
traditional whole life, universal life, term life, hospital indemnity, cancer
and short-term disability.
The following table (in millions) presents information concerning Loyal in
accordance with statutory accounting principles.
<TABLE>
<CAPTION>
JUNE 30
-----------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets....................................... $255 $255 $252 $250 $244 $238 $188
Insurance Reserves:
Life............................................. $168 $166 $166 $163 $158 $154 $113
Accident and Health.............................. 29 28 28 28 29 29 28
Annuities........................................ 6 7 7 8 8 9 7
---- ---- ---- ---- ---- ---- ----
$203 $201 $201 $199 $195 $192 $148
==== ==== ==== ==== ==== ==== ====
Capital and Surplus................................ $ 36 $ 35 $ 35 $ 34 $ 32 $ 29 $ 27
Asset and Valuation Reserve (a)(b)................. 3 2 3 2 3 3 3
Interest Maintenance Reserve (b)................... 1 1 1 1 1 -- --
Premiums Written:
Life............................................. $ 11 $ 11 $ 21 $ 23 $ 24 $ 23 $ 22
Accident and Health.............................. 10 10 20 19 19 17 16
Annuities........................................ -- -- -- 1 -- -- --
---- ---- ---- ---- ---- ---- ----
Total Premiums................................ $ 21 $ 21 $ 41 $ 43 $ 43 $ 40 $ 38
==== ==== ==== ==== ==== ==== ====
<FN>
- ------------------
(a) For 1991, amount represents the Mandatory Securities Valuation Reserve.
(b) Allocation of surplus.
</TABLE>
At December 31, 1995, Loyal had approximately $2.1 billion of life
insurance in force.
Loyal's marketing strategy emphasizes third party sponsorship to assist in
its selling process. In the payroll deduction market, with the approval of the
employer, Loyal's products are presented to the employees at the work place and
premiums are paid by payroll deduction with billings sent directly to the
employees for processing and remittance.
With credit unions, the products are offered with the endorsement of the
credit union management. The products are presented to the membership through
in-home sales, job-site or lobby enrollments and direct mail solicitation.
The distribution channel for payroll deduction plans is comprised of
selective relationships with marketing companies who provide job-site product
presentations. The distribution channels for credit unions are comprised of
independent agents and marketing companies who provide personnel for lobby sales
and job-site enrollments.
INVESTMENTS
Investments comprise approximately 90% of the Company's assets and are the
principal source of income. Fixed income securities (including policy loans,
mortgage loans and short-term investments) comprise over 98% of the Company's
investment portfolio.
20
<PAGE> 24
The Company's investment strategy emphasizes high quality fixed income
securities which management believes should produce a relatively consistent and
predictable level of investment income.
The National Association of Insurance Commissioners ("NAIC") assigns
quality ratings to publicly traded as well as privately placed securities. These
ratings range from Class 1 (highest quality) to Class 6 (lowest quality). The
following table shows the company's fixed maturity portfolio at market value by
NAIC designation (and comparable Standard & Poor's Corporation rating) at June
30, 1996:
<TABLE>
<CAPTION>
NAIC % OF TOTAL
RATING COMPARABLE S & P RATING MARKET VALUE
------ -------------------------------------------------- ------------
<S> <C> <C>
1 AAA, AA, A........................................ 66%
2 BBB............................................... 28
-------
Total investment grade............................ 94
-------
3 BB................................................ 3
4 B................................................. 3
5 CCC, CC, C........................................ *
6 D................................................. *
-------
Total non-investment grade........................ 6
-------
Total fixed maturities............................ 100%
=======
</TABLE>
- ------------------
* less than 1%
AAG's primary investment objective in selecting securities for its fixed
maturity portfolio is to optimize interest yields while maintaining an
appropriate relationship of maturities between assets and expected liabilities.
The Company invests in bonds that have primarily intermediate-term maturities.
This practice provides flexibility to respond to fluctuations in the
marketplace.
At June 30, 1996, the average maturity of AAG's fixed maturity investments
was approximately 7 years (including mortgage-backed securities, which had an
estimated average life of approximately 8 1/2 years). The table below sets forth
the maturities of the Company's fixed maturity investments at June 30, 1996
based on their carrying value.
<TABLE>
<CAPTION>
MATURITY
----------------------------------------------------------------------
<S> <C>
One year or less...................................................... 1%
After one year through five years..................................... 17
After five years through ten years.................................... 38
After ten years....................................................... 12
---
68
Mortgage-backed securities............................................ 32
---
100%
===
</TABLE>
The following table shows the performance of AAG's investment portfolio,
excluding equity investments in affiliates (dollars in millions):
<TABLE>
<CAPTION>
JUNE 30,
---------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average cash and investments at cost.................. $5,936 $5,040 $5,220 $4,750 $4,455
Gross investment income............................... 231 197 411 377 358
Realized gains........................................ 1 -- 16 -- 35
Percentage earned:
Excluding realized gains............................ 7.8% 7.8% 7.9% 7.9% 8.0%
Including realized gains............................ 7.8% 7.8% 8.2% 7.9% 8.8%
</TABLE>
21
<PAGE> 25
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
at June 30, 1996, as adjusted to give the effect to the third quarter
transactions discussed below and as further adjusted to give pro forma effect to
the sale of the Preferred Securities.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
HISTORICAL
HISTORICAL ADJUSTED (A) PRO FORMA
---------- ------------ --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Notes payable................................................ $ 170.4 $ 159.9 $ 109.9(b)
Preferred Securities of Trust................................ -- -- 75.0
Stockholders' equity:
Series B Preferred Stock (at redemption value)............. 17.0 17.0 17.0
Common Stock, $1.00 par value.............................. 43.1 43.1 43.1
Capital surplus............................................ 360.9 360.9 360.9
Accumulated deficit at December 31, 1992................... (212.6) (212.6) (212.6)
Retained earnings since January 1, 1993.................... 158.1 158.1 158.1
Unrealized gain on marketable securities, net of deferred
income taxes and insurance adjustments................... 13.8 13.8 13.8
---------- ------------ --------------
Total stockholders' equity............................... 380.3 380.3 380.3
---------- ------------ --------------
Total capitalization......................................... $ 550.7 $ 540.2 $ 565.2
========= =========== ==============
Notes payable as a percentage of total capitalization........ 30.9% 29.6% 19.4%
<FN>
- ------------------
(a) Adjusted to reflect the repurchase of $17.4 million in debt through
September 1, 1996 and additional bank line borrowings of $7 million through
September 1, 1996.
(b) Assumes that $50 million of the proceeds of the Offering are used to reduce
the outstanding amount on the Bank Lines of Credit.
</TABLE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements with the Preferred Securities accounted for and
captioned in the consolidated balance sheet directly above stockholders' equity.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the Company and its subsidiaries. Fixed charges are computed on a
"total enterprise" basis. For purposes of calculating the ratios, earnings have
been computed by adding to pretax earnings (excluding discontinued operations)
the fixed charges and the minority interest in earnings of subsidiaries having
fixed charges and deducting (adding) the undistributed equity in earnings
(losses) of investees. Fixed charges include interest (excluding interest on
annuity benefits), amortization of debt issue expense, preferred dividend
requirements and a portion of rental expense deemed to be representative of the
interest factor.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (1)................ 5.7 4.6 6.0 4.0 3.8
<FN>
(1) On March 31, 1994, AAG issued approximately 3.2 million shares of Common
Stock in exchange for all of its outstanding Series A Preferred Stock. In
December 1995, AAG sold 170,000 shares of $8.50 Series B Preferred Stock for
$17 million.
</TABLE>
22
<PAGE> 26
USE OF PROCEEDS
The net proceeds from the sale of Preferred Securities by the Trust will be
invested in the Subordinated Debentures of AAG Holding. AAG Holding expects to
use the net proceeds from the sale of the Subordinated Debentures to repay
outstanding debt and for general corporate purposes. Until the net proceeds are
used for these purposes, AAG Holding may deposit them in interest-bearing
accounts or invest them in short-term marketable securities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The Bank of New York, will act as the
indenture trustee for purposes of compliance with the provisions of the Trust
Indenture Act. The terms of the Preferred Securities will include those stated
in the Declaration, including those required to be made part of the Declaration
by the Trust Indenture Act. The following summary of the principal terms and
provisions of the Preferred Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Declaration, a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue, on behalf of the
Trust, the Preferred Securities, which represent undivided beneficial interests
in the assets of the Trust. All of the Common Securities will be owned by,
directly or indirectly, AAG Holding. The Common Securities will have equivalent
terms to and will rank pari passu, and payments will be made thereon on a pro
rata basis, with the Preferred Securities, except that upon the occurrence and
during the continuance of a Declaration Event of Default (as defined herein),
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
In addition, holders of the Common Securities have the exclusive right (subject
to the terms of the Declaration) to appoint, replace or remove the Trustees and
to increase or decrease the number of the Trustees. The Declaration does not
permit the issuance by the Trust of any securities other than the Trust
Securities or the incurrence of any indebtedness by the Trust. Pursuant to the
Declaration, the Property Trustee will hold the Subordinated Debentures and the
Debt Guarantee for the benefit of the holders of the Trust Securities. The
payment of distributions out of money held by the Trust, and payments upon
redemption of the Preferred Securities or liquidation of the Trust, are
guaranteed by the Company to the extent described under "Description of Trust
Guarantee." The Trust Guarantee, when taken together with the back-up
undertakings, consisting of obligations of AAG Holding as set forth in the
Declaration of Trust (including the obligation to pay expenses of the Trust),
the Indenture, the Subordinated Debentures and the Debt Guarantee issued to the
Trust, provide a full and unconditional guarantee by the Company of the
Preferred Securities. The Trust Guarantee will be held by The Bank of New York,
the Preferred Securities Guarantee Trustee, for the benefit of the holders of
the Preferred Securities. The Trust Guarantee only covers payment of
distributions when AAG Holding or the Company has made the corresponding payment
of interest or principal on the Subordinated Debentures or Debt Guarantee held
by the Trust. In the absence of such payment of interest or principal, the
remedy of a holder of Preferred Securities is to direct the Property Trustee to
enforce the Property Trustee's rights as the holder of the Subordinated
Debentures except in the limited circumstances where the holder may take direct
action against AAG Holding. See--"Declaration Events of Default."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will (to the extent permitted
by applicable law) bear interest thereon from and including the last day of such
quarter at the rate per annum of % thereof compounded quarterly. The term
"distributions" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period
23
<PAGE> 27
will be computed on the basis of a 360-day year of twelve 30-day months, and for
any period shorter than a full quarter, on the basis of the actual number of
days elapsed in such 90-day quarter.
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1996 and will be payable quarterly in arrears on January 15,
April 15, July 15 and October 15 of each year, commencing January 15, 1997,
when, as and if available for payment by the Property Trustee, except as
otherwise described below.
AAG Holding has the right under the Indenture to defer payments of interest
on the Subordinated Debentures by extending the interest payment period from
time to time on the Subordinated Debentures, which right, if exercised, would
defer quarterly distributions on the Preferred Securities (although to the
extent permitted by law, such distributions would continue to accrue with
interest since interest would continue to accrue on the Subordinated Debentures)
during any such Extension Period. AAG Holding has the right to defer payments of
interest on the Subordinated Debentures, from time to time, for up to 20
consecutive quarters, provided that no Extension Period may extend beyond the
Maturity Date of the Subordinated Debentures. There could be multiple Extension
Periods of varying lengths throughout the term of the Subordinated Debentures.
In the event that AAG Holding exercises this right, then during any Extension
Period (a) the Company and AAG Holding shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock and (b) the
Company and AAG Holding shall not, directly or indirectly, and will not allow
any of their subsidiaries to, make any payment of interest, principal or
premium, if any, on, or repay, repurchase or redeem, any debt securities issued
by the Company or AAG Holding that rank pari passu with or junior to the
Subordinated Debentures; provided, however, that the restriction in clause (a)
above does not apply (i) to repurchases or acquisitions of shares of the common
stock of the Company or AAG Holding as contemplated by any employment
arrangement, benefit plan or other similar contract with or for the benefit of
employees, officers or directors entered into in the ordinary course of
business, (ii) as a result of an exchange or conversion of any class or series
of the Company's or AAG Holding's capital stock for common stock, (iii) to the
purchase of fractional interests in shares of the Company or AAG Holding's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged or (iv) to the payment of any
stock dividend by the Company or AAG Holding payable in common stock. AAG
Holding may further extend the interest payment period; provided that each
Extension Period, if any, may not exceed 20 consecutive quarters and may not
extend beyond the Maturity Date of the Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due, AAG
Holding may commence a new Extension Period, subject to the above requirements.
See "Description of the Subordinated Debentures and Debt Guarantee--Interest"
and "Description of the Subordinated Debentures and Debt Guarantee--Option to
Extend Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to holders of record of
the Preferred Securities as they appear on the books and records of the Trust on
the record date for distributions due at the end of such deferral period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from AAG Holding under the Subordinated Debentures or from the
Company under the Debt Guarantee. See "Description of the Subordinated
Debentures and Debt Guarantee." The payment of distributions out of moneys held
by the Trust is guaranteed by the Company to the extent set forth under
"Description of Trust Guarantee." The Trust Guarantee, when taken together with
the back-up undertakings, consisting of obligations of AAG Holding as set forth
in the Declaration of Trust of the Trust (including the obligation to pay
expenses of the Trust), the Indenture, the Subordinated Debentures issued to the
Trust and the Subordinated Debt Guarantee, provides a full and unconditional
guarantee by the Company of the Preferred Securities.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in global form,
will be one Business Day (as defined below) prior to the relevant payment dates.
Such
24
<PAGE> 28
distributions will be paid through the Property Trustee, which will hold amounts
received in respect of the Subordinated Debentures and Debt Guarantee in the
Property Account for the benefit of the holders of the Trust Securities. Subject
to any applicable laws and regulations and the provisions of the Declaration,
each such payment will be made as described under "--Book-Entry Issuance--The
Depository Trust Company" below. In the event that the Preferred Securities do
not continue to remain in global form, the relevant record dates for the
Preferred Securities shall conform to the rules of any securities exchange on
which the Preferred Securities are listed and, if none, shall be selected by the
Regular Trustees, which dates shall be at least one Business Day but less than
60 Business Days prior to the relevant payment dates. Distributions payable on
any Preferred Securities that are not punctually paid on any distribution
payment date will cease to be payable to the person in whose name such Preferred
Securities are registered on the relevant record date, and such defaulted
distribution will instead be payable to the person in whose name such Preferred
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture. In the event that any date on which
distributions are to be made on the Preferred Securities is not a Business Day,
then payment of the distributions payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such record date. A "Business Day" shall mean any day other than a day on
which banking institutions in New York, New York are authorized or required by
law to close.
MANDATORY REDEMPTION
Upon the repayment of the Subordinated Debentures, whether at maturity or
upon redemption, the proceeds from such repayment or redemption shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debentures so repaid or redeemed at the Redemption Price; provided that, holders
of Trust Securities shall be given not less than 30 nor more than 60 days notice
of such redemption. The Subordinated Debentures will mature on ,
2026 unless the maturity date is changed at the option of AAG Holding (provided
in the case of an extension of the maturity date that certain financial
conditions are met), and may be redeemed, in whole or in part, at any time on or
after , 2001 or at any time, in whole (but not in part), upon the
occurrence of a Special Event. See "Description of the Subordinated Debentures
and Debt Guarantee-- Optional Redemption." In the event that fewer than all of
the outstanding Trust Securities are to be redeemed, the Trust Securities will
be redeemed pro rata to each holder according to the aggregate liquidation
amount of Trust Securities held by the relevant holder in relation to the
aggregate liquidation amount of all Trust Securities outstanding. See
"--Book-Entry Issuance--The Depository Trust Company" below for a description of
DTC's (as hereinafter defined) procedures in the event of redemption.
SPECIAL EVENT REDEMPTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of an independent tax counsel experienced in such matters to the effect that, as
a result of (a) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of original issuance
of the Preferred Securities, there is more than an insubstantial risk that (i)
the Trust is, or will be within 90 days after the date thereof, subject to
United States federal income tax with respect to interest accrued or received on
the Subordinated Debentures, (ii) the Trust is, or will be within 90 days after
the date thereof, subject to more than a de minimis amount of taxes, duties or
other governmental charges, or (iii) interest payable to the Trust on the
Subordinated Debentures is not, or within 90 days of the date thereof, will not
be deductible, in whole or in part, by AAG Holding for United States federal
income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of an independent counsel experienced in practice under the
Investment Company Act of 1940, as amended (the "1940 Act"), to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
25
<PAGE> 29
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, AAG Holding
shall have the right, upon not less than 30 nor more than 60 days notice, to
redeem the Subordinated Debentures in whole (but not in part), for cash within
90 days following the occurrence of such Special Event, and, following such
redemption, all Trust Securities shall be redeemed by the Trust at the
Redemption Price.
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
At any time, AAG Holding will have the right to terminate the Trust and,
after satisfaction of the liabilities of creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures and Debt Guarantee to be
distributed to the holders of the Trust Securities in liquidation of the Trust.
Under current United States federal income tax law and interpretation and
assuming, as expected, the Trust is treated as a grantor trust, a distribution
of the Subordinated Debentures and Debt Guarantee should not be a taxable event
to holders of the Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Special Event or other circumstances, however,
the distribution could be a taxable event to the holders of the Preferred
Securities. In addition, a dissolution of the Trust in which holders of the
Preferred Securities receive cash would be a taxable event to such holders. See
"United States Federal Income Taxation--Receipt of Subordinated Debentures or
Cash Upon Liquidation of the Trust."
If the Subordinated Debentures and Debt Guarantee are distributed to the
holders of the Preferred Securities, AAG Holding will use its best efforts to
cause the Subordinated Debentures to be listed on the NYSE or on such other
exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debentures, together
with the Debt Guarantee, upon dissolution of the Trust, (i) the Preferred
Securities will no longer be deemed to be outstanding and (ii) the record
holders of the Preferred Securities will receive a registered global certificate
or certificates representing the Subordinated Debentures to be delivered upon
such distribution in exchange for the Preferred Securities held by such holders.
If AAG Holding elects to liquidate the Trust and thereby causes the
Subordinated Debentures and Debt Guarantee to be distributed to holders of the
Preferred Securities in liquidation of the Trust, AAG Holding shall have the
right to shorten the maturity of such Subordinated Debentures to a date not
earlier than , 2001 or extend the maturity of such Subordinated
Debentures to a date not later than the earlier of (a) , 2045 or
(b) the Interest Deduction Date (as defined herein), provided that it can extend
the maturity only if certain conditions are met. See "Description of the
Subordinated Debentures and Debt Guarantee--Option to Change Scheduled Maturity
Date."
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution and liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Debentures that an investor may receive if a dissolution and
liquidation of the Trust were to occur, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"),
the revenue portion of President Clinton's fiscal 1997 budget proposal, was
released. The Bill would, among other things, generally deny interest deductions
for interest or OID on an instrument issued by a corporation that has a maximum
weighted average maturity of more than 40 years. The Bill would also treat as
equity instruments issued by a corporation that have a maximum term of more than
20 years and that are not shown as indebtedness on the consolidated balance
sheet of the issuer. For purposes of determining the weighted average maturity
or the term of an instrument, any right to extend would be treated as exercised.
The above-described provisions of the Bill were proposed to be effective
generally for instruments issued on or after December 7, 1995. However,
26
<PAGE> 30
on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means
Committees issued a joint statement (the "Joint Statement") to the effect that
it was their intention that the effective date of the President's legislative
proposals, if adopted, would be no earlier than the date of appropriate
Congressional action. In addition, subsequent to the publication of the Joint
Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons
and Charles B. Rangel wrote letters to Treasury Department officials concurring
with the views expressed in the Joint Statement. Under current law, it is likely
that the Subordinated Debentures will be treated as indebtedness of AAG Holding,
and AAG Holding will be able to deduct interest on the Subordinated Debentures
beneficially held by the holders of the Preferred Securities. The terms of the
Subordinated Debentures limit AAG Holding's right to extend the maturity of the
Subordinated Debentures to a date which is six months shorter than any
legislative limit on the length of debt securities for which interest is
deductible. Based on the advice of tax counsel, the Company believes this will
allow AAG Holding an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, AAG Holding will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no assurance
that current or future legislative proposals, adverse judicial decisions, final
legislation or official administrative pronouncements will not affect the
ability of AAG Holding to deduct interest on the Subordinated Debentures, giving
rise to a Tax Event (as defined below) which would permit AAG Holding to cause
the redemption of the Preferred Securities prior to , 2001 (the
first date on which AAG Holding would otherwise be able to cause a redemption of
the Preferred Securities). See "Description of the Preferred Securities--Special
Event Redemption" and "United States Federal Income Taxation."
REDEMPTION PROCEDURES
The Trust may not redeem any of the outstanding Preferred Securities unless
all accrued and unpaid distributions have been paid on all Preferred Securities
for all quarterly distribution periods terminating on or prior to the date of
redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided that AAG Holding has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Subordinated Debentures, the Trust will
irrevocably deposit with the depository funds sufficient to pay the applicable
Redemption Price and will give the depository irrevocable instructions to pay
the Redemption Price to the holders of the Preferred Securities. If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (without any interest or other payment in respect of any
such delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In the
event that AAG Holding fails to repay the Subordinated Debentures on maturity or
payment of the Redemption Price in respect of Preferred Securities is improperly
withheld or refused and not paid either by the Trust or by the Company pursuant
to the Trust Guarantee, distributions on such Preferred Securities will continue
to accrue at the then applicable rate from the original redemption date to the
actual date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed as described below
under "--Book-Entry Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by a national securities exchange or other
organization on which the Preferred Securities are then listed, AAG
27
<PAGE> 31
Holding, pursuant to the Indenture, will only redeem the Subordinated Debentures
in whole and, as a result, the Trust may only redeem the Preferred Securities in
whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company, AAG Holding or their
affiliates may at any time, and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the holders of
the Preferred Securities will be entitled to receive on a pro rata basis, solely
out of the assets of the Trust, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Subordinated Debentures in an aggregate stated
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Preferred Securities
have been distributed on a pro rata basis to the holders of the Preferred
Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
The Trust Guarantee, when taken together with the back-up undertakings,
consisting of obligations of AAG Holding as set forth in the Declaration
(including the obligation to pay expenses of the Trust), the Indenture, the
Subordinated Debentures issued to the Trust and the Subordinated Debenture
Guarantee, provide a full and unconditional guarantee by the Company of the
Preferred Securities.
TERMINATION
Pursuant to the Declaration, the Trust shall terminate upon the earliest of
(i) , 2051, (ii) the bankruptcy of the Company or AAG Holding, (iii)
the filing of a certificate of dissolution or its equivalent with respect to the
Company or AAG Holding, the filing of a certificate of cancellation with respect
to the Trust, after obtaining the consent of the holders of at least a majority
in liquidation amount of the Trust Securities affected thereby voting together
as a single class to file such certification of cancellation or the revocation
of the charter of the Company or AAG Holding and the expiration of 90 days after
the date of revocation without a reinstatement thereof, (iv) the distribution of
all the Subordinated Debentures from the Trust, (v) the entry of a decree of a
judicial dissolution of the Company, AAG Holding or the Trust, or (vi) the
redemption of all the Trust Securities.
DECLARATION 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 Trust
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 Default 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 so 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 (as defined herein) or the Property Trustee as the holder of the
Subordinated Debentures will have the right under the Indenture to declare the
principal of and interest on the Subordinated Debentures to be immediately due
and payable. Each
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of AAG Holding and the Company is required to file annually with the Property
Trustee an officer's certificate as to its compliance with all conditions and
covenants under the Declaration.
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures or Debt Guarantee held by the Trust, any record holder
of Preferred Securities may institute legal proceedings directly against AAG
Holding or the Company to enforce the Property Trustee's rights under such
Subordinated Debentures or Debt Guarantee without first instituting any legal
proceedings against such Property Trustee or any other person or entity. In
addition, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of AAG Holding to pay interest,
principal or other required payment on the Subordinated Debentures issued to the
Trust on the date such interest, principal or other payment is otherwise
payable, then a record holder of Preferred Securities may institute a proceeding
directly against AAG Holding for enforcement of payment on the Subordinated
Debentures on or after the respective due dates specified in the Subordinated
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities held by such holder. In connection with such Direct
Action, AAG Holding will be subrogated to the rights of such record holder of
Preferred Securities to the extent of any payment made by AAG Holding to such
record holder of Preferred Securities. The record holder in the case of the
issuance of one or more global Preferred Securities certificates will be The
Depository Trust Company acting at the direction of the beneficial owners of the
Preferred Securities.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of Trust Guarantee--Modification of the Trust Guarantee;
Assignment," and as otherwise required by law and the Declaration, the holders
of the Preferred Securities will have no 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 Subordinated Debentures and Debt Guarantee, to (i) exercise the remedies
available under the Indenture with respect to the Subordinated Debentures and
Debt Guarantee, (ii) waive any past Indenture Event of Default that is waivable
under the Indenture, or (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Debentures shall be due
and payable, or consent to any amendment, modification or termination of the
Indenture or the Subordinated Debentures, where such consent should be required;
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 Subordinated 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 Subordinated 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 Subordinated 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 clauses (i), (ii) or
(iii) 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 other than a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures and Debt Guarantee, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, the Property Trustee shall request the direction of the
holders of the Trust 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 Trust
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 Trust Securities which the
relevant Super-
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Majority represents of the aggregate principal amount of the Subordinated
Debentures outstanding. The Property Trustee shall not take any such action in
accordance with the directions of the holders of the Trust Securities unless the
Property Trustee has obtained an opinion of tax counsel to the effect that the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes on account of such action.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to redeem
and cancel Preferred Securities or distribute Subordinated Debentures in
accordance with the 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 at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Issuance--The Depository
Trust Company" below.
Holders of the Preferred Securities will have no rights to appoint or
remove the Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of
the Regular Trustees (and in certain circumstances the Property Trustee),
provided that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of the Trust other than pursuant to the terms of the Declaration,
then the holders of the Trust Securities voting together as a single class will
be entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of at least a majority in
liquidation amount of the Trust Securities affected thereby; provided that, if
any amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified as other than a grantor trust for United States federal income tax
purposes, (ii) reduce or otherwise adversely affect the powers of the Property
Trustee or (iii) cause the Trust to be deemed an "investment company" which is
required to be registered under the 1940 Act.
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MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Property Trustee or the Delaware Trustee, consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State;
provided that, (i) such successor entity either (x) expressly assumes all of the
obligations of the Trust under the Trust Securities or (y) substitutes for the
Trust Securities other securities having substantially the same terms as the
Trust Securities (the "Successor Securities"), so long as the Successor
Securities rank the same as the Trust Securities rank with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) AAG
Holding expressly acknowledges a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Subordinated
Debentures and the Company expressly acknowledges such trustee of such successor
entity as the holder of the Debt Guarantee, (iii) the Preferred Securities or
any Successor Securities with respect to the Preferred Securities are listed, or
any such Successor Securities will be listed upon notification of issuance, on
any national securities exchange or with another organization on which the
Preferred Securities are then listed or quoted, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Preferred Securities (including
any Successor Securities with respect to the Preferred Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation or replacement, the Company
has received an opinion of an independent counsel to the Trust experienced in
such matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (C) the
Trust will continue to be classified as a grantor trust for federal income tax
purposes, and (viii) the Company guarantees the obligations of such successor
entity under the Successor Securities at least to the extent provided by the
Trust Guarantee. Notwithstanding the foregoing, the Trust shall not, except with
the consent of holders of 100% in liquidation amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or replacement would
cause the Trust or the Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes and each holder of the Trust
Securities not to be treated as owning an undivided interest in the Subordinated
Debentures.
EXPENSES AND TAXES
In the Indenture, AAG Holding has agreed to pay all debts and other
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, the fees and expenses of the Trustees and the costs and expenses
relating to the operation of the Trust) and to pay any and all taxes and all
costs and expenses with respect thereto (other than United States withholding
taxes) to which the Trust might become subject. The foregoing obligations of AAG
Holding under the Indenture are for the benefit of, and shall be enforceable by,
any person to whom any such debts, obligations, costs, expenses and taxes are
owed (a "Creditor") whether or not such Creditor has received notice thereof.
Any such Creditor may enforce such obligations of AAG Holding directly against
AAG Holding, and AAG Holding has irrevocably waived any right or remedy to
require that any such Creditor take any action against the Trust or any other
person before proceeding against AAG Holding. AAG Holding has also agreed in the
Indenture to execute such additional agreements as may be necessary or desirable
to give full effect to the foregoing.
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BOOK-ENTRY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Preferred Securities. The Preferred Securities initially will be issued only
as fully-registered securities registered in the name of Cede&Co. (DTC's
nominee). One or more fully-registered global Preferred Securities certificates,
representing the total aggregate number of Preferred Securities, will be issued
and will be delivered to DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Preferred
Securities as represented by a global certificate.
DTC has advised the Company and the Trust that 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
("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, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the NYSE, 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 transactions through or maintain a direct or indirect
custodial relationship with a Direct Participant ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the Preferred Securities, except in the event that
use of the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of Beneficial Owners that are their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount of
the interest of each Direct Participant in such Preferred Securities to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The
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Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy). The Company
and the Trust believe that the arrangements among DTC, Direct and Indirect
Participants, and Beneficial Owners will enable the Beneficial Owners to
exercise rights equivalent in substance to the rights that can be directly
exercised by a holder of a beneficial interest in the Trust.
Distribution payments on the Preferred Securities will be made 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, as is the case with securities
held for the account of customers in bearer form or registered in "street name,"
and such payments will be the responsibility of such Participant and not of DTC,
the Trust or the Company, subject to any statutory or regulatory requirements
that may be in effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depository is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
the Company) may decide to discontinue use of the system of book-entry transfers
through DTC (or any successor depository) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but none of the Company, AAG Holding nor the Trust takes
responsibility for the accuracy thereof. Unless the context otherwise requires,
the term "holder of Preferred Securities" shall refer to Beneficial Owners
rather than to DTC.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration, in the terms of the Trust Securities or in the
Trust Indenture Act and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Preferred Securities will not be required to offer such
indemnity in the event such holders, by exercising their voting rights, direct
the Property Trustee to take any action following a Declaration Event of
Default. The Property Trustee also serves as Preferred Securities Guarantee
Trustee.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry
form, the following provisions would apply:
Securities Transfer Company , Cincinnati, Ohio, will act as the initial
paying agent. The Company may designate an additional or substitute paying agent
at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or AAG Holding may require) in respect of any tax or
other government charges that may be imposed in relation to it.
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The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or be characterized as other than a grantor trust
for United States federal income tax purposes. AAG Holding is authorized and
directed to conduct its affairs so that the Subordinated Debentures will be
treated as indebtedness of AAG Holding for United States federal income tax
purposes. In this connection, AAG Holding and the Regular Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Articles of Incorporation of AAG
Holding, that each of AAG Holding and the Regular Trustees determines in their
discretion to be necessary or desirable to achieve such end, as long as such
action does not adversely affect the interests of the holders of the Preferred
Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
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DESCRIPTION OF TRUST GUARANTEE
Set forth below is a summary of information concerning the Trust Guarantee
that will be executed and delivered by the Company for the benefit of the
holders, from time to time, of Preferred Securities. The Trust Guarantee will be
qualified as an indenture under the Trust Indenture Act. The Bank of New York
will act as independent indenture trustee for Trust Indenture Act purposes under
the Trust Guarantee (the "Preferred Securities Guarantee Trustee"). The terms of
the Trust Guarantee will be those set forth in such Trust Guarantee and those
made part of such Trust Guarantee by the Trust Indenture Act. The summary of
certain provisions of the Trust Guarantee does not purport to be complete and is
subject to and qualified in its entirety by reference to the provisions of the
form of Trust Guarantee, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and the Trust
Indenture Act. The Trust Guarantee will be held by the Preferred Securities
Guarantee Trustee for the benefit of the holders of the Preferred Securities of
the Trust.
GENERAL
Pursuant to the Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay in full to the holders of the Preferred Securities, the
Trust Guarantee Payments (as defined below) (except to the extent paid by the
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which the Trust may have or assert. The following payments or
distributions with respect to the Preferred Securities (the "Trust Guarantee
Payments"), to the extent not paid by the Trust, will be subject to the Trust
Guarantee (without duplication): (i) any accrued and unpaid distributions that
are required to be paid on such Preferred Securities, to the extent the Trust
shall have funds available therefor, (ii) the redemption price, including all
accrued and unpaid distributions to the date of redemption (the "Redemption
Price"), to the extent the Trust has funds available therefor, with respect to
any Preferred Securities called for redemption by the Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debentures to
the holders of Preferred Securities or the redemption of all of the Preferred
Securities upon maturity or redemption of the Subordinated Debentures) the
lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on such Preferred Securities to the date of payment, to the extent
the Trust has funds available therefor or (b) the amount of assets of the Trust
remaining for distribution to holders of such Preferred Securities in
liquidation of the Trust. The Company's obligation to make a Trust Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of Preferred Securities or by causing the Trust to pay
such amounts to such holders.
The Trust Guarantee will not apply to any payment of distributions except
to the extent the Trust shall have funds available therefor. If AAG Holding does
not make interest or principal payments on the Subordinated Debentures purchased
by the Trust and the Company does not fulfill its obligations under the Debt
Guarantee, the Trust will not pay distributions on the Preferred Securities
issued by the Trust and will not have funds available therefor.
The Company has also agreed to guarantee the obligations of the Trust with
respect to the Common Securities (the "Trust Common Guarantee") to the same
extent as the Trust Guarantee, except that, if an Event of Default under the
Indenture has occurred and is continuing, holders of Preferred Securities under
the Trust Guarantee shall have priority over holders of the Common Securities
under the Trust Common Guarantee with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Trust Guarantee, the Company will covenant that, so long as any
Preferred Securities remain outstanding, if there shall have occurred any event
of default under the Trust Guarantee or a Declaration Event of Default under the
Declaration, then (a) the Company will not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock; (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Company which rank pari passu with or junior to the Trust Guarantee and (c)
the Company shall not make any guarantee
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payments with respect to the foregoing (other than pursuant to the Trust
Guarantee or the Debt Guarantee); provided, however, that the Company may
declare and pay a stock dividend where the dividend is paid in the form of the
same stock as that on which the dividend is being paid.
MODIFICATION OF THE TRUST GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent of such holders
will be required), the Trust Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of such Preferred Securities is set forth above under "Description of
the Preferred Securities--Voting Rights." All guarantees and agreements
contained in the Trust Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Trust Guarantee will occur upon the failure
of the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Preferred Securities Guarantee Trustee in respect of
the Trust Guarantee or to direct the exercise of any trust or power conferred
upon the Preferred Securities Guarantee Trustee under the Trust Guarantee.
If the Preferred Securities Guarantee Trustee fails to enforce the Trust
Guarantee, any record holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Preferred Securities
Guarantee Trustee's rights under the Trust Guarantee without first instituting a
legal proceeding against the Trust, the Preferred Securities Guarantee Trustee
or any other person or entity. Notwithstanding the foregoing, if the Company has
failed to make a Trust Guarantee Payment, a record holder of Preferred
Securities may directly institute a proceeding against the Company for
enforcement of the Trust Guarantee for such payment to the record holder of the
Preferred Securities of the principal of or interest on the Subordinated
Debentures on or after the respective due dates specified in the Subordinated
Debentures, and the amount of the payment will be based on the holder's pro rata
share of the amount due and owing on all of the Preferred Securities. The
Company has waived any right or remedy to require that any action be brought
first against the Trust or any other person or entity before proceeding directly
against the Company. The record holder in the case of the issuance of one or
more global Preferred Securities certificates will be DTC acting at the
direction of its Direct Participants who in turn will be acting at the direction
of the Beneficial Owners of the Preferred Securities.
The Company will be required to provide annually to the Preferred
Securities Guarantee Trustee a statement as to the performance by the Company of
certain of its obligations under the Trust Guarantee and as to any default in
such performance.
INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE
The Preferred Securities Guarantee Trustee, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth in
the Trust Guarantee and, after default with respect to the Trust Guarantee,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the Preferred
Securities Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Guarantee at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to the Preferred Securities upon full
payment of the Redemption Price of all Preferred Securities, upon distribution
of the Subordinated Debentures held by the Trust to the holders of all of the
Preferred Securities or upon full payment of the amounts payable in accordance
with the Declaration upon liquidation of the Trust. The Trust Guarantee will
continue to be effective or will be
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reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Trust Guarantee.
STATUS OF THE TRUST GUARANTEE
The Trust Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except those liabilities of the Company made pari
passu or subordinate by their terms, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company and (iii) senior
to the Company's Common Stock. The terms of the Preferred Securities provide
that each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Trust Guarantee will be governed by and construed in accordance with
the law of the State of Delaware.
DESCRIPTION OF THE SUBORDINATED DEBENTURES AND DEBT GUARANTEE
Set forth below is a description of the specific terms of the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the description in the Indenture, dated as of September , 1996 (the
"Indenture"), among AAG Holding as issuer, AAG, as Guarantor, and The Bank of
New York, as Trustee (the "Indenture Trustee"), the form of which is filed as an
Exhibit to the Registration Statement of which this Prospectus is a part, and
the Trust Indenture Act. Certain capitalized terms used herein are defined in
the Indenture.
At any time, AAG Holding will have the right to liquidate the Trust and
cause the Subordinated Debentures and Debt Guarantee to be distributed to the
holders of the Preferred Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Distribution of the Subordinated
Debentures."
If the Subordinated Debentures and the Debt Guarantee are distributed to
the holders of the Preferred Securities, the Company will use its best efforts
to have such securities listed on the NYSE or on such other exchange on which
the Preferred Securities are then listed.
GENERAL
The Subordinated Debentures will be issued as unsecured subordinated debt
securities under the Indenture. The Subordinated Debentures will be limited in
aggregate principal amount to approximately $ million, such amount being the
sum of the aggregate stated liquidation amount of the Preferred Securities and
the capital contributed by AAG Holding in exchange for the Common Securities
(the "AAG Holding Payment").
The Subordinated Debentures are not subject to a sinking fund provision.
The entire principal amount of the Subordinated Debentures will mature and
become due and payable, together with any accrued and unpaid interest thereon
including Compounded Interest (as hereinafter defined), if any, on ,
2026, subject to the election of AAG Holding to shorten or extend the scheduled
maturity date of the Subordinated Debentures, which election, in the case of an
extension of the scheduled maturity date, is subject to AAG Holding satisfying
certain financial conditions. See "--Option to Change Scheduled Maturity Date."
The Subordinated Debentures will be fully and unconditionally guaranteed on a
subordinated basis as to principal, premium, if any, and interest by the
Company.
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If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, it is
presently anticipated that such Subordinated Debentures will initially be issued
in the form of one or more Global Securities (as defined below). As described
herein, under certain limited circumstances, Subordinated Debentures may be
issued in definitive certificated form in exchange for a Global Security. See
"--Book-Entry and Settlement" below. In the event that Subordinated Debentures
are issued in definitive certificated form, such Subordinated Debentures will be
in denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Subordinated Debentures
issued as a Global Security will be made to DTC or its nominee, a successor
depository or its nominee. In the event Subordinated Debentures are issued in
definitive certificated form, principal and interest will be payable, the
transfer of the Subordinated Debentures will be registrable and Subordinated
Debentures will be exchangeable for Subordinated Debentures of other
denominations of a like aggregate principal amount at the principal corporate
trust office of the Indenture Trustee in New York, New York; provided that
payment of interest may be made at the option of AAG Holding by check mailed to
the address of the persons entitled thereto.
The Indenture does not contain provisions that afford the holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company or AAG Holding or other similar transaction
that may adversely affect such holders.
DEBT GUARANTEE
The Indenture provides that the Company will fully and unconditionally
guarantee the due and punctual payment of the principal and interest on the
Subordinated Debentures when and as the same shall become due and payable,
whether at maturity, upon redemption or otherwise. Since AAG is a holding
company, the right of the Company and, hence, the right of creditors of the
Company (including the holders of the Subordinated Debentures) to participate in
any distribution of the assets of any subsidiaries of the Company, whether upon
liquidation, reorganization or otherwise, is subject to prior claims of
creditors of its subsidiaries, except to the extent that claims of the Company
itself as a creditor of a subsidiary may be recognized.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated
and junior in right of payment to all Senior Indebtedness of AAG Holding and
that the Debt Guarantee is subordinated and junior in right of payment to all
Senior Indebtedness of the Company. No payment of principal of (including
redemption payments), premium, if any, or interest on, the Subordinated
Debentures and no payment under the Debt Guarantee may be made if any Senior
Indebtedness of AAG Holding or the Company, as the case may be, is not paid when
due, any applicable grace period with respect to such default has ended and such
default has not been cured or waived or ceased to exist, or if the maturity of
any Senior Indebtedness of AAG Holding or the Company, as the case may be, has
been accelerated because of a default. Upon any distribution of assets of AAG
Holding or the Company to creditors upon any dissolution, winding up,
liquidation or reorganization, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal of,
premium, if any, and interest due or to become due on, all Senior Indebtedness
of AAG Holding or the Company, as the case may be, (including interest after the
commencement of any bankruptcy, insolvency, receivership or other proceedings at
the rate specified in the applicable Senior Indebtedness, whether or not such
interest is an allowable claim in any such proceeding) must be first paid in
full before the holders of Subordinated Debentures or the Debt Guarantee are
entitled to receive or retain any payment. The rights of the holders of the
Subordinated Debentures and the Debt Guarantee will be subrogated to the rights
of the holders of Senior Indebtedness of AAG Holding or the Company, as the case
may be, to receive payments or distributions applicable to Senior Indebtedness
until the principal of (and premium, if any) and interest on the Subordinated
Debentures or the Debt Guarantee, as the case may be, (including interest after
the commencement of any bankruptcy, insolvency, receivership or other
proceedings at the rate specified in the applicable Senior Indebtedness, whether
or not such interest is an allowable claim in any such proceeding) are paid in
full. In addition, the Subordinated Debentures and the Debt Guarantee will rank
at least pari passu with all other subordinated debt securities and debt
guarantees initially issued to other trusts, partnerships or
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other entities affiliated with the Company in connection with an issuance of
securities similar to the Preferred Securities.
The term "Senior Indebtedness" shall include (i) the principal, premium, if
any, and interest in respect of (A) indebtedness of such obligor for money
borrowed and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by such obligor ; (ii) all capital lease
obligations of such obligor; (iii) all obligations of such obligor issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such obligor and all obligations of such obligor under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such obligor for the
reimbursement on any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise,
including under all support agreements or guarantees by such obligor of
debentures, notes and other securities issued by its subsidiaries; and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such obligor (whether or
not such obligation is assumed by such obligor); except in each case for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Debentures, and (2) any indebtedness in respect of debt securities
issued to any trust, or a trustee of such trust, partnership or other entity
affiliated with AAG Holding or the Company that is a financing entity for such
obligor (a "financing entity") in connection with the issuance by such financing
entity of securities that are similar to the Preferred Securities. Such Senior
Indebtedness shall continue to be Senior Indebtedness and be entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by AAG Holding or the Company.
OPTIONAL REDEMPTION
AAG Holding shall have the right to redeem the Subordinated Debentures, (i)
at any time, in whole or in part, from time to time, on or after ,
2001 or (ii) at any time in whole (but not in part) upon the occurrence of a
Special Event as described under "Description of the Preferred
Securities--Special Event Redemption," upon not less than 30 nor more than 60
days notice, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest to the redemption date. If a
partial redemption of the Preferred Securities resulting from a partial
redemption of the Subordinated Debentures would result in the delisting of the
Preferred Securities, AAG Holding may only redeem the Subordinated Debentures in
whole. AAG Holding may not redeem any Subordinated Debentures if there is
accrued and unpaid interest on the Subordinated Debentures as of the Interest
Payment Date (as defined below) next preceeding the redemption date.
INTEREST
Each Subordinated Debenture shall bear interest at the rate of % per
annum from the original date of issuance, or from the most recent interest
payment date to which interest has been paid or provided for, payable quarterly
in arrears on January 15, April 15, July 15 and October 15 of each year (each,
an "Interest Payment Date"), commencing January 15, 1997, to the person in whose
name such Subordinated Debenture is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. In the event the Subordinated Debentures shall not continue to
remain in book-entry form, AAG Holding shall have the right to select record
dates, which shall be more than one Business Day but less than 60 Business Days
prior to the Interest Payment Date. Any installment of interest not punctually
paid will cease to be payable to the holders of the Subordinated Debentures on
the regular record date and may be paid to the person in whose name the
Subordinated Debentures are registered at the close of business on a special
record date to be fixed by the Indenture Trustee for the payment of such
defaulted interest, notice of which shall be given to the holders of the
Subordinated Debentures not less than 10 days prior to such special record date,
or may be paid at any time in any other lawful manner not inconsistent with the
requirements of
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any securities exchange, interdealer quotation system or other organization on
which the Subordinated Debentures may be listed, and upon such notice as may be
required by such exchange, system or organization.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
will be computed on the basis of the actual number of days elapsed in such 90
day quarter. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
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, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO CHANGE SCHEDULED MATURITY DATE
The "Scheduled Maturity Date" of the Subordinated Debentures is
, 2026. AAG Holding, however, may, extend such maturity date ( ,
2026 or the maturity date then in effect, as the case may be, is hereinafter
referred to as the "Maturity Date") for one or more periods, but in no event
later than the earlier of (i) , 2045 or (ii) (the "Interest
Deduction Date"). The "Interest Deduction Date" shall mean the date which is six
months earlier than the ending date of the maximum term (beginning on the date
of issue of the Subordinated Debentures and including any extensions thereof),
as determined under any federal statute applicable by its terms to the
Subordinated Debentures which is enacted at any time after the issuance of the
Subordinated Debentures (including, but not limited to, at any time after an
extension of the Maturity Date), of a debt instrument for which interest is
deductible for federal income tax purposes. In no event shall the extended
Maturity Date be later than the Interest Deduction Date even if the Maturity
Date has previously been extended to a date beyond the Interest Deduction Date.
AAG Holding must exercise its right to extend the term at least 90 days prior to
the Maturity Date then in effect and must satisfy the following conditions on
the date AAG Holding exercises such right and on the Maturity Date then in
effect prior to such proposed extension: (a) AAG Holding is not in bankruptcy or
otherwise insolvent, (b) AAG Holding is not in default on any Subordinated
Debenture issued to the Trust or to any trustee of the Trust in connection with
an issuance of Trust Securities by the Trust, (c) AAG Holding has made timely
payments on the Subordinated Debentures for the immediately preceding six
quarters without deferrals, (d) the Trust is not in arrears on payments of
distributions on the Trust Securities, (e) the Subordinated Debentures or
Preferred Securities are rated investment grade by any one of Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff &
Phelps Credit Rating Company or any other nationally recognized statistical
rating organization, and (f) the final maturity of such Subordinated Debentures
is not later than the 49th anniversary of the issuance of the Preferred
Securities. Pursuant to the Declaration, the Regular Trustees are required to
give notice of AAG Holding's election to change the Maturity Date to the holders
of the Preferred Securities.
In addition, if AAG Holding exercises its right to liquidate the Trust and
distribute the Subordinated Debentures as discussed above under "Description of
the Preferred Securities--Distribution of the Subordinated Debentures,"
effective upon such exercise, the Maturity Date of the Subordinated Debentures
may be changed to (i) any date elected by AAG Holding that is no earlier than
, 2001 and (ii) any date elected by AAG Holding which is not later
than the earlier of (a) , 2045 or (b) the "Interest Deduction Date;"
provided that on the date AAG Holding exercises such right, and on the Maturity
Date in effect prior to such proposed extension, the conditions specified in the
previous paragraph are satisfied.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
AAG Holding has the right, from time to time, to defer payment of interest
on the Subordinated Debentures for up to 20 consecutive quarters, provided that
no Extension Period may extend beyond the Maturity Date of the Subordinated
Debentures. There could be multiple Extension Periods of varying lengths during
the term of the Subordinated Debentures. At the end of each Extension Period, if
any, AAG Holding shall pay all interest then accrued and unpaid, together with
interest thereon, compounded quarterly at the rate specified for the
Subordinated Debentures to the extent permitted by applicable law ("Compounded
Interest"). In the event AAG Holding exercises this right, then during any
Extension Period, (a) the
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Company and AAG Holding shall not declare or pay any dividends on, make any
distribution with respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to any of its capital stock and (b) the Company and AAG
Holding shall not, directly or indirectly, and will not allow any of their
subsidiaries to, make any payment of interest, principal or premium, if any, on,
or repay, repurchase or redeem, any debt securities issued by the Company and
AAG Holding that rank pari passu with or junior to the Subordinated Debentures;
provided, however, that, the restriction in clause (a) above does not apply (i)
to repurchases or acquisitions of shares of the common stock of the Company or
AAG Holding as contemplated by any employment arrangement, benefit plan or other
similar contract with or for the benefit of employees, officers or directors
entered into in the ordinary course of business, (ii) as a result of an exchange
or conversion of any class or series of the Company's or AAG Holding's capital
stock for common stock, (iii) to the purchase of fractional interests in shares
of the Company or AAG Holding's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged or (iv) to the payment of any stock dividend by the Company or AAG
Holding payable in common stock. Prior to the termination of any such Extension
Period, AAG Holding may further defer payments of interest by extending the
interest payment period; provided, however, that such Extension Period,
including all such previous and further extensions, may not exceed 20
consecutive quarters or extend beyond the Maturity Date. Upon the termination of
any Extension Period and the payment of all amounts then due, AAG Holding may
commence a new Extension Period, subject to the terms set forth in this section.
No interest during an Extension Period, except at the end thereof, shall be due
and payable. AAG Holding has no present intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Subordinated Debentures. If the Property Trustee shall be the sole holder of the
Subordinated Debentures, AAG Holding shall give the Regular Trustees and the
Property Trustee notice of its selection of such Extension Period one Business
Day prior to the earlier of (i) the date distributions on the Preferred
Securities are payable or (ii) the date the Regular Trustees are required to
give notice to the NYSE (or other applicable self-regulatory organization) or to
holders of the Preferred Securities of the record date or the date such
distribution is payable. The Regular Trustees shall give notice of AAG Holding's
selection of such Extension Period to the holders of the Preferred Securities.
If the Property Trustee shall not be the sole holder of the Subordinated
Debentures, AAG Holding shall give the holders of the Subordinated Debentures
notice of its selection of such Extension Period ten Business Days prior to the
earlier of (i) the applicable Interest Payment Date or (ii) the date upon which
AAG Holding is required to give notice to the NYSE (or other applicable
self-regulatory organization) or to holders of the Subordinated Debentures of
the record or payment date of such related interest payment.
COVENANTS
The Indenture requires AAG Holding to covenant to the following with
respect to the Subordinated Debentures: (i) to duly and punctually pay the
principal of and interest on the Subordinated Debentures (together with any
additional amounts payable pursuant to the terms thereof) and comply with all
other terms, agreements and conditions contained therein or made in the
Indenture for the benefit of the Subordinated Debentures; (ii) to maintain an
office or agency where the Subordinated Debentures may be presented, surrendered
for payment, transferred or exchanged and where notices to AAG Holding may be
served; (iii) if AAG Holding shall act as its own paying agent for the
Subordinated Debentures, to segregate and hold in trust for the benefit of the
persons entitled thereto a sum sufficient to pay the principal of and premium or
interest, if any, so becoming due; (iv) to appoint a successor trustee whenever
necessary to avoid or fill a vacancy in the office of trustee, (v) to preserve
its corporate existence, (vi) to cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition and (vii) to pay or discharge, before the same shall
become delinquent, all taxes, assessments, government charges, and all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of AAG Holding or a Subsidiary that comprise more than
10% or more of the combined assets of AAG Holding and its Subsidiaries, other
than claims contested in good faith by AAG Holding. The Indenture also requires
AAG Holding to deliver to the Trustee, within 120 days after the end of each
fiscal year, a written statement as to whether, to the best knowledge of the
officer signing the statement, AAG Holding is in compliance with the terms of
the Indenture and, if not, the nature and status of such non-compliance.
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In addition, AAG Holding has also covenanted, with respect to the
Subordinated Debentures, that for so long as the Preferred Securities and the
Common Securities remain outstanding AAG Holding will (i) maintain 100% direct
or indirect ownership of the Common Securities, provided, however, that any
permitted successor of AAG Holding under the Indenture may succeed to AAG
Holding's ownership of the Common Securities, (ii) not voluntarily dissolve,
wind-up or terminate the Trust, except in connection with the distribution of
Subordinated Debentures or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, (iii) timely perform its duties as sponsor
of the Trust, (iv) use its reasonable efforts to cause the Trust (a) to remain a
business trust classified as a grantor trust, except in connection with a
distribution of the Subordinated Debentures to the holders of Preferred
Securities in liquidation of the Trust, the redemption of all of the Preferred
Securities and Common Securities of the Trust or certain mergers, consolidations
or amalgamations, each as permitted by the Declaration, and (b) continue not to
be treated as an association taxable as a corporation for United States federal
income tax purposes other than in connection with a distribution of Subordinated
Debentures to the holders of Preferred Securities in liquidation of the Trust,
and (v) use its reasonable efforts to cause each holder of Preferred Securities
and Common Securities to be treated as owning an undivided beneficial interest
in the Subordinated Debentures.
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Upon any consolidation of AAG Holding with, or merger of AAG Holding into,
any other person or any conveyance, transfer or lease of the properties and
assets of AAG Holding substantially as an entirety, the successor person formed
by such consolidation or into which AAG Holding is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, AAG Holding under the Indenture with
the same effect as AAG Holding prior to such transaction, and thereafter, except
in the case of a lease, the predecessor person shall be relieved of all
obligations and covenants under the Indenture and the Subordinated Debentures.
INDENTURE EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the
Subordinated Debentures will, unless otherwise specified, constitute an "Event
of Default" with respect to the Subordinated Debentures: (a) default for thirty
(30) days in the payment of any installment of interest on the Subordinated
Debentures; (b) default in the payment of any of the principal of the
Subordinated Debentures when due, whether at maturity, upon redemption, by
declaration of acceleration or otherwise; (c) default for sixty (60) days by AAG
Holding in the observance or performance of any other covenant or agreement
contained in the Subordinated Debentures or the Indenture (other than a covenant
or agreement default which is specifically designated as having a different time
period) for the benefit of the Subordinated Debentures after written notice
thereof as provided in the Indenture; (d) (i) an event of default occurs under
any instrument (including the Indenture) under which there is at the time
outstanding, or by which there may be secured or evidenced, any indebtedness of
the Company or AAG Holding for money borrowed by the Company or AAG Holding, as
the case may be, (other than non-recourse indebtedness) which results in
acceleration or nonpayment at maturity (after giving effect to any applicable
grace period) of such indebtedness in an aggregate amount exceeding $15,000,000;
or any such indebtedness exceeding $15,000,000 shall otherwise be declared to be
due and payable, or required to be prepaid (other than by a regularly scheduled
prepayment or exercise of an optional prepayment right), prior to the stated
maturity thereof; or any failure by the Company or AAG Holding to make any
payment under a guarantee in respect of any indebtedness, in each case in an
amount of at least $15,000,000, on the date such payment is due (or within any
grace period specified in the agreement or other instrument governing such
indebtedness); in which case the Company or AAG Holding shall immediately give
notice to the Trustee of such acceleration or non-payment, and (ii) there shall
have been a failure to cure such default or to pay or discharge such defaulted
indebtedness within ten (10) days after written notice thereof as provided in
the Indenture; (e) any final non-appealable judgment or order for the payment of
money in excess of $15,000,000 is rendered against the Company or AAG Holding,
such judgment or order is not satisfied by payment or bonded and either
enforcement proceedings have been commenced by the judgment creditor or there
has been a period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not
have been in effect; provided, however, that a judgment or order fully
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covered by insurance (or a judgment or order for the payment of money covered by
insurance to the extent of all payments in excess of $15,000,000), which
coverage has not been disputed by the insurer, shall not be considered a default
or an Event of Default; or (f) certain events of bankruptcy, insolvency or
reorganization relating to the Company or AAG Holding.
In addition, an Event of Default shall include the voluntary or involuntary
dissolution or winding up of the business of the Trust or other termination of
the existence of the Trust, other than in connection with (i) the distribution
of the Subordinated Debentures to holders of the Trust Securities in liquidation
of their interests in the Trust, (ii) the redemption of all of the outstanding
Trust Securities, or (iii) certain mergers, consolidations or amalgamations of
the Trust, each as permitted by the Declaration.
If any Event of Default shall occur and be continuing, the Property
Trustee, as the holder of the Subordinated Debentures, will have the right to
declare the principal of and the interest on the Subordinated Debentures
(including any Compounded Interest and any other amounts payable under the
Indenture) to be forthwith due and payable and to enforce its other rights as a
creditor with respect to the Subordinated Debentures subject to the
subordination provisions in the Indenture. An Event of Default also constitutes
a Declaration Event of Default. If the Property Trustee fails to enforce its
rights with respect to the Subordinated Debentures held by the Trust, any record
holder of Preferred Securities may institute legal proceedings directly against
AAG Holding to enforce the Property Trustee's rights under such Subordinated
Debentures without first instituting any legal proceedings against such Property
Trustee or any other person or entity. In addition, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of AAG Holding to pay interest or principal on the Subordinated
Debentures issued to the Trust on the date such interest or principal is
otherwise payable and the Company fails to make payments under the Debt
Guarantee with respect to such amounts, then a record holder of Preferred
Securities may institute a proceeding directly against AAG Holding for
enforcement of payment to the record holder of the Preferred Securities of the
principal of or interest on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures, and the amount of
the payment will be based on the holder's pro rata share of the amount due and
owing on all of the Preferred Securities. The record holder in the case of the
issuance of one or more global Preferred Securities certificates will be DTC
acting at the direction of its direct participants who will be acting at the
direction of Beneficial Owners. The holders of Preferred Securities in certain
circumstances have the right to direct the Property Trustee to exercise its
rights, with respect to other than principal and interest payments on the
Subordinated Debentures, as the holder of the Subordinated Debentures. See
"Description of the Preferred Securities--Declaration Events of Default" and
"Description of the Preferred Securities--Voting Rights."
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust, it
is presently anticipated that the Subordinated Debentures will be issued in the
form of one or more global certificates (each a "Global Security") registered in
the name of a securities depository or its nominee. Except under the limited
circumstances described below, Subordinated Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by the depository to a nominee of the
depository or by a nominee of the depository to the depository or another
nominee of the depository or to a successor depository or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the Holders (as defined
in the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Debentures shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the depository or its nominee or to a successor depository or its
nominee. Accordingly, each beneficial owner must rely on the procedures of the
depository or,
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if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest to exercise any rights of a Holder
under the Indenture.
THE DEPOSITORY
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will act
as securities depository for the Subordinated Debentures. For a description of
DTC and the specific terms of the depository arrangements, see "Description of
the Preferred Securities--Book-Entry Issuance--The Depository Trust Company." As
of the date of this Prospectus, the description therein of DTC's book-entry
system and DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Preferred Securities apply in all material respects
to any debt obligations represented by one or more Global Securities held by
DTC. AAG Holding may appoint a successor to DTC or any successor depository in
the event DTC or such successor depository is unable or unwilling to continue as
the depository for the Global Securities.
None of AAG Holding, the Trust, the Indenture Trustee, any paying agent and
any other agent of AAG Holding or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for the Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debentures in
definitive certificated form registered in the names of persons other than the
depository or its nominee only if (i) the depository notifies AAG Holding that
it is unwilling or unable to continue as a depository for such Global Security
and no successor depository shall have been appointed, (ii) the depository, at
any time, ceases to be a clearing agency registered under the Exchange Act at
which time the depository is required to be so registered to act as such
depository and no successor depository shall have been appointed, or (iii) AAG
Holding, in its sole discretion, determines that such Global Security shall be
so exchangeable. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for 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
Security.
MISCELLANEOUS
The Indenture will provide that the AAG Holding will pay all fees and
expenses related to (i) the offering of the Trust Securities and the
Subordinated Debentures, (ii) the organization, maintenance and dissolution of
the Trust, (iii) the retention of the Trustees and (iv) the enforcement by the
Property Trustee of the rights of the holders of the Preferred Securities.
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<PAGE> 48
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED
DEBENTURES, THE DEBT GUARANTEE AND THE TRUST GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to (i)
issue the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust, (ii) invest the proceeds from such issuance and sale in the
Subordinated Debentures and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because: (i) the aggregate principal
amount of Subordinated Debentures will be equal to the sum of the aggregate
stated liquidation amount of the Trust Securities; (ii) the interest rate and
the interest and other payment dates on the Subordinated Debentures will match
the distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) AAG Holding shall pay all, and the Trust shall not be
obligated to pay, directly or indirectly, any, costs, expenses, debts and
obligations (other than with respect to the Trust Securities) related to the
Trust; and (iv) the Declaration provides that the Trustees shall not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of Trust Guarantee." If AAG Holding does not make interest and/or
principal payments on the Subordinated Debentures purchased by the Trust and the
Company does not make payments under the Debt Guarantee, the Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The Trust
Guarantee will not apply to the payment of distributions and other payments on
the Preferred Securities when the Trust does not have sufficient funds to make
such distributions or other payments.
The Debt Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except those made pari passu or subordinate by their
terms, and (ii) senior to the Company's preferred and common stock.
The Trust Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except those made pari passu or subordinate by their
terms, (ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Company and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock of any
affiliate of the Company and (iii) senior to the Company's common stock.
The Trust Guarantee, when taken together with the back-up undertakings,
consisting of obligations of The Company as set forth in the Declaration
(including the obligation to pay expenses of the Trust), the Indenture, the Debt
Guarantee and the Subordinated Debentures issued to the Trust, provide a full
and unconditional guarantee by the Company of the Preferred Securities. If the
Preferred Securities Guarantee Trustee fails to enforce the Trust Guarantee, any
record holder of Preferred Securities may institute a legal proceeding directly
against the Company to enforce the Preferred Securities Guarantee Trustee's
rights under the Trust Guarantee without first instituting a legal proceeding
against the Trust, the Preferred Securities Guarantee Trustee or any other
person or entity. In addition, if the Company has failed to make a Trust
Guarantee Payment, a record holder of Preferred Securities may directly
institute a proceeding against the Company for enforcement of the Trust
Guarantee for such payment to the record holder of the Preferred Securities of
the principal of or interest on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures, and the amount of
the payment will be based on the holder's pro rata share of the amount due and
owing on all of the Preferred Securities. The Company has waived any right or
remedy to require that any action be brought first against the Trust or any
other person or entity before proceeding directly against the Company. The
record holder in the case of the issuance of one or more global Preferred
Securities certificates will be DTC acting at the direction of its Direct
Participants, who in turn will be acting at the direction of the Beneficial
Owners of the Preferred Securities.
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<PAGE> 49
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures or Debt Guarantee held by the Trust, any record holder
of Preferred Securities may institute legal proceedings directly against AAG
Holding or the Company to enforce the Property Trustee's rights under such
Subordinated Debentures or Debt Guarantee, respectively, without first
instituting any legal proceedings against such Property Trustee or any other
person or entity. In addition, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of AAG Holding
to pay interest, principal or other required payments on the Subordinated
Debentures issued to the Trust on the date such interest, principal or other
required payment is otherwise payable, then a record holder of Preferred
Securities may institute a Direct Action against AAG Holding for enforcement of
such payment on the Subordinated Debentures on or after the respective due dates
specified in the Subordinated Debentures. To the extent the Company or AAG
Holding makes a payment to a record holder of Preferred Securities in connection
with proceedings by such record holder directly against the Company or AAG
Holding, the Company or AAG Holding, as the case may be, will be subrogated to
the rights of the record holder of Preferred Securities to the extent of
payments made by the Company or AAG Holding to the record holder. The record
holder in the case of the issuance of one or more global Preferred Securities
certificates will be DTC acting at the direction of its Direct Participants, who
in turn will be acting at the direction of the Beneficial Owners of the
Preferred Securities. If another Indenture Event of Default occurs and is
continuing, the Declaration provides a mechanism whereby the holders of the
Preferred Securities, using the procedures described in "Description of the
Preferred Securities--Voting Rights," may direct the Property Trustee to enforce
its rights under the Subordinated Debentures.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders who purchase the Preferred
Securities upon original issuance ("Initial Holders"). It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not address
the tax consequences to persons that have a functional currency other than the
U.S. dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of Preferred Securities. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities. This summary is based on the Code, U.S. Treasury
regulations thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis. Any such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner of
the Preferred Securities. In particular, legislation has been proposed that
could adversely affect AAG Holding's ability to deduct interest on the
Subordinated Debentures, which may in turn permit AAG Holding to cause a
redemption of the Preferred Securities prior to 2001. See "--Proposed Tax Law
Changes."
CLASSIFICATION OF THE SUBORDINATED DEBENTURES AND THE TRUST
In connection with the issuance of the Subordinated Debentures, Akin, Gump,
Strauss, Hauer & Feld, L.L.P. ("Tax Counsel"), tax counsel for the Company, AAG
Holding and the Trust, will render its opinion generally to the effect that,
although not entirely free from doubt, under current law and assuming full
compliance with the terms of the Indenture (and certain other documents), and
based upon current facts and assumptions contained in such opinion, the
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of AAG Holding.
In connection with the issuance of the Preferred Securities, Tax Counsel
will render its opinion generally to the effect that under current law and
assuming full compliance with the terms of the Declaration and other
46
<PAGE> 50
documents, and based upon certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Subordinated Debentures. Each holder will be required to include
in its gross income its allocable share of income on the Subordinated
Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued income tax regulations applicable to all debt
instruments that, like the Subordinated Debentures, are issued on or after
August 13, 1996, remote contingencies that stated interest will not be timely
paid are ignored in determining whether a debt instrument is issued with OID.
OID must be included in income by all holders as it accrues economically on a
daily basis, without regard to when it is paid in cash or whether a particular
holder generally uses the cash method of accounting. The Company has concluded
that the likelihood of its exercising its option to defer payments of interest
is remote because exercising that option would prevent the Company from
declaring dividends on its stock. Based upon this conclusion, and although not
free from doubt, in the opinion of Tax Counsel the Subordinated Debentures will
not include OID. As a consequence, holders of the Preferred Securities should
report interest under their own methods of accounting (e.g., cash or accrual)
instead of under the daily economic accrual rules for OID instruments.
Under the new regulations, however, if the Company exercises its right to
defer payments of interest, the Subordinated Debentures will become OID
instruments, and all holders of the Preferred Securities will be required to
accrue interest on a daily basis during any Extension Period even though the
Company will not pay the interest in cash until the end of the Extension Period,
and even though a holder may use the cash method of accounting. A holder who
disposes of the Preferred Securities during such an Extension Period may suffer
a loss because the market value of the Trust Securities will likely fall if the
Company exercises its option to defer payments of interest on the Subordinated
Debentures. Furthermore, the market value of the Preferred Securities may not
reflect the accumulated distribution that will be paid at the end of the
Extension Period, and a holder who sells the Preferred Securities during the
Extension Period will not receive from the Company any cash related to the
interest income the holder accrued and included in its taxable income under the
OID rules (because that cash will be paid to the holder of record at the end of
the Extension Period).
If the Subordinated Debentures become OID instruments (i.e., if the Company
ever exercises its right to defer payment of interest), the Subordinated
Debentures will be taxed as OID instruments for as long as they remain
outstanding. Thus, even after the end of the Extension Period, all holders will
be required to continue accruing interest on the Subordinated Debentures on a
daily basis, regardless of their method of accounting.
The new regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service ("IRS"), and it is possible that
the IRS could take a position contrary to the interpretation herein.
Corporate holders of the Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than Initial Holders may be
considered to have acquired their undivided interests in the Subordinated
Debentures with "market discount" or "acquisition premium" as such phrases are
defined for United States federal income tax purposes. Such holders are advised
to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
As described under the caption "Description of the Preferred
Securities--Distribution of the Subordinated Debentures," Subordinated
Debentures may be distributed to holders in exchange for the Preferred
Securities and in liquidation of the Trust. Under current law, such a
distribution would be treated for United States federal income tax purposes as a
non-taxable event to each holder, and each holder would receive an
47
<PAGE> 51
aggregate tax basis in the Subordinated Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Subordinated Debentures so received in liquidation of the Trust would
include the period during which the Preferred Securities were held by such
holder. If, however, the liquidation of the Trust were to occur because the
Trust is subject to United States federal income tax with respect to income
accrued or received on the Subordinated Debentures, the distribution of the
Subordinated Debentures to holders would be a taxable event to each holder and a
holder would recognize gain or loss as if the holder had exchanged its Preferred
Securities for the Subordinated Debentures it received upon liquidation of the
Trust.
Under certain circumstances described herein (see "Description of the
Preferred Securities--Special Event Redemption"), the Subordinated Debentures
may be redeemed for cash, with the proceeds of such redemption distributed to
holders in redemption of their Preferred Securities. Under current law, such a
redemption would constitute a taxable disposition of the redeemed Preferred
Securities for United States federal income tax purposes, and a holder would
recognize gain or loss as if it sold such redeemed Preferred Securities for
cash. See "--Sales of Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities. Assuming AAG
Holding does not defer interest on the Subordinated Debentures by extending the
interest payment period, a holder's adjusted tax basis in the Preferred
Securities generally will equal its initial purchase price. Subject to the
market discount rules described above and the discussion below regarding accrued
and unpaid interest, such gain or loss generally will be a capital gain or loss
and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. If the Company exercises its right to defer payments of
interest, a holder who disposes of Preferred Securities between record dates for
payments of distributions thereon will be required to include in income as
ordinary income, accured and unpaid interest on the Subordinated Debentures
through the date of disposition, and to add such amount to the adjusted tax
basis in such holder's pro rata share of the underlying Subordinated Debentures
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis (which will include all accrued but unpaid interest) a holder 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. Accrual basis taxpayers would be subjected to similar treatment
without regard to AAG Holding's election to defer.
UNITED STATES ALIEN HOLDERS
Prospective purchasers of Preferred Securities that are United States Alien
Holders should consult their tax advisors with respect to the United States
federal tax consequences, including in particular potential withholding tax
consequences, as well as any tax consequences that may arise under the laws of
any U.S. state, local or other U.S. or non-U.S. tax jurisdiction.
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust.
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to holders on Forms
1099, which forms should be mailed to holders of Preferred Securities by January
31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld
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<PAGE> 52
amounts will be allowed as a credit against the holder's federal income tax,
provided the required information is provided to the Internal Revenue Service.
PROPOSED TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996, the revenue
portion of President Clinton's fiscal 1997 budget proposal was released. The
Bill would, among other things, generally deny interest deductions for interest
or OID on an instrument, issued by a corporation, that has a maximum weighted
average maturity of more than 40 years. The Bill would also treat as equity,
instruments issued by a corporation that have a maximum term of more than 20
years and that are not shown as indebtedness on the consolidated balance sheet
of the issuer. For purposes of determining the weighted average maturity or the
term of an instrument, any right to extend would be treated as exercised. The
above-described provisions of the Bill were proposed to be effective generally
for instruments issued on or after December 7, 1995. However, on March 29, 1996,
the Chairmen of the Senate Finance and House Ways and Means Committees issued a
joint statement (the "Joint Statement") to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, would be no earlier than the date of appropriate Congressional action.
In addition, subsequent to the publication of the Joint Statement, Senator
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the views expressed in
the Joint Statement. Under current law, it is likely that the Subordinated
Debentures will be treated as indebtedness of AAG Holding and AAG Holding will
be able to deduct interest on the Subordinated Debentures beneficially held by
the holders of the Preferred Securities. The terms of the Subordinated
Debentures limit the right to extend the maturity of the Subordinated Debentures
to a date which is six months shorter than any legislative limit on the length
of debt securities for which interest is deductible. Based on the advice of Tax
Counsel, the Company believes this will allow AAG Holding an interest deduction
if the 40-year weighted average maturity component of the Bill is enacted.
However, if the provision of the Bill regarding a 20-year term is enacted with
retroactive effect with regard to the Subordinated Debentures, AAG Holding will
not be entitled to an interest deduction with respect to the Subordinated
Debentures. There can be no assurance that current or future legislative
proposals, final legislation, adverse judicial decisions or official
pronouncements will not affect the ability of AAG Holding to deduct interest on
the Subordinated Debentures, giving rise to a Tax Event which would permit AAG
Holding to cause the redemption of the Preferred Securities prior to July 30,
2001 (the first date on which AAG Holding would otherwise be able to cause a
redemption of Preferred Securities) as described more fully under "Description
of Preferred Securities--Special Event Redemption."
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
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<PAGE> 53
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named herein, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith, Incorporated; are acting as representatives
(the "Representatives"), has severally agreed to purchase the number of
Preferred Securities set forth opposite its name below. In the Underwriting
Agreement, the several Underwriters have agreed, subject to the terms and
conditions set forth therein, to purchase all 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 nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
--------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................
--------------------
Total....................................... 3,000,000
=================
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such price
less a concession not in excess of $ per Preferred Security. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of AAG Holding,
the Underwriting Agreement provides that AAG Holding will agree to pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds, an amount of $ per Preferred Security (or
$ in the aggregate) for the accounts of the several Underwriters provided that
such compensation for sales of 10,000 or more Preferred Securities to any single
purchaser will be $ per Preferred Security. Therefore, to the extent of such
sales, the actual amount of Underwriters' Compensation will be less than the
aggregate amount specified in the preceding sentence.
Pursuant to the Underwriting Agreement, the Trust, AAG Holding and the
Company have granted to the Underwriters an option exercisable for 30 days to
purchase up to an additional 450,000 Preferred Securities at the offering price
per Preferred Security set forth on the cover page hereof, solely to cover
over-allotments, if any, in the sale of the Preferred Securities. The Company
will pay Underwriters' Compensation in the amounts per Preferred Security set
forth above with respect to such additional Preferred Securities. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional Preferred Securities as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of Preferred
Securities offered by the Underwriters hereby.
During a period of 90 days from the date of this Prospectus, none of the
Trust, the Company or AAG Holding will, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
any equity securities substantially similar to the Preferred Securities (except
for the Subordinated Debentures and the Preferred Securities offered hereby).
Application will be made to list the Preferred Securities, if approved, on
the NYSE. If approved, trading of the Preferred Securities on the NYSE is
expected to commence within a 30-day period after the initial delivery of the
Preferred Securities. The Representatives have advised the Trust that they
intend to make a market in the Preferred Securities prior to the commencement of
trading on the NYSE. The Representatives
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<PAGE> 54
have no obligation to make a market in the Preferred Securities, however, and
may cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
The Company, AAG Holding and the Trust have agreed to indemnify the
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
The validity of the Subordinated Debentures, the Trust Guarantee and the
Debt Guarantee will be passed upon for the Company, AAG Holding and the Trust by
Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio. Certain United States
federal income taxation matters also will be passed upon for AAG Holding and the
Trust by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, D.C. Attorneys
in the Keating, Muething & Klekamp, P.L.L. and Akin, Gump, Strauss, Hauer &
Feld, L.L.P. law firms hold shares of Common Stock of the Company. Certain
matters of Delaware law relating to the validity of the Preferred Securities
will be passed upon for the Trust by Morris, Nichols, Arsht & Tunnell,
Wilmington, Delaware. Certain legal matters in connection with the Securities
will be passed upon for the Underwriters by Taft, Stettinius & Hollister,
Cincinnati, Ohio and Skadden, Arps, Meagher & Flom, New York, New York.
EXPERTS
The consolidated financial statements of AAG appearing in AAG's annual
report (Form 10-K) for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR
THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
Prospectus Summary...................... 3
The Company............................. 3
AAG Holding Company, Inc................ 3
The Trust............................... 3
The Offering............................ 4
Summary Financial Information........... 6
Risk Factors............................ 7
The Trust............................... 15
The Company............................. 15
Capitalization.......................... 22
Accounting Treatment.................... 22
Ratio of Earnings to Fixed Charges...... 22
Use of Proceeds......................... 23
Description of the Preferred
Securities............................ 23
Description of Trust Guarantee.......... 35
Description of the Subordinated
Debentures and Debt Guarantee......... 37
Effect of Obligations Under the
Subordinated Debentures, the Debt
Guarantee and the Trust Guarantee..... 45
United States Federal Income Taxation... 46
Underwriting............................ 50
Legal Matters........................... 51
Experts................................. 51
</TABLE>
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3,000,000
PREFERRED SECURITIES
AMERICAN ANNUITY GROUP
CAPITAL TRUST I
% TRUST ORIGINATED
PREFERRED SECURITIESSM ("TOPRSSM")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
AMERICAN ANNUITY GROUP, INC.
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the offering
described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee*...................... $ 29,742
NYSE listing fee..........................................................
Legal fees and expenses...................................................
Accounting fees and expenses..............................................
Printing and engraving expenses...........................................
Trustee's fees and expenses...............................................
Rating Agencies' fees.....................................................
Blue Sky fees and expenses................................................
Miscellaneous.............................................................
--------
Total................................................................ $
========
<FN>
- ---------
*Actual; other expenses are to be filed by amendment.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides
generally and in pertinent part that a Delaware corporation may indemnify its
directors and officer against expenses, judgments, fines, and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believe to be
in, or not opposed to, the best interest of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 145 further provides that, in connection with the defense or settlement
of any action by or in the right of the corporation, a Delaware corporation may
indemnify its directors and officers against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in good
faith, in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and without negligence or misconduct in the
performance of their duties to the corporation. Section 145 further permits a
Delaware corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
Article VII of American Annuity Group, Inc., By-Laws provides for
indemnification of directors and officers similar to that provided in Section
145 of DGCL.
Reference is made to Section 102(b)(7) of the DGCL, which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. Article Ninth of American Annuity Group, Inc.,
Certificate of Incorporation eliminates the liability of directors to the extent
permitted by Section 102(b)(7) of the DGCL.
American Annuity Group, Inc. also maintains directors' and officers'
reimbursement and liability insurance and has entered into agreements with its
directors and officers providing for indemnification in certain events.
II-1
<PAGE> 57
Ohio Revised Code, Section 1701.13(E), allows indemnification by AAG
Holding Company, Inc. ("AAG Holding") to any person made or threatened to be
made a party to any proceedings, other than a proceeding by or in the right of
AAG Holding, by reason of the fact that he is or was a director, officer,
employee or agent of AAG Holding, against expenses, including judgment and
fines, if he acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of AAG Holding and, with respect to criminal
actions, in which he had no reasonable cause to believe that his conduct was
unlawful. Similar provisions apply to actions brought by or in the right of AAG
Holding, except that no indemnification shall be made in such cases when the
person shall have been adjudged to be liable for negligence or misconduct to AAG
Holding unless deemed otherwise by the court. Indemnification is to be made by a
majority vote of a quorum of disinterested directors or the written opinion of
independent counsel or by the shareholders or by the court. AAG Holding's
Regulations extends such indemnification.
The Declaration of Trust of American Annuity Group Capital Trust I (the
"Trust") provides that no Regular Trustee, affiliate of the Regular Trustee, or
any officers, directors, shareholders, members, partners, employees,
representatives or agents of any Regular Trustee, or any employee or agent of
the Trust or its affiliates (each, an "Indemnified Person") shall be liable,
responsible or accountable in damages or otherwise to the Trust or any employee
or agent of the Trust or its affiliates for any loss, damage or claim incurred
by reason of any act or omission performed or omitted by such Indemnified Person
in good faith on behalf of the Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by such Declaration or by law, except that an Indemnified
Person shall be liable for any loss, damage or claim incurred by reason of such
Indemnified Person's gross negligence or willful misconduct with respect to such
acts or omissions. The Declaration of Trust also provides that to the fullest
extent permitted by applicable law, American Annuity Group, Inc. shall indemnify
and hold harmless each Indemnified Person from and against any loss, damage or
claim incurred by such Indemnified Person by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by such
Declaration or by law, except that an Indemnified Person shall be liable for any
loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions. The
Declaration of Trust further provides that, to the fullest extent permitted by
applicable law, expenses (including legal fees) incurred by an Indemnified
Person in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by American Annuity Group, Inc., prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Indemnified Person to repay such amount if
it shall be determined that the Indemnified Person is not entitled to be
indemnified for the underlying cause of action as authorized by the Declaration.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement for Preferred Securities
4.1 Form of Indenture
4.2 Certificate of Trust of American Annuity Group Capital Trust I
4.3* Declaration of Trust of American Annuity Group Capital Trust I
4.4 Form of Preferred Securities Guarantee Agreement by American Annuity Group, Inc.
4.5 Form of Subordinated Debenture (contained in Exhibit 4.1)
4.6 Form of Preferred Security
4.7 Form of Common Security
4.9 Form of Subordinated Debt Guarantee by American Annuity Group, Inc. (contained in
Exhibit 4.1)
4.10 Form of Common Securities Guarantee Agreement
5.1* Opinion of Keating, Muething & Klekamp, P.L.L.
</TABLE>
II-2
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------------------------------------------------------------------
<C> <S>
5.2* Opinion of Morris, Nichols, Arsht & Tunnell
8.1* Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1 Consent of Ernst & Young.
23.2* Consent of Keating, Muething & Klekamp, P.L.L. (Contained on Exhibit 5.1).
23.3* Consent of Morris, Nichols, Arsht & Tunnel (Contained on Exhibit 5.2).
23.4* Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (Contained in Exhibit 8.1).
24 Powers of Attorney (contained on the signature page).
25.1 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee under the Indenture
25.2 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee under the Declaration of American
Annuity Group Capital Trust I
25.3 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee of the Trust Preferred Securities
Guarantee for the benefit of the holders of Preferred Securities of American
Annuity Group Capital Trust I
</TABLE>
- ---------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
(a) American Annuity Group, Inc. hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrants' annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrants hereby undertake that
(1) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Cincinnati, State of Ohio, as of the 24th day of
September, 1996.
AMERICAN ANNUITY GROUP, INC.
CARL H. LINDNER
By:
Carl H. Lindner
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. The persons whose names are marked an
asterisk (*) below hereby designate Mark F. Muething or William J. Maney to sign
all amendments, including post effective amendments to this Registration
Statement as well as any related Registration Statement, or amendment thereto,
filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------- ----------------------------------- -------------------
<C> <S> <C>
* CARL H. Chairman of the Board of Directors September 24, 1996
LINDNER (Principal Executive Officer)
- -----------------------------------
Carl H. Lindner
* S. CRAIG Director September 24, 1996
LINDNER
- -----------------------------------
S. Craig Lindner
* ROBERT A. Director September 24, 1996
ADAMS
- -----------------------------------
Robert A. Adams
* A. LEON Director September 24, 1996
FERGENSON
- -----------------------------------
A. Leon Fergenson
* RONALD G. Director September 24, 1996
JOSEPH
- -----------------------------------
Ronald G. Joseph
* JOHN T. LAWRENCE Director September 24, 1996
III
- -----------------------------------
John T. Lawrence III
* WILLIAM R. Director September 24, 1996
MARTIN
- -----------------------------------
William R. Martin
</TABLE>
II-4
<PAGE> 60
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------- ----------------------------------- -------------------
<C> <S> <C>
* RONALD F. Director September 24, 1996
WALKER
- -----------------------------------
Ronald F. Walker
* WILLIAM J. Senior Vice President, Treasurer September 24, 1996
MANEY and Chief Financial Officer
- ----------------------------------- (Principal Financial Officer and
William J. Maney Principal Accounting Officer)
</TABLE>
II-5
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Cincinnati, State of Ohio, as of the 24th day of
September, 1996.
AAG HOLDING COMPANY, INC.
By: CARL H. LINDNER
----------------------------------
Carl H. Lindner
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. The persons whose names are marked an
asterisk (*) below hereby designate Mark F. Muething or William J. Maney to sign
all amendments, including post effective amendments to this Registration
Statement as well as any related Registration Statement, or amendment thereto,
filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------- ----------------------------------- -------------------
<C> <S> <C>
* CARL H. LINDNER Director September 24, 1996
- -----------------------------------
CARL H. LINDNER
* S. CRAIG LINDNER Director September 24, 1996
- -----------------------------------
S. CRAIG LINDNER
* ROBERT A. ADAMS Director September 24, 1996
- -----------------------------------
ROBERT A. ADAMS
* WILLIAM J. MANEY Senior Vice President, Chief September 24, 1996
- ----------------------------------- Financial Officer and Treasurer
WILLIAM J. MANEY (Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
II-6
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, American
Annuity Group Capital Trust I certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Cincinnati, State of Ohio,
as of the 24th day of September, 1996.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person below whose signature is
preceded by an (*) hereby constitutes and appoints Mark F. Muething and William
J. Maney, or each of them, his true and lawful attorney and agent, to do any and
all acts and instruments for him and in his name in the capacity indicated
below, which said attorneys and agents, or either of them, may deem necessary or
advisable to enable American Annuity Group Capital Trust I to comply with the
Securities Act of 1933, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign amendments (including post effective amendments) and any related
Registration Statement, or amendment thereto, filed pursuant to Rule 462(b)
promulgated under the Securities Act of 1933.
AMERICAN ANNUITY GROUP CAPITAL TRUST I
By: * MARK F. MUETHING
---------------------------------------
MARK F. MUETHING, as Trustee
By: * CHRISTOPHER P. MILIANO
---------------------------------------
CHRISTOPHER P. MILIANO, as Trustee
II-7
<PAGE> 1
Exhibit 4.1
AAG HOLDING COMPANY, INC.
Issuer
AMERICAN ANNUITY GROUP, INC.
Guarantor
AND
THE BANK OF NEW YORK
Trustee
INDENTURE
Dated as of September ___, 1996
-----------------------------
____% Subordinated Debentures Due ______, 2026
<PAGE> 2
- i -
<TABLE>
<S> <C>
ARTICLE 1 Definitions and Other Provisions of General Application...........................................1
SECTION 1.01 Definitions ................................................................................1
SECTION 1.02 Compliance Certificates and Opinions .......................................................8
SECTION 1.03 Form of Documents Delivered to Trustee......................................................8
SECTION 1.04 Acts of Holders; Record Dates...............................................................9
SECTION 1.05 Notices, Etc. to Trustee and the Company...................................................10
SECTION 1.06 Notice to Holders; Waiver..................................................................10
SECTION 1.07 Conflict with Trust Indenture Act..........................................................10
SECTION 1.08 Effect of Headings and Table of Contents...................................................11
SECTION 1.09 Separability Clause........................................................................11
SECTION 1.10 Benefits of Indenture......................................................................11
SECTION 1.11 Governing Law..............................................................................11
SECTION 1.12 Legal Holidays.............................................................................11
ARTICLE 2 Security Forms...................................................................................12
SECTION 2.01 Forms Generally............................................................................12
SECTION 2.02 Form of Face of Security...................................................................12
SECTION 2.03 Form of Reverse of Security................................................................15
SECTION 2.04 Form of Trustee's Certificate of Authentication............................................17
SECTION 2.05. Unconditional Guarantees..................................................................17
SECTION 2.06 Execution of Guarantee.....................................................................18
SECTION 2.07 Assumption by Guarantor....................................................................18
ARTICLE 3 The Securities...................................................................................19
SECTION 3.01 Title and Terms............................................................................19
SECTION 3.02 Denominations..............................................................................21
SECTION 3.03 Execution, Authentication, Delivery and Dating.............................................21
SECTION 3.04 Temporary Securities.......................................................................22
SECTION 3.05 Registration; Registration of Transfer and Exchange........................................22
SECTION 3.06 Mutilated, Destroyed, Lost and Stolen Securities..........................................23
SECTION 3.07 Payment of Interest; Interest Rights Preserved.............................................24
SECTION 3.08 Persons Deemed Owners......................................................................25
SECTION 3.09 Cancellation...............................................................................25
SECTION 3.10 Computation of Interest....................................................................25
SECTION 3.11 Right of Set-Off...........................................................................26
SECTION 3.12 CUSIP Numbers..............................................................................26
SECTION 3.13 Global Securities..........................................................................26
ARTICLE 4 Satisfaction and Discharge; Defeasance...........................................................28
SECTION 4.01 Satisfaction and Discharge of Indenture....................................................28
SECTION 4.02 Defeasance and Discharge..................................................................28
SECTION 4.03 Covenant Defeasance........................................................................29
SECTION 4.04 Conditions to Defeasance or Covenant Defeasance............................................30
SECTION 4.05 Application of Trust Money.................................................................31
</TABLE>
<PAGE> 3
- ii -
<TABLE>
<S> <C>
SECTION 4.06 Indemnity for U.S. Government Obligations..................................................31
ARTICLE 5 Remedies.........................................................................................31
SECTION 5.01 Events of Default..........................................................................31
SECTION 5.02 Acceleration of Maturity; Rescission and Annulment.........................................33
SECTION 5.03 Collection of Indebtedness and Suits for Enforcement by Trustee............................33
SECTION 5.04 Trustee May File Proofs of Claim...........................................................34
SECTION 5.05 Trustee May Enforce Claims Without Possession of Securities................................34
SECTION 5.06 Application of Money Collected.............................................................34
SECTION 5.07 Limitation on Suits........................................................................35
SECTION 5.08 Unconditional Right of Holders to Receive Principal and Interest...........................35
SECTION 5.09 Restoration of Rights and Remedies.........................................................36
SECTION 5.10 Rights and Remedies Cumulative.............................................................36
SECTION 5.11 Delay or Omission Not Waiver...............................................................36
SECTION 5.12 Control by Holders.........................................................................36
SECTION 5.13 Waiver of Past Defaults....................................................................37
SECTION 5.14 Undertaking for Costs......................................................................37
SECTION 5.15 Waiver of Stay or Extension Laws...........................................................37
SECTION 5.16 Preferred Security Holders Rights..........................................................38
ARTICLE 6 The Trustee......................................................................................38
SECTION 6.01 Certain Duties and Responsibilities........................................................38
SECTION 6.02 Notice of Defaults.........................................................................38
SECTION 6.03 Certain Rights of Trustee..................................................................39
SECTION 6.04 Not Responsible for Recitals or Issuance of Securities.....................................39
SECTION 6.05 May Hold Securities........................................................................40
SECTION 6.06 Money Held in Trust........................................................................40
SECTION 6.07 Compensation; Reimbursement; and Indemnity.................................................40
SECTION 6.08 Disqualification; Conflicting Interests....................................................41
SECTION 6.09 Corporate Trustee Required; Eligibility....................................................41
SECTION 6.10 Resignation and Removal; Appointment of Successor..........................................41
SECTION 6.11 Acceptance of Appointment by Successor.....................................................42
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business................................43
SECTION 6.13 Preferential Collection of Claims Against Company..........................................43
ARTICLE 7 Holders' Lists and Reports by Trustee and Company................................................43
SECTION 7.01 Company to Furnish Trustee Names and Addresses of Holders..................................43
SECTION 7.02 Preservation of Information; Communications to Holders.....................................44
SECTION 7.03 Reports by Trustee.........................................................................44
SECTION 7.04 Reports by Company.........................................................................44
ARTICLE 8 Consolidation, Merger, Conveyance, Transfer or Lease.............................................44
SECTION 8.01 Successor Substituted......................................................................44
</TABLE>
<PAGE> 4
- iii -
<TABLE>
<S> <C>
ARTICLE 9 Supplemental Indentures..........................................................................45
SECTION 9.01 Supplemental Indentures Without Consent of Holders.........................................45
SECTION 9.02 Supplemental Indentures with Consent of Holders............................................45
SECTION 9.03 Execution of Supplemental Indentures.......................................................46
SECTION 9.04 Effect of Supplemental Indentures..........................................................47
SECTION 9.05 Conformity with Trust Indenture Act........................................................47
SECTION 9.06 Reference in Securities to Supplemental Indentures.........................................47
ARTICLE 10 Covenants; Representations and Warranties.......................................................47
SECTION 10.01 Payment of Principal and Interest.........................................................47
SECTION 10.02 Maintenance of Office or Agency...........................................................47
SECTION 10.03 Money for Security Payments to Be Held in Trust...........................................48
SECTION 10.04 Statement by Officers as to Default.......................................................49
SECTION 10.05 Existence.................................................................................49
SECTION 10.06 Maintenance of Properties.................................................................49
SECTION 10.07 Payment of Taxes and Other Claims.........................................................49
SECTION 10.08 Additional Interest.......................................................................50
SECTION 10.09 Additional Covenants......................................................................50
SECTION 10.10 Waiver of Certain Covenants...............................................................51
ARTICLE 11 Subordination of Securities.....................................................................51
SECTION 11.01 Securities Subordinate to Senior Indebtedness.............................................51
SECTION 11.02 Default on Senior Indebtedness............................................................52
SECTION 11.03 Liquidation; Dissolution; Bankruptcy......................................................52
SECTION 11.04 Subrogation...............................................................................54
SECTION 11.05 Trustee to Effectuate Subordination.......................................................54
SECTION 11.06 Notice by the Company.....................................................................55
SECTION 11.07 Rights of the Trustee; Holders of Senior Indebtedness.....................................55
SECTION 11.08 Subordination May Not be Impaired.........................................................56
ARTICLE 12 Redemption of Securities........................................................................56
SECTION 12.01 Optional Redemption; Conditions to Optional Redemption....................................56
SECTION 12.02 Applicability of Article..................................................................57
SECTION 12.03 Election to Redeem; Notice to Trustee.....................................................57
SECTION 12.04 Selection by Trustee of Securities to Be Redeemed.........................................57
SECTION 12.05 Notice of Redemption......................................................................58
SECTION 12.06 Deposit of Redemption Price...............................................................58
SECTION 12.07 Securities Payable on Redemption Date.....................................................59
SECTION 12.08 Securities Redeemed in Part...............................................................59
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Sections 310 through 318 of the Trust Indenture Act of 1939:
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- --------------------------- -----------------
Section 310(a)(1)........................................................................................6.09
(a)(2) .............................................................................................6/09
(a)(3)......................................................................................Not Applicable
(a)(4)......................................................................................Not Applicable
(b).............................................................................................6.08, 6.10
Section 311(a)...........................................................................................6.13
(b)...................................................................................................6.13
Section 312(a)...........................................................................................7.01
(b)................................................................................................7.02(b)
(c)................................................................................................7.02(c)
Section 313(a).........................................................................................7.03(a)
(a)(4).........................................................................................1.01, 10.04
(b)................................................................................................7.03(a)
(c)................................................................................................7.03(a)
(d)................................................................................................7.03(b)
Section 314(a)...........................................................................................7.04
(b).........................................................................................Not Applicable
(c)(1)................................................................................................1.02
(c)(2) .............................................................................................1.02
(c)(3)......................................................................................Not Applicable
(d).........................................................................................Not Applicable
(e)...................................................................................................1.02
Section 315(a)...........................................................................................6.01
(b)...................................................................................................6.02
(c)...................................................................................................6.01
(d)...................................................................................................6.01
(e)...................................................................................................5.14
Section 316(a)...........................................................................................1.01
(a)(1)(A).............................................................................................5.02
(a)(1)(B).................................................................................................
(a)(2)......................................................................................Not Applicable
(b)...................................................................................................5.08
(c)................................................................................................1.04(c)
Section 317(a)(1)........................................................................................5.03
(a)(2)................................................................................................5.04
(b)..................................................................................................10.03
Section 318(a)...........................................................................................1.07
</TABLE>
<PAGE> 6
- 1 -
INDENTURE, dated as of September __, 1996, among AAG Holding Company,
Inc., an Ohio corporation 250 East Fifth Street, Cincinnati, Ohio 45202 (the
"Company"), American Annuity Group, Inc., a Delaware corporation (the
Guarantor") and The Bank of New York, a ____________________ (the "Trustee").
Unless otherwise defined herein, all capitalized items used herein shall have
the meanings ascribed to them in the Amended and Restated Declaration of Trust
between the Company as Depositor and _____________________, as trustees, dated
as of ________, 1996 (the "Declaration"), as in effect on the date hereof, and
which is incorporated by reference hereto.
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its _____% Subordinated Debentures due 2026 (the "Debt
Securities");
WHEREAS, for its lawful corporate purposes, the Guarantor has duly
authorized the execution and delivery of this Indenture and deems it
appropriate to issue its guarantee of the Debt Securities on the terms herein
provided (the "Guarantee" and, together with the Debt Securities, the
"Securities");
WHEREAS, American Annuity Group Capital Trust I (the "Trust") has
offered to the public $[ ] aggregate liquidation amount of its ____% Trust
Originated Preferred Securities (the "Preferred Securities") representing
undivided beneficial interests in the assets of the Trust and proposes to
invest the proceeds from such offering in $[ ] aggregate principal amount of
the Securities;
WHEREAS, to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered, the Company and the Guarantor
have duly authorized the execution of this Indenture;
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company and the Guarantor, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holder thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01 DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE> 7
- 2 -
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(5) a reference to any Person shall include its successors and
assigns;
(6) a reference to any agreement or instrument shall mean such
agreement or instrument as supplemented, modified, amended or amended and
restated and in effect from time to time;
(7) a reference to any statute, law, rule or regulation, shall include
any amendments thereto applicable to the relevant Person, and any successor
statute, law, rule or regulation; and
(8) a reference to any particular rating category shall be deemed to
include any corresponding successor category, or any corresponding rating
category issued by a successor or subsequent rating agency.
"Act," when used with respect to any Holder, has the meaning specified
in Section ?.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means the board of directors of the Company or
the Guarantor or any duly authorized committee of either of such boards as the
context requires.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or the Guarantor, as the
case may be, to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
<PAGE> 8
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"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the Property
Trustee, under the Trust Agreement, is closed for business.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934,
or, if at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Securities" means the common securities issued by the Trust.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in
the City of New York, at which at any particular time its corporate trust
business shall be administered and which at the date of this Indenture is
________________.
"Covenant Defeasance" has the meaning specified in Section ?.
"Debt Securities" means the Debt Securities authenticated and
delivered under this Indenture.
"Declaration" has the meaning specified in the Recitals.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Defeasance" has the meaning specified in Section 4.02.
"Depositary" means, with respect to Securities issuable in whole or in
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated to act as Depositary for such
Securities.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor legislation.
<PAGE> 9
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"Expense Agreement" means the Expense Agreement contemplated by
Section 6.07.
"Extension Period" has the meaning specified in Section 3.01.
"Global Security" means a Security that evidences all or part of the
Securities and is authenticated and delivered to, and registered in the name
of, the Depositary for such Securities or a nominee thereof.
"Guarantee" means the agreement of the Guarantor, in the form set forth in
Section ? hereof, to be endorsed on the Debt Securities authenticated and
delivered under this Indenture.
"Guarantor" means American Annuity Group, Inc., a corporation duly
organized and existing under the laws of the State of Delaware.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Institutional Trustee" has the meaning set forth in the Declaration.
"Interest Deduction Date" has the meaning specified in Section 3.01.
"Interest Payment Date," when used with respect to any installment of
interest on a Security, means the date specified in such Security as the fixed
date on which an installment of interest with respect to the Securities is due
and payable.
"Investment Company Event" means the receipt by the Trust of an
opinion of an independent counsel experienced in practice under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), 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
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the Investment Company Act.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant
<PAGE> 10
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Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 10.04 shall be the principal executive, financial or
accounting officer of the Company. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company (and who may be an employee of the Company), and who
shall be reasonably acceptable to the Trustee. An opinion of counsel may rely
on certificates as to matters of fact.
" Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities authenticated and delivered under this
Indenture, except: (i) Securities canceled by the Trustee or delivered to the
Trustee for cancellation; (ii) Securities for whose payment or redemption money
in the necessary amount has been deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holder of
such Securities; provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and (iii) Securities which
have been paid pursuant to Section 3.06, or in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
<PAGE> 11
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"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.06 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the Recitals to this
instrument.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
" Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the Business Day next preceding such Interest Payment Date or if the
Securities are no longer in the form prescribed by Section 3.13, the date
selected by the Company which shall be more than one Business Day but less than
60 Business Days prior to the relevant Interest Payment Date.
"Responsible Officer," when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or
any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of his knowledge of and familiarity
with the particular subject.
"Securities" means any Debt Securities with a Guarantee endorsed
thereon.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.05.
"Senior Indebtedness" means, with respect to the Company or Guarantor,
(i) the principal, premium, if any, and interest in respect of (A) indebtedness
of such obligor for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar instruments issued by such
obligor, (ii) all capital lease obligations of such obligor, (iii) all
obligations of such obligor issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such obligor and all obligations
of such obligor under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business), (iv) all
obligations of such obligor for the reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit transaction,
(v) all obligations of the type referred to in clauses (i) through (iv) above
of other persons for the payment of which
<PAGE> 12
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such obligor is responsible or liable as obligor, guarantor or otherwise
including under all support agreements or guarantees by such obligor of
debentures, notes and other securities issued by such obligor's subsidiaries;
and (vi) all obligations of the type referred to in clauses (i) through (v)
above of other persons secured by any lien on any property or asset of such
obligor (whether or not such obligation is assumed by such obligor), except, in
each case, for (1) any such indebtedness that is by its terms subordinated to or
pari passu with the Securities and (2) any indebtedness in respect of debt
securities, issued to any trust, or a trustee of such trust, partnership or
other entity affiliated with the Company or the Guarantor that is a financing
entity for such obligor (a "financing entity") in connection with the issuance
by such financing entity of securities that are similar to the Preferred
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and be entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of such Senior Indebtedness.
"Special Event" means Investment Company Event or Tax Event.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the date on which the principal, together with any accrued and unpaid interest,
of such Security or such installment of interest is due and payable (whether
the initial such date or, if pursuant to Section 3.01 the Company elects to
extend the Stated Maturity, such later date as is chosen by the Company
pursuant to Section 3.01).
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Tax Event" means the receipt by the Trust of an opinion of
independent tax counsel experienced in such matters to the effect that, as a
result of (a) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein, or (b) as a
result of any amendment to, or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency or
regulatory authority which amendment or change is enacted, promulgated, issued
or announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the date of issuance of the
Preferred Securities), there is more than an insubstantial risk that (i) the
Trust is, or will be within 90 days of the date thereof, subject to United
States Federal income tax with respect to interest received on the Securities,
(ii) interest payable by the Company on the Securities is not,
<PAGE> 13
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or within 90 days of the date thereof will not be, deductible, in whole or in
part, for United States Federal income tax purposes or (iii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"U.S. Government Obligations" has the meaning specified in Section
4.04.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
SECTION 1.02 COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
SECTION 1.03 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession
<PAGE> 14
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of the Company, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04 ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee at the address specified in Section 1.05 and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.01) conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 7.01) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
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(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 1.05 NOTICES, ETC. TO TRUSTEE AND THE COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office; or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 1.06 NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
<PAGE> 16
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COMMON 1.07 CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the provision of the Trust Indenture Act
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or
to be excluded, as the case may be.
COMMON 1.08 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Common headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.09 SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.10 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness, the holders of Preferred
Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.11 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE PROVISIONS OF THE
TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE REQUIRED TO BE PART OF THIS
INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
SECTION 1.12 LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal of the Securities need not be made on such date, but may be made on
the next succeeding Business Day (except that, if such Business Day is in the
next succeeding calendar year, such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, shall be the immediately preceding
Business Day) with the same force and effect as if made on the Interest Payment
Date or Redemption Date, or at the Stated
<PAGE> 17
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Maturity, provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
ARTICLE 2
SECURITY FORMS
SECTION 2.01 FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these or other methods, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02 FORM OF FACE OF SECURITY.
AAG HOLDING COMPANY, INC.
__% Subordinated Debenture, Due ____________, 2026
$_________
No.______
CUSIP No. _________
AAG HOLDING COMPANY, INC., a corporation duly organized and existing
under the laws of the State of Ohio (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to
______________________________, or registered assigns, the principal sum of
________ DOLLARS ($_____) on ____ __, 2026, provided that the Company may
extend the maturity date subject to certain conditions specified in Section
3.01 of the Indenture, which extended maturity date shall in no case be later
than ____ __, 2045, and to pay interest on said principal sum from September
__, 1996 or from the most recent interest payment date (each such date, an
"Interest Payment Date") to which interest has been paid or duly provided for,
quarterly (subject to deferral as set forth herein) in arrears on January 15,
April 15, July 15 and October 15 of each year, commencing January 15, 1997, at
the rate of __% per annum until the principal hereof shall have become due and
payable, and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the same rate per annum. The amount of
interest
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payable for any period will be computed on the basis of twelve 30-day months
and a 360-day year. The amount of interest payable for any period shorter than
a full quarterly period for which interest is computed, will be computed on the
basis of actual number of days elapsed in such 90-day quarter. In the event
that any date on which interest is payable on this Security is not a Business
Day, then a payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date the payment was originally payable. A "Business Day"
shall mean any day other than a Saturday or Sunday or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the Corporate Trust Office
of the Trustee, or the principal office of the Property Trustee under the Trust
Agreement, is closed for business. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities, as defined in the Indenture) is
registered at the close of business on the Regular Record Date for such
interest installment, which shall be the close of business on the Business Day
next preceding such Interest Payment Date. Any such interest installment not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities not less than 10 days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
The Company shall have the right at any time during the term of this
Security, from time to time, to defer payment of interest on such Security for
up to 20 consecutive quarters (an "Extension Period"), provided that no
Extension Period may extend past the Maturity of this Security. There may be
multiple Extension Periods of varying lengths during the term of this Security.
At the end of each Extension Period, if any, the Company shall pay all interest
then accrued and unpaid, together with interest thereon, compounded quarterly
at the rate specified on this Security to the extent permitted by applicable
law; provided, that during any such Extension Period, (a) the Company and the
Guarantor shall not declare or pay any dividends on, or make a distribution
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of their capital stock (other than (i) repurchases or
acquisitions of shares of the Common Stock of the Company or the Guarantor as
contemplated by any employment arrangement, benefit plan or other similar
contract with or for the benefit of employees, officers or directors entered
into in the ordinary course of business, (ii) as a result of an exchange or
conversion of any class or series of the Company's or the Guarantor's capital
stock for the Company's or the Guarantor's Common Stock, as the case may be,
(iii) the purchase of fractional interests in shares of the Company's or the
Guarantor's capital stock pursuant to the conversion or exchange provisions of
such Company or Guarantor capital stock or the security being
<PAGE> 19
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converted or exchanged, as the case may be or (iv) the payment of any stock
dividend by the Company or the Guarantor payable in the Company's or the
Guarantor's Common Stock, as the case may be) or (b) the Company and the
Guarantor shall not, directly or indirectly, and shall not allow any of their
Subsidiaries to, make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by the Company or the
Guarantor that rank pari passu with or junior to this Security. Prior to the
termination of any such Extension Period, the Company may further defer
payments of interest by extending the interest payment period; provided that
such Extension Period together with all such previous and further extensions
thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity
of this Security. Upon the termination of any such Extension Period and upon
the payment of all accrued and unpaid interest then due, the Company may select
a new Extension Period, subject to the above requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof. The
Company shall give the Trustee notice of its selection of an Extension Period
at least one Business Day prior to the earlier of (i) the Interest Payment Date
or (ii) the date the Trust is required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders of
the Preferred Securities of the record date or the date such distributions are
payable, but in any event not less than one Business Day prior to such record
date.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Paying Agent maintained for that purpose in the
United States, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company, payment of interest may
be made (i) by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register or (ii) by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the Security
Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. Each Holder hereof, by his acceptance hereof, waives all notice of
the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions. Reference is hereby made to the further provisions of the
Indenture summarized on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place. Unless the
certificate of authentication hereon has been executed by the Trustee referred
to on the reverse hereof by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
<PAGE> 20
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IN WITNESS WHEREOF, AAG Holding Company, Inc. has caused this instrument
to be duly executed under its corporate seal.
Dated:____________, 1996
AAG HOLDING COMPANY, INC.
By:________________________________
Name:_____________________________
Title:______________________________
Attest:
- -------------------------------------
SECTION 2.03 FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of Securities of AAG
Holding Company, Inc., designated as its __% Subordinated Debentures, due ____
__, 2026 (herein called the "Securities"), limited in aggregate principal
amount to $___________ issued under an Indenture, dated as of __________, 1996
(herein called the "Indenture"), among the Company, American Annuity Group,
Inc., a Delaware corporation, as Guarantor (the "Guarantor") and The Bank of
New York, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Trustee,
the Company, the Guarantor and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
All terms used in this Security which are defined in the Indenture or
in the Declaration attached as Annex A thereto shall have the meanings assigned
to them in the Indenture or the Declaration, as the case may be.
At any time on or after ____ __, 2001, the Company shall have the
right, subject to the terms and conditions of Article 12 of the Indenture, to
redeem this Security at the option of the Company, without premium or penalty,
in whole or in part, at a Redemption Price equal to 100% of the principal
amount to be redeemed plus accrued but unpaid interest to the Redemption Date.
If a Special Event as defined in Article 12 of the Indenture shall occur and be
continuing, the Company shall have the right, subject to the terms and
conditions of Article 12 of the Indenture, to redeem this Security at the
option of the Company, without premium or penalty, in whole but not in part, at
a Redemption Price equal to 100% of the principal amount thereof plus accrued
but unpaid interest to the Redemption Date. Any redemption pursuant to this
paragraph will be made upon not less than 30 nor more than 60 days notice, at
the Redemption Price. If the
<PAGE> 21
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Securities are only partially redeemed by the Company, the Securities will be
redeemed pro rata. If a partial redemption of the Preferred Securities
resulting from a partial redemption of the Securities would result in the
delisting of the Preferred Securities, the Company may only redeem the
Securities in whole. In the event of redemption of this Security in part only,
a new Security or Securities for the unredeemed portion hereof will be issued
in the name of the Holder hereof upon the cancellation hereof. If an Event of
Default with respect to the Securities shall occur and be continuing, the
principal of the Securities may be declared due and payable in the manner, with
the effect and subject to the conditions provided in the Indenture. The
Indenture contains provisions for satisfaction and discharge at any time of the
entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of Holders of not less than a majority in principal
amount of the Outstanding Securities affected by such modification, to modify
the Indenture in a manner affecting the rights of the Holders of the
Securities; provided that no such modification may, without the consent of the
Holder of each Outstanding Security affected thereby, (i) except to the extent
permitted and subject to the conditions set forth in the Indenture with respect
to the extension of the Maturity of this Security, change the Maturity of, the
principal of, or any installment of interest on, the Security, or reduce the
principal amount hereof or the rate of interest thereon, or change the place of
payment where, or the coin or currency in which, this Security or interest
hereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Maturity hereof (or, in the case of
redemption, on or after the Redemption Date), or modify the provisions of the
Indenture with respect to the subordination of the Securities in a manner
adverse to the Holders, (ii) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences) provided for in the Indenture, or
(iii) modify any of the provisions of Section 5.13, Section 9.03 or Section
10.09 of the Indenture, except to increase any such percentage or to provide
that certain other provisions of the Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided, that, so long as any of the Preferred Securities remains
outstanding, no such amendment shall be made that adversely affects the holders
of the Preferred Securities, and no termination of the Indenture shall occur,
and no waiver of any Event of Default or compliance with any covenant under
this Indenture shall be effective, without the prior consent of the holders of
at least a majority of the aggregate liquidation preference of the outstanding
Preferred Securities unless and until the principal of and any premium on the
Securities and all accrued and unpaid interest thereon have been paid in full.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
<PAGE> 22
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As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees. No service charge shall
be made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Securities are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 2.04 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
---------------------------------,
The Bank of New York, as Trustee
By:______________________________
Authorized Officer
SECTION 2.05. UNCONDITIONAL GUARANTEES.
(FORM OF GUARANTEE)
<PAGE> 23
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FOR VALUE RECEIVED, the Guarantor, hereby unconditionally guarantees
to the holder of the Debt Security upon which this Guarantee is endorsed the
due and punctual payment of the principal or interest on said Debt Security,
when and as the same shall become due and payable, whether at maturity, upon
redemption or otherwise, according to the terms thereof and of the Indenture
referred to therein.
The Guarantor agrees to determine, at least one business day prior to
the date upon which a payment of principal of or interest on said Debt Security
is due and payable, whether the Company has available the funds to make such
payment as the same shall become due and payable. In case of the failure of the
Company punctually to pay any such principal, premium, if any, or interest, the
Guarantor hereby agrees to cause any such payment to be made punctually when
and as the same shall become due and payable, whether at maturity, upon
redemption, or otherwise, and as if such payment were made by the Company.
The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrevocable, and absolute, irrespective of the validity,
regularity, or enforceability of said Debt Security or said Indenture, the
absence of any action to enforce the same, any waiver or consent by the Holder
of said Debt Security with respect to any provisions thereof, the recovery of
any judgment against the Company or any action to enforce the same, or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to said Debt Security or
indebtedness evidenced thereby, and all demands whatsoever and covenants that
this Guarantee will not be discharged except by complete performance of the
obligations contained in said Security and in this Guarantee.
The Guarantor shall be subrogated to all rights of the holder of said
Debt Security against the Company in respect of any amounts paid by the
Guarantor pursuant to the provisions of this Guarantee; provided, however, that
the Guarantor shall not, without the consent of the holders of all of the Debt
Securities then outstanding, be entitled to enforce or to receive any payments
arising out of or based upon such right of subrogation until the principal of
and premium, if any, and interest on all Debt Securities shall have been paid
in full or payment thereof shall have been provided for in accordance with said
Indenture.
Notwithstanding anything to the contrary contained herein, if
following any payment of principal or interest by the Company on the Debt
Securities to the holders of the Debt Securities it is determined by a final
decision of a court of competent jurisdiction that such payment shall be
avoided by a trustee in bankruptcy (including any debtor-in-possession) as a
preference under 11 U.S.C. Section 547 and such payment is paid by such holder
to such trustee in bankruptcy, then and to the extent of such repayment, the
obligations of the Guarantor hereunder shall remain in full force and effect.
<PAGE> 24
- 19 -
This Guarantee shall not be valid or become obligatory for any purpose
with respect to a Debt Security until the certificate of authentication on such
Security shall have been signed by the Trustee (or the Authentication Agent).
This Guarantee shall be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, American Annuity Group, Inc. has caused this
Guarantee to be signed in its corporate name by the facsimile signature of two
of its officers thereunto duly authorized and has caused a facsimile of its
corporate seal to be affixed hereunto or imprinted or otherwise reproduced
hereon.
AMERICAN ANNUITY GROUP, INC.
By:_________________________________
Name:______________________________
Title:_______________________________
Attest: _______________________________
SECTION 2.06 ASSUMPTION BY GUARANTOR.
(1) The Guarantor may, without the consent of the Holders, assume all
of the rights and obligations of the Company hereunder with respect to the Debt
Securities if, after giving effect to such assumption, no Event of Default
shall have occurred and be continuing. Upon such an assumption, the Guarantor
shall execute a supplemental indenture evidencing its assumption of all such
rights and obligations of the Company and the Company shall be released from
its liabilities hereunder and under such Debt Securities as obligor.
(2) The Guarantor shall assume all of the rights and obligations of
the Company hereunder with respect to the Debt Securities if, upon a default by
the Company in the due and punctual payment of the principal or interest on
such Debt Securities, the Guarantor is prevented by any court order or judicial
proceeding from fulfilling its obligations under Section 7 with respect to such
Debt Securities. Such assumption shall result in the Debt Securities becoming
the direct obligations of the Guarantor and shall be effected without the
consent of the holders of the Debt Securities. Upon such an assumption, the
Guarantor shall execute a supplemental indenture evidencing its assumption of
all such rights and obligations of the Company, and the Company shall be
released from its liabilities hereunder and under the Debt Securities as
obligor.
<PAGE> 25
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ARTICLE 3
THE SECURITIES
SECTION 3.01 TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $____________
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
3.04, 3.05, 3.06, 9.06 or 12.08.
The Securities shall be known and designated as the "__% Subordinated
Debentures, Due ____ __, 2026" of the Company. Their initial Stated Maturity
shall be _____________, 2026. Not less than ninety (90) days prior to the
initial Stated Maturity, the Company may, in its sole discretion, extend the
Stated Maturity for one or more periods, but in no event later than the earlier
of (i) ______, 2045 or (ii) the Interest Deduction Date. The "Interest
Deduction Date" shall mean the date which is six months earlier than the ending
date of the maximum term (beginning on the date of issue of the Debt Securities
and including any extensions thereof), as determined under any federal statute
applicable by its terms to the Debt Securities which is enacted at any time
after the issuance of the Debt Securities (including, but not limited to, at
any time after an extension of the Stated Maturity), of a debt instrument for
which interest is deductible for federal income tax purposes. In no event shall
the extended Stated Maturity be later than the Interest Deduction Date even if
the Stated Maturity has previously been extended to a date beyond the Interest
Deduction Date; provided that all of the following conditions are satisfied at
the time the Company elects to extend the stated maturity: (i) the Company is
not in bankruptcy or otherwise insolvent, (ii) the Company is not in default in
the payment of any interest or principal on any Security issued to the Trust or
to any Trustee of the Trust in connection with an issuance of Preferred
Securities or Common Securities by the Trust, (iii) the Company has made timely
payments on the Securities for the immediately preceding six quarters without
deferrals, (iv) the Trust is not in arrears on payments of distributions on the
Preferred Securities, (v) the Securities or Preferred Securities are rated
investment grade by any one of Standard & Poors Corporation, Moody's Investors
Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or
any other nationally recognized statistical rating organization, and (vi) the
extended Stated Maturity is no later than the 49th anniversary of the issuance
of the Preferred Securities.
In addition, if the Company exercises its right to liquidate the Trust
and distribute the Securities effective upon such exercise, the Maturity of the
Securities may be changed to (i) any date elected by the Company that is no
earlier than __________, 2001 and (ii) any date elected by the Company which is
not later than the earlier of (a) __________, 2045 or (b) the Interest
Deduction Date; provided that on the date the Company exercises such right, and
on the Maturity in effect prior to such proposed extension, the conditions
specified in the previous paragraph are satisfied.
<PAGE> 26
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The Securities shall bear interest at the rate of __% per annum, from
_______, 1996 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, as the case may be, payable quarterly
(subject to deferral as set forth herein), in arrears, on January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1996 until the
principal thereof is paid or made available for payment. Interest will compound
quarterly and will accrue at the rate of __% per annum on any interest
installment in arrears for more than one quarter or during an extension of an
interest payment period as set forth below in this Section 3.01. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then a payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (except that, if such Business Day
is in the next succeeding calendar year, such Interest Payment Date shall be
the immediately preceding Business Day) (and without any interest or other
payment in respect of any such delay).
The Company shall have the right at any time during the term of the
Securities, from time to time, to defer payment of interest on such Security
for up to 20 consecutive quarters (an "Extension Period"), provided that no
Extension Period may extend past the Maturity of the Security. There may be
multiple Extension Periods of varying lengths during the term of the
Securities. At the end of each Extension Period, if any, the Company shall pay
all interest then accrued and unpaid, together with interest thereon,
compounded quarterly at the rate specified on this Security to the extent
permitted by applicable law; provided, that during any such Extension Period,
(a) the Company and the Guarantor shall not declare or pay any dividends on, or
make a distribution with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of their capital stock (other than (i)
repurchases or acquisitions of shares of the Common Stock of the Company or the
Guarantor as contemplated by any employment arrangement, benefit plan or other
similar contract with or for the benefit of employees, officers or directors
entered into in the ordinary course of business, (ii) as a result of an
exchange or conversion of any class or series of the Company's or the
Guarantor's capital stock for the Company's or the Guarantor's Common Stock, as
the case may be, (iii) the purchase of fractional interests in shares of the
Company's or the Guarantor's capital stock pursuant to the conversion or
exchange provisions of such Company or Guarantor capital stock or the security
being converted or exchanged, as the case may be or (iv) the payment of any
stock dividend by the Company or the Guarantor payable in the Company's or the
Guarantor's Common Stock, as the case may be) or (b) the Company and the
Guarantor shall not, directly or indirectly, and shall not allow any of their
Subsidiaries to, make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by the Company or the
Guarantor that rank pari passu with or junior to this Security. Prior to the
termination of any such Extension Period, the Company may further defer
payments of interest by extending the interest payment period; provided that
such Extension Period together with all such previous and further extensions
thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity
of this Security. Upon the termination of any such Extension Period and upon
the payment of all accrued and unpaid interest then due, the Company may select
a new Extension Period, subject to the above requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof. The
Company has no present intention of exercising its right to defer payments of
interest by extending the interest payment period on the Securities. If the
Trust is
<PAGE> 27
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the sole holder of the Securities, the Company shall give the Trust notice of
its selection of such Extension Period one Business Day prior to the earlier of
(i) the date distributions on the Preferred Securities are payable or (ii) the
date the Trust is required to give notice to the New York Stock Exchange or to
holders of the Preferred Securities of the record date or the date such
distribution is payable. If the Trust is not the sole holder of the Securities,
the Company shall give the holders of the Securities notice of its selection of
such Extension Period ten Business Days prior to the earlier of (i) the
applicable Interest Payment Date or (ii) the date the Trust is required to give
notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Preferred Securities of the record date.
The Trustee shall promptly give notice of the Company's selection of
such Extension Period to the holders of the Preferred Securities.
The principal of and interest on the Securities shall be payable at
the office or agency of the Paying Agent in the United States maintained for
such purpose and at any other office or agency maintained by the Company for
such purpose in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the Security
Register.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article 11.
The Securities shall be redeemable as provided in Article 12.
SECTION 3.02 DENOMINATIONS.
The Securities shall be issuable only in registered form, without
coupons, and only in denominations of $25 and any integral multiple thereof.
SECTION 3.03 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company and the
Guarantor by their respective Chairman of the Board, its Vice Chairman of the
Board, its President or one of the respective Vice Presidents, under their
corporate seals reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company or the Guarantor shall
bind the Company or the Guarantor, as the case may be, notwithstanding that
such individuals or any of them have ceased to hold such
<PAGE> 28
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offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company and
the Guarantor to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
SECTION 3.04 TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company and the
Guarantor may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.02, without charge
to the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities
of authorized denominations. Until so exchanged the temporary Securities shall
in all respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 3.05 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.02 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
<PAGE> 29
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hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 10.02 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate
principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
and the Guarantor shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company and the Guarantor,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.04, 9.06 or 12.08 not involving any transfer.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption under Section 12.03 and ending at the close of business on the day
of such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
SECTION 3.06 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
and the Guarantor shall execute and the Trustee shall authenticate and deliver
in exchange therefor a new Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
<PAGE> 30
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If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing
<PAGE> 31
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of the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and, if so listed, upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee. Subject to the
foregoing provisions of this Section, each Security delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
SECTION 3.08 PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee shall
treat the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.07) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 3.09 CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled
<PAGE> 32
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by the Trustee. No Securities shall be authenticated in lieu of or in exchange
for any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee shall
be disposed of as directed by a Company Order.
SECTION 3.10 COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30- day months. The amount of interest payable for any period
shorter than a full quarterly period for which interest is computed, will be
computed on the basis of actual number of days elapsed in such 90 day quarter.
SECTION 3.11 RIGHT OF SET-OFF.
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
thereunder to the extent the Company has theretofore made, or is concurrently
on the date of such payment making, a payment under the Guarantee.
SECTION 3.12 CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
SECTION 3.13 GLOBAL SECURITIES.
If the Securities are distributed to holders of Preferred Securities
in liquidation of such holder's interests in the Trust, such Securities will
initially be issued as a Global Security. If the Company shall establish that
the Securities are to be issued in the form of one or more Global Securities,
then the Company shall execute and the Trustee shall, in accordance with
Section 3.03 and the Company Order, authenticate and deliver one or more Global
Securities that (i) shall represent and shall be denominated in an amount equal
to the aggregate principal amount of all of the Securities to be issued in the
form of Global Securities and not yet canceled, (ii) shall be registered in the
name of the Depositary for such Global Security or Securities or the nominee of
such Depositary, and (iii) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions. Global Securities shall bear a
legend substantially to the following effect:
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This
<PAGE> 33
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Global Security is exchangeable for Securities registered in the name of a
Person other than the Depositary or its nominee only in the limited
circumstances described in the Indenture, and no transfer of this Security
(other than a transfer of this Security as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary) may be registered except in such limited
circumstances. Every Security delivered upon registration of transfer of, or in
exchange for, or in lieu of, this Global Security shall be a Global Security
subject to the foregoing, except in the limited circumstances described above.
Unless this certificate is presented by an authorized representative of The
Depositary Trust Company, a New York corporation ("DTC"), to the Company or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is to be made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein. Notwithstanding the provisions of
Section 3.05, unless and until it is exchanged in whole or in part for
Securities in definitive registered form, a Global Security representing all or
a part of the Securities may not be transferred in the manner provided in
Section 3.05 except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
If at any time the Depositary for any Securities represented by one or
more Global Securities notifies the Company that it is unwilling or unable to
continue as Depositary for such Securities or if at any time the Depositary for
such Securities shall no longer be eligible under this Section 3.13, the
Company shall appoint a successor Depositary with respect to such Securities.
If a successor Depositary for such Securities is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company's election that such Securities be represented by
one or more Global Securities shall no longer be effective and the Company
shall execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of definitive Securities, will authenticate and
deliver Securities in definitive registered form, in any authorized
denominations, in an aggregate principal amount equal to the principal amount
of the Global Security or Securities representing such Securities in exchange
for such Global Security or Securities.
The Company may at any time and in its sole discretion determine that
the Securities issued in the form of one or more Global Securities shall no
longer be represented by a Global Security or Securities. In such event the
Company shall execute, and the Trustee, upon receipt of a Company Order or an
Officers' Certificate for the authentication and delivery of definitive
Securities, shall authenticate and deliver, Securities in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal
to the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
<PAGE> 34
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If specified by the Company with respect to Securities represented by
a Global Security, the Depositary for such Global Security may surrender such
Global Security in exchange in whole or in part for Securities in definitive
registered form on such terms as are acceptable to the Company and such
Depositary. Thereupon, the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge, (i) to the Person specified
by such Depositary, a new Security or Securities, of any authorized
denominations as requested by such Person, in an aggregate principal amount
equal to and in exchange for such Person's beneficial interest in the Global
Security; and (ii) to such Depositary a new Global Security in a denomination
equal to the difference, if any, between the principal amount of the
surrendered Global Security and the aggregate principal amount of Securities
authenticated and delivered pursuant to clause (i) above. Upon the exchange of
a Global Security for Securities in definitive registered form in authorized
denominations, such Global Security shall be canceled by the Trustee or an
agent of the Company or the Trustee. Securities in definitive registered form
issued in exchange for a Global Security pursuant to this Section 3.13 shall be
registered in such names and in such authorized denominations as the Depositary
for such Global Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee or an agent of the
Company or the Trustee. The Trustee or such agent shall deliver at its office
such Securities to or as directed by the Persons in whose names such Securities
are so registered.
ARTICLE 4
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 4.01 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on written demand of and at the
expense of the Company, shall execute instruments supplied by the Company
acknowledging satisfaction and discharge of this Indenture, when (1) either (A)
All Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.03) have been delivered to the Trustee
for cancellation; or (B) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, or (ii) will become
due and payable at their Stated Maturity within one year, or (iii) if
redeemable at the option of the Company, 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, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be; (2) the Company has paid or caused to be paid all
other
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sums payable hereunder by the Company; and (3) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with. Notwithstanding the
satisfaction and discharge of this Indenture, the obligations of the Company to
the Trustee under Section 6.07 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 4.02 and the last paragraph of Section
10.03 shall survive.
SECTION 4.02 DEFEASANCE AND DISCHARGE.
The following provisions shall apply to the Securities unless
specifically otherwise provided in a Board Resolution, Officers' Certificate or
indenture supplemental hereto provided pursuant to Section 3.01. In addition to
discharge of this Indenture pursuant to Sections 4.01 and ?, in the case of any
Securities with respect to which the exact amount described in subparagraph (a)
of Section 4.04 can be determined at the time of making the deposit referred to
in such subparagraph (a), the Company shall be deemed to have paid and
discharged the entire indebtedness on all the Securities as provided in this
Section on and after the date the conditions set forth in Section 4.04 are
satisfied, and the provisions of this Indenture with respect to the Securities
shall no longer be in effect (except as to (i) rights of registration of
transfer and exchange of Securities, (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to
receive, solely from the trust fund described in subparagraph (a) of Section
4.04, payments of principal thereof and interest, if any, thereon upon the
original stated due dates therefor (but not upon acceleration), (iv) the
rights, obligations, duties and immunities of the Trustee hereunder, (v) this
Section 4.02 and (vi) the rights of the Holders of Securities as beneficiaries
hereof with respect to the property so deposited with the Trustee payable to
all or any of them) (hereinafter called "Defeasance"), and the Trustee at the
cost and expense of the Company, shall execute proper instruments acknowledging
the same.
SECTION 4.03 COVENANT DEFEASANCE.
In the case of any Securities with respect to which the exact amount
described in subparagraph (a) of Section 4.04 can be determined at the time of
making the deposit referred to in such subparagraph (a), (i) the Company shall
be released from its obligations under any covenants specified in or pursuant
to this Indenture (except as to (i) rights of registration of transfer and
exchange of Securities, (ii) substitution of mutilated, defaced, destroyed,
lost or stolen Securities, (iii) rights of Holders of Securities to receive,
from the Company pursuant to Section 10.01, payments of principal thereof and
interest, if any, thereon upon the original stated due dates therefor (but not
upon acceleration), (iv) the rights, obligations, duties and immunities of the
Trustee hereunder and (v) the rights of the Holders of Securities as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them), and (ii) the occurrence of any event specified
in Section 5.01(3) (with respect to any of the covenants specified in or
pursuant to this Indenture) shall be deemed not to be or result in an Event of
Default, in each case with respect to the Outstanding Securities as provided in
this Section on and after the date the conditions set forth in Section 4.04 are
satisfied (hereinafter called
<PAGE> 36
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"Covenant Defeasance"), and the Trustee, at the cost and expense of the
Company, shall execute proper instruments acknowledging the same. For this
purpose, such Covenant Defeasance means that the Company may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant (to the extent so specified in the
case of Section 5.01(4)), whether directly or indirectly by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document,
but the remainder of this Indenture and the Securities shall be unaffected
thereby.
SECTION 4.04 CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
4.02 or 4.03 to the Outstanding Securities:
(a) with reference to Section 4.02 or 4.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the Trustee as
funds in trust, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of Securities (i) cash in an amount, or (ii) direct
obligations of the United States of America, backed by its full faith and
credit ("U.S. Government Obligations"), maturing as to principal and interest,
if any, at such times and in such amounts as will insure the availability of
cash, (iii) obligations of a Person controlled or supervised by and acting as
any agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation of the United States of American, or (iv) a combination thereof, in
each case sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge the principal of and interest,
if any, on all Securities on each date that such principal or interest, if any,
is due and payable;
(b) in the case of Defeasance under Section 4.02, the Company has
delivered to the Trustee an Opinion of Counsel based on the fact that (x) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (y), since the date hereof, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and such opinion shall confirm that, the Holders of the Securities of
such series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, Defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times, as would have been the case if such deposit, Defeasance and
discharge had not occurred;
(c) in the case of Covenant Defeasance under Section ?, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that, and such
opinion shall confirm that, the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and Covenant Defeasance and will be subject to federal income tax on
the same amount and in the same manner and at the same times, as would have
been the case if such deposit and Covenant Defeasance had not occurred;
<PAGE> 37
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(d) such Defeasance or Covenant Defeasance will not result in a breach
or violation of, or constitute a default under, any agreement or instrument to
which the Company is a party or by which it is bound; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent contemplated by this provision have been complied with.
SECTION 4.05 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.03, all
money and U.S. Government Obligations deposited with the Trustee pursuant to
Section 4.01 shall be held in trust and such money and all money from such U.S.
Government Obligations shall be applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal and interest for whose payment such money and U.S. Government
Obligations has been deposited with the Trustee.
SECTION 4.06 INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 4.04 or the principal or interest received in
respect of such obligations other than any such tax, fee or other charge that
by law is for the account of the Holders of Outstanding Securities.
ARTICLE 5
REMEDIES
SECTION 5.01 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article 11 or 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):
(1) failure for 30 days to pay any installment of interest on the
Securities when due (subject to the deferral of any due date in the case of an
Extension Period); or
(2) failure to pay any principal on the Securities when due whether at
Stated Maturity, following notice of redemption, by declaration of acceleration
or otherwise; or
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(3) failure to observe or perform in any material respect any other
covenant or agreement herein (other than a covenant or agreement default which
is specifically designated as having a different time period) for 60 days after
written notice to the Company from the Trustee; or
(4) default under any instrument (including this Indenture) or any
other evidence of Indebtedness for money borrowed by the Company having an
aggregate outstanding principal amount in excess of $15 million, at maturity or
which default shall have resulted in such Indebtedness being accelerated,
without such Indebtedness being discharged or such acceleration having been
rescinded or annulled within 10 days after receipt of notice thereof by the
Company from the Trustee; or
(5) the voluntary or involuntary dissolution or winding up of the
business of the Trust or other termination of the existence of the Trust, other
than in connection with (i) the distribution of the Securities to holders of
the Preferred Securities and Common Securities in liquidation of their
interests in the Trust, (ii) the redemption of all outstanding Preferred
Securities and Common Securities, or (iii) certain mergers, consolidations or
amalgamations of the Trust, each as permitted by the Declaration; or
(6) any final non-appealable judgment or order for the payment of
money in excess of $15 million is rendered against the Company, such judgment
or order is not satisfied by payment or bonded and either enforcement
proceedings shall have been commenced by the judgment and/or there has been a
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not have
been in effect; provided, however, that a judgment or order fully covered by
insurance (or a judgment or order for the payment of money covered by insurance
to the extent of all payments in excess of $15 million), which coverage has not
been disputed by the insurer, shall not be considered a default or an Event of
Default; or
(7) entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Guarantor or the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of substantially all of the
property of the Company, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 90 consecutive
days; or
(8) (A) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or (B) the consent by the Company or to
the entry of a decree or order for relief in respect of itself in an
involuntary case
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or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Company, or (C) the filing by the
Company of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or (D) the consent by the Company to
the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of all or substantially all of the property
of the Company, or (E) the making by the Company of an assignment for the
benefit of creditors.
SECTION 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Securities shall have the right to declare the principal of
and the interest on all the Securities and any other amounts payable hereunder
to be due and payable immediately, provided, however, that if upon an Event of
Default, the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities fail to declare the payment of all amounts
on the Securities to be immediately due and payable, the holders of at least
50% in aggregate liquidation preference of Preferred Securities then
outstanding shall have such right, by a notice in writing to the Company (and
to the Trustee if given by Holders or the holders of Preferred Securities) and
upon any such declaration such principal and all accrued interest shall become
immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if (1) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Securities, (B) the principal
of (and premium, if any, on) any Securities which have become due otherwise
than by such declaration of acceleration and interest thereon at the rate borne
by the Securities, (C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and (D) all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
(2) all Events of Default, other than the non-payment of the principal of
Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 5.13. No such rescission shall
affect any subsequent default or impair any right consequent thereon.
SECTION 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
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(2) default is made in the payment of the principal of any Security at
the Maturity thereof, the Company will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal and interest, and, to the extent
that payment thereof shall be legally enforceable, interest on any overdue
principal and on any overdue interest, at the rate borne by the Securities,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company (or any other obligor upon the Securities),
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee
shall be authorized to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 6.07. No provision of this
Indenture shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 5.05 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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SECTION 5.06 APPLICATION OF MONEY COLLECTED.
Subject to Article 11, any money collected by the Trustee pursuant to
this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal upon presentation of the Securities and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and interest, respectively.
SECTION 5.07 LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities; it being understood and
intended that no one or more Holders shall have any right in any manner
whatever by virtue of, or by availing of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holders, or to obtain or
to seek to obtain priority or preference over any other Holders or to enforce
any right under this Indenture, except in the manner herein provided and for
the equal and ratable benefit of all the Holders.
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SECTION 5.08 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 3.07) interest on
such Security on the Stated Maturity (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 5.09 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.06, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.11 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12 CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture; and
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(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13 WAIVER OF PAST DEFAULTS.
Subject to Sections 9.02 and 10.09 hereof, the Holders of not less
than a majority in principal amount of the Outstanding Securities may on behalf
of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default:
(1) in the payment of the principal of or interest on any Security
(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 Trustee); or
(2) in respect of a covenant or provision hereof which under Article 9
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected; provided, however, that such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation preference of Preferred Securities shall have consented
to such waiver or modification to such waiver; provided further, that if the
consent of the Holder of each of the Outstanding Securities is required, such
waiver shall not be effective until each Holder of the Preferred Securities
shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist, effective as
of the date specified in such waiver (and effective retroactively to the date
of default, if so specified) and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 5.14 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company
or the Trustee or in any suit for the enforcement of the right to receive the
principal of and interest on any Security.
SECTION 5.15 WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
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may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.16 PREFERRED SECURITY HOLDERS RIGHTS.
If an Event of Default constituting the failure to pay interest or
principal on the Securities on the date such interest or principal is otherwise
payable has occurred and is continuing, then a holder of Preferred Securities
may directly institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on the Securities having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities or
such holder on or after the respective due date specified in the Securities.
ARTICLE 6
THE TRUSTEE
SECTION 6.01 CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section.
SECTION 6.02 NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
except in the case of a default in the payment of the principal of or interest
on any Security, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the
Holders of Securities; provided, further, that in the case of any default of
the character specified in Section 5.01(3), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. For the purpose of
this Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default. For purposes of this
Section, the Trustee shall not be deemed to have knowledge of a default unless
the Trustee has actual knowledge of such default or has received written notice
of such default in the manner contemplated by Section 1.05.
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SECTION 6.03 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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SECTION 6.04 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
SECTION 6.05 MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar, or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent. Money held
by the Trustee in trust hereunder shall not be invested by the Trustee pending
distribution thereof to the holders of the Securities.
SECTION 6.06 MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 6.07 COMPENSATION; REIMBURSEMENT; AND INDEMNITY.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim, liability or
expense, including taxes (other than taxes based on the income of the Trustee)
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust or the trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
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The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the payment of principal of (and premium,
if any, on) or interest on particular Securities.
SECTION 6.08 DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.09 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and has its
Corporate Trust Office in New York, New York. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
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1) the Trustee shall fail to comply with Section 6.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
2) the Trustee shall cease to be eligible under Section 6.09 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in
the manner provided in Section 1.06. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; provided that, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
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property and money held by such retiring Trustee hereunder. Upon request of any
such successor Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE 7
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than February 15 and August 15 in each
year, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders to the extent the Company has knowledge thereof as
of a date not more than 15 days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished; excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
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SECTION 7.02 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 supplied to the
Trustee by the Depository at the Trustee's request, and the names and addresses
of Holders received by the Trustee in its capacity as Security Registrar. The
Trustee may destroy any list furnished to it as provided in Section 7.01 upon
receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 7.03 REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 7.04 REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 shall
be filed with the Trustee within 15 days after the same is so required to be
filed with the Commission.
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ARTICLE 8
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01 SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been named as
the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under
this Indenture and the Securities.
ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company and the Guarantor,
when authorized by appropriate Board Resolutions, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein and
in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company;
or
(3) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided that such action pursuant to this clause (3) shall not
adversely affect the interests of the Holders of the Securities or, so long as
any of the Preferred Securities shall remain outstanding, the holders of the
Preferred Securities; or
(4) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company, the Guarantor and the Trustee, the Company and the
Guarantor, when authorized by appropriate Board Resolutions, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture;
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provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) except to the extent permitted and subject to the conditions set
forth in Section 3.01 with respect to the extension of the Stated Maturity of
the Securities, change the Stated Maturity of, the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or modify the provisions of this Indenture with
respect to the subordination of the Securities in a manner adverse to the
Holders,
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.09, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby;
provided, that, so long as any of the Preferred Securities remains outstanding,
no such amendment shall be made that adversely affects the holders of the
Preferred Securities, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of the outstanding
Preferred Securities unless and until the principal of and any premium on the
Securities and all accrued and unpaid interest thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
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SECTION 9.04 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 9.05 CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 9.06 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE 10
COVENANTS; REPRESENTATIONS AND WARRANTIES
SECTION 10.01 PAYMENT OF PRINCIPAL AND INTEREST.
The Company will duly and punctually pay the principal of and interest
on the Securities in accordance with the terms of the Securities and this
Indenture and comply with all other terms, agreements and conditions contained
herein.
SECTION 10.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange, where Securities
may be surrendered for conversion and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive
all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be
presented or surrendered for any or all such
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purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the United States
for such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
SECTION 10.03 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or at the option of the Company on or before each due date of the principal
of or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act. In such case the Company shall not invest
the amount so segregated and held in trust pending the distribution thereof.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act; provided, however, that any such deposit on a due date shall
be initiated prior to 1:00 p.m. (New York time) in same-day funds.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture
Act applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general
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creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease.
SECTION 10.04 STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the material terms, provisions and conditions of this Indenture (without regard
to any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 10.05 EXISTENCE.
Subject to Article 8, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders and,
while any Preferred Securities are outstanding, the holders of the Preferred
Securities.
SECTION 10.06 MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 10.07 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary that
comprise more
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than 10% of the assets of the Company and its Subsidiaries taken as a whole;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 10.08 ADDITIONAL COVENANTS.
The Company also covenants that so long as the Preferred Securities
and Common Securities remain outstanding (i) to maintain 100% direct or
indirect ownership of the Common Securities of the Trust; provided, however,
that any permitted successor of the Company hereunder may succeed to the
Company's ownership of such Common Securities, (ii) not to voluntarily
dissolve, wind-up or terminate the Trust, except in connection with a
distribution of the Securities or certain mergers, consolidations or
amalgamations, (iii) to timely perform its duties as sponsor of the Trust, (iv)
to use its reasonable efforts to cause the Trust (A) to remain a business trust
classified as a grantor trust except in connection with the distribution of the
Securities to the holders of the Preferred Securities in liquidation of the
Trust, the redemption of all Preferred Securities and Common Securities of the
Trust or certain mergers, consolidations or amalgamations, each as permitted by
the Declaration, and (B) to continue not to be treated as an association
taxable as a corporation for United States federal income tax purposes other
than in connection with a distribution of Securities to the holders of
Preferred Securities in liquidation of the Trust, (v) to use its reasonable
efforts to cause each holder of Preferred Securities and Common Securities to
be treated as owning an undivided beneficial interest in the Securities and
(vi) to appoint a successor trustee whenever necessary to avoid or fill a
vacancy in the office of Trustee.
SECTION 10.09 WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified as contemplated by Section 3.01 for
Securities, the Company may, with respect to the Securities, omit in any
particular instance to comply with any term, provision or condition set forth
in any covenant provided pursuant to Section 9.01(2) for the benefit of the
Holders if before the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities shall, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
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ARTICLE 11
SUBORDINATION OF SECURITIES
SECTION 11.01 SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to Article 4), the
payment of the principal of and interest on each and all of the Securities are
hereby expressly made subordinate and subject in right of payment to the prior
payment in full in cash of all Senior Indebtedness. The payment by the
Guarantor of any obligation due under the Guarantee shall, to the extent and in
the manner hereinafter set forth, be subordinated and junior in right of
payment to the prior payment in full of all Senior Indebtedness of the
Guarantor, whether outstanding at the date of this Indenture or thereafter
incurred.
This Article 11 shall constitute a continuing offer to all persons who
become holders of, or continue to hold, Senior Indebtedness, and such
provisions are made for the benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any one or more of them may
enforce such provisions. Holders of Senior Indebtedness need not prove reliance
on the subordination provisions hereof.
SECTION 11.02 DEFAULT ON SENIOR INDEBTEDNESS.
In the event and during the continuation of any default by the Company
or the Guarantor in the payment of principal, premium, interest or any other
payment due on any Senior Indebtedness (and any applicable grace period with
respect to such default has ended and such default has not been cured or
waived) or in the event that the maturity of any Senior Indebtedness of the
Company or the Guarantor, as the case may be, has been accelerated because of a
default, then, in either case, no payment shall be made by the Company with
respect to the principal (including redemption payments) of, or interest on,
the Securities, including payment with respect to any obligation due under the
Guarantee.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Holder when such payment is prohibited by the
preceding paragraph of this Section 11.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee within 90 days of such payment
of the amounts then due and owing on the Senior Indebtedness and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness.
SECTION 11.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment by the Company or the Guarantor, or distribution of
assets of the Company or the Guarantor of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution or winding-up
or liquidation or reorganization of the Company or the Guarantor, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or
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other proceedings, all principal of, and premium, if any, and interest due or
to become due upon all Senior Indebtedness of the Company or the Guarantor, as
the case may be, (including interest after the commencement of any bankruptcy,
insolvency, receivership or other proceedings at the rate specified in the
applicable Senior Indebtedness whether or not such interest is an allowable
claim in any such proceeding) shall first be paid in full, or payment thereof
provided for in money in accordance with its terms, before any payment is made
on account of the principal or interest on the Securities; and upon any such
dissolution or winding-up or liquidation or reorganization any payment by the
Company or the Guarantor, or distribution of substantially all of the assets of
the Company or the Guarantor of any kind or character, whether in cash,
property or securities, to which the Holders of the Securities or the Trustee
would be entitled, except for the provisions of this Article 11, shall be paid
by the Company or the Guarantor, as the case may be, or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders of the Securities or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Indebtedness of the Company or the Guarantor, as the case may be, (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Company or the
Guarantor, as the case may be) or their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full of the Company or the Guarantor, as the case may be,
(including interest after the commencement of any bankruptcy, insolvency,
receivership or other proceedings at the rate specified in the applicable
Senior Indebtedness whether or not such interest is an allowable claim in any
such proceeding) or to provide for such payment in money in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness, before any payment or distribution is made
to the Holders of Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or the Guarantor of any kind or
character, whether in cash, property or securities, prohibited by the
foregoing, shall be received by the Trustee or the Holders of the Securities
before all Senior Indebtedness of the Company or the Guarantor is paid in full,
of the Company or the Guarantor, as the case may be, (including interest after
the commencement of any bankruptcy, insolvency, receivership or other
proceedings at the rate specified in the applicable Senior Indebtedness whether
or not such interest is an allowable claim in any such proceeding) or provision
is made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company or the
Guarantor, for application to the payment of all Senior Indebtedness of the
Company or the Guarantor, as the case may be, remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness.
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Any holder of Senior Indebtedness may file any proof of claim or
similar instrument on behalf of the Trustee and the Holders if such instrument
has not been filed by the date which is 30 days prior to the date specified for
filing thereof.
For purposes of this Article 11, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company or
the Guarantor as reorganized or readjusted, or securities of the Company or the
Guarantor or any other corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated at least to the extent
provided in this Article 11 with respect to the Securities to the payment of
all Senior Indebtedness of the Company or the Guarantor, as the case may be,
that may at the time be outstanding, provided, however, that (i) the Senior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of the
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company or the
Guarantor with, or the merger of the Company or the Guarantor into, another
corporation or the liquidation or dissolution of the Company or the Guarantor
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article 8 hereof shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section
11.03 if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article 8 hereof.
Nothing in Section 11.02 or in this Section 11.03 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.07.
SECTION 11.04 SUBROGATION.
Subject to the payment in full of all Senior Indebtedness of the
Company or the Guarantor, the rights of the Holders of the Securities shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company or the
Guarantor, as the case may be, applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be paid
in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article 11, and no payment over
pursuant to the provisions of this Article 11, to or for the benefit of the
holders of Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as between (i) the Company, its creditors other than holders of Senior
Indebtedness of the Company, and the Holders of the Securities, or (ii) the
Guarantor, its creditors other than the holders of Senior Indebtedness of the
Guarantor, and the holders of the Securities, and the Holders of the
Securities, be deemed to be a payment by the Company or the Guarantor, as the
case may be, to or on account of the Senior Indebtedness. It is understood that
the provisions of this Article 11 are and are intended solely for the purposes
of defining the relative rights of the Holders of the Securities, on the one
hand, and the holders of the Senior Indebtedness on the other hand.
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Nothing contained in this Article 11 or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between (i) the Company,
its creditors other than the holders of Senior Indebtedness of the Company, and
the Holders of the Securities, or (ii) the Guarantor, its creditors other than
holders of Senior Indebtedness of the Guarantor, and the holders of the
Securities, the obligation of the Company or the Guarantor, as the case may be,
which is absolute and unconditional, to pay to the Holders of the Securities
the principal of (and premium, if any) and interest on the Securities as and
when the same shall become due and payable in accordance with their terms, or
is intended to or shall affect the relative rights of the Holders of the
Securities and creditors of the Company or the Guarantor, as the case may be,
other than the holders of the Senior Indebtedness or the Guarantor, as the case
may be, nor shall anything herein or therein prevent the Trustee or the Holder
of any Security from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, subject to the rights, if any, under
this Article 11 of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company or the Guarantor, as the case may be,
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company or the
Guarantor referred to in this Article 11, the Trustee, subject to the
provisions of Section 6.01, and the Holders of the Securities, shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities, for the purposes of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company or the Guarantor, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 6.01.
SECTION 11.05 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 11 and
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes.
SECTION 11.06 NOTICE BY THE COMPANY AND THE GUARANTOR.
The Company or the Guarantor shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the Company or the
Guarantor that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Securities pursuant to the provisions of this Article
11. Notwithstanding the provisions of this Article 11 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities pursuant to the provisions of
this Article 11, unless and until a Responsible Officer of the Trustee shall
have received written notice thereof at the Corporate
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Trust Office of the Trustee from the Company or the Guarantor or a holder or
holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 6.01, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 11.06 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary
that may be received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 6.01, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness of the Company or the Guarantor, as the case may be, or
a trustee on behalf of any such holder or holders. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Article 11, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such Person under this Article
11, and if such evidence is not furnished the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
SECTION 11.07 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 11 in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company or
the Guarantor, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article 11, and
no implied covenants or obligations with respect to the holders of Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness and, subject to the provisions of Section 6.01, the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall pay over or
deliver to holders of Securities, the Company, the Guarantor or any other
Person money or assets to which any holder of Senior Indebtedness shall be
entitled by virtue of this Article 11 or otherwise.
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SECTION 11.08 SUBORDINATION MAY NOT BE IMPAIRED.
No right of any present or future holder of any Senior Indebtedness of
the Company or the Guarantor to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act
on the part of the Company or the Guarantor, as the case may be, or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company or the Guarantor, as the case may be, with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof that any
such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company or the Guarantor may, at any
time and from time to time, without the consent of or notice to the Trustee or
the Holders of the Securities, without incurring responsibility to the Holders
of the Securities and without impairing or releasing the subordination provided
in this Article or the obligations hereunder of the Holders of the Securities
to the holders of Senior Indebtedness, do any one or more of the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness or otherwise amend or supplement in any
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any Person liable in any manner for
the collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company or the Guarantor, as the case may be,
and any other Person.
ARTICLE 12
REDEMPTION OF SECURITIES
SECTION 12.01 OPTIONAL REDEMPTION; CONDITIONS TO OPTIONAL REDEMPTION.
At any time on or after _____________, 2001, the Company shall have
the right, subject to the last paragraph of this Section 12.01, to redeem the
Securities, in whole or in part, from time to time, at a Redemption Price equal
to 100% of the principal amount of Securities to be redeemed plus any accrued
but unpaid interest to the Redemption Date.
If a Special Event shall occur and be continuing, the Company shall
have the right, subject to the last paragraph of this Section 12.01 to redeem,
upon not less than 30 nor more than 60 days notice, the Securities in whole,
but not in part, at a Redemption Price equal to 100% of the principal amount of
Securities then outstanding plus accrued but unpaid interest to the Redemption
Date within 90 days following such Special Event.
For so long as the Trust is the Holder of all Securities Outstanding,
the proceeds of any redemption described in this Section 12.01 shall be used by
the Trust to redeem Preferred Securities in accordance with their terms. The
Company shall not redeem the Securities in part
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unless all accrued and unpaid interest has been paid in full on all Securities
Outstanding for all quarterly interest periods terminating on or prior to the
Redemption Date.
SECTION 12.02 APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company, as permitted
by Section 12.01, shall be made in accordance with such provision and this
Article.
SECTION 12.03 ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem Securities pursuant to Section
12.01 shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company, the Company shall, at least 30 days and no more
than 60 days prior to the Redemption Date fixed by the Company, notify the
Trustee of such Redemption Date and of the principal amount of Securities to be
redeemed and provide a copy of the notice of redemption given to Holders of
Securities to be redeemed pursuant to Section 12.04.
SECTION 12.04 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected by lot, at its discretion, on a pro rata basis (or
such other method of selection as the Trustee may customarily employ) not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to
be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
<PAGE> 64
- 59 -
SECTION 12.05 NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest thereon
will cease to accrue on and after said date, and
(4) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 12.06 DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.03) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date; provided, however, that any such deposit
on a Redemption Date shall be initiated prior to 1:00 p.m. (New York time) in
same-day funds.
SECTION 12.07 SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.07.
<PAGE> 65
- 60 -
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
SECTION 12.08 SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at a place of payment therefor (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
- -----------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
AAG HOLDING COMPANY, INC.
By:_________________________________
Name:______________________________
Title:_______________________________
Attest:___________________________
AMERICAN ANNUITY GROUP, INC.
By:_________________________________
Name:______________________________
Title:_______________________________
Attest: __________________________
THE BANK OF NEW YORK
By:_________________________________
Name:______________________________
Title:_______________________________
Attest: __________________________
<PAGE> 66
- 61 -
STATE OF )
) ss:
COUNTY OF )
On the __ day of September 1996, before me personally came __________,
to me known, who, being by me duly sworn, did depose and say that he/she is the
__________ of AAG Holding Company, Inc., one of the corporations described in
and which executed the foregoing instrument; and that he/she signed his/her
name thereto by authority of the Board of Directors of such corporation.
------------------------------------
STATE OF )
) ss:
COUNTY OF )
On the __ day of September 1996, before me personally came __________,
to me known, who, being by me duly sworn, did depose and say that he/she is the
__________ of AMERICAN ANNUITY GROUP, INC. one of the corporations described in
and which executed the foregoing instrument; and that he/she signed his/her
name thereto by authority of the Board of Directors of such corporation.
------------------------------------
STATE OF )
) ss.:
COUNTY OF )
On the __ day of __________, 1996, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she is a ______________________ of The Bank of New York, a New York
banking association described in and which executed the foregoing instrument;
and that he/she signed his/her name thereto by authority of the Board of
Directors of such corporation.
------------------------------------
<PAGE> 67
- 62 -
<PAGE> 1
Exhibit 4.2
CERTIFICATE OF TRUST
OF
AMERICAN ANNUITY GROUP CAPITAL TRUST I
This Certificate of Trust is being executed as of September 13, 1996
for the purpose of organizing a business trust pursuant to the Delaware Business
Trust Act, 12 Del. C. section 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1) NAME. The name of the business trust is "American Annuity Group
Capital Trust I "(the "Trust").
2) DELAWARE TRUSTEE. The name and business address of the Delaware
resident trustee of the Trust meeting the requirements of Section 3807 of the
Act are as follows:
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711.
3) EFFECTIVE. This Certificate of Trust, which may be executed in
counterparts, shall be effective immediately upon filing in the Office of the
Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the
Trust, have duly executed this Certificate of Trust as of the day and year
first above written.
THE BANK OF NEW YORK (Delaware),
as Delaware Trustee
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:
--------------------------------
Name:
Title:
-----------------------------------
CHRISTOPHER P. MILIANO, as Trustee
-----------------------------------
MARK F. MUETHING, as Trustee
<PAGE> 1
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"),
dated as of September __, 1996, is executed and delivered by American Financial
Group, Inc., an Ohio corporation (the "Guarantor"), and _______________, as
trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as
defined herein) of the Preferred Securities (as defined herein) of American
Annuity GroupCapital Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to the Declaration (as defined herein), the Issuer
is issuing on the date hereof 3,000,000 preferred securities, having an
aggregate liquidation amount of $75,000,000, designated the ___% Trust
Originated Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein;
and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (as amended, modified or supplemented from time to time, the "Common
Securities Guarantee") in substantially identical terms to this Preferred
Securities Guarantee for the benefit of the holders of the Common Securities (as
defined herein), except that if an Event of Default (as defined in the
Declaration), has occurred and is continuing, the rights of holders of the
Common Securities to receive payments under the Common Securities Guarantee are
subordinated to the rights of Holders of Preferred Securities to receive
Guarantee Payments under this Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Interpretation and Definitions.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
<PAGE> 2
(b) a term defined anywhere in this Preferred Securities Guarantee
has the same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this Preferred
Securities Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise
defined in this Preferred Securities Guarantee or unless the context
otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Preferred Securities Guarantee is located at
_____________________, Attention: Corporate Trust Services Division; telecopy
no. ________________.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the series of subordinated deferrable interest
debentures to be issued by the Guarantor designated the ____% Junior
Subordinated Debentures due 2026 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Declaration" means the Declaration of Trust, dated as of September
__,1996, as amended, modified or supplemented from time to time, among the
trustees of the Issuer named therein, the Guarantor, as sponsor, and the Holders
from time to time of undivided beneficial interests in the assets of the Issuer.
2
<PAGE> 3
"Guarantee Event of Default" means a default by the Guarantor on any
of its payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) that are required to be paid on such Preferred Securities to
the extent the Issuer shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds available therefor,
with respect to any Preferred Securities called for redemption by the Issuer,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Issuer (other than in connection with the distribution of Debentures to
the Holders in exchange for Preferred Securities as provided in the Declaration
or the redemption of all the Preferred Securities upon maturity or redemption of
the Debentures as provided in the Declaration), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid Distributions on the
Preferred Securities to the date of payment, to the extent the Issuer shall have
funds available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution"). If an Event of Default (as defined in the
Declaration) has occurred and is continuing, the rights of holders of the Common
Securities to receive payments under the Common Securities Guarantee are
subordinated to the rights of Holders of Preferred Securities to receive
Guarantee Payments under this Preferred Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor; and provided
further, that in determining whether the Holders of the requisite liquidation
amount of Preferred Securities have voted on any matter provided for in this
Preferred Securities Guarantee, then for the purpose of such determination only
(and not for any other purpose hereunder), if the Preferred Securities remain in
the form of one or more Global Certificates (as defined in the Declaration), the
term "Holders" shall mean the holder of the Global Certificate acting at the
direction of the Preferred Security Beneficial Owners (as defined in the
Declaration).
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of September __, 1996,
among the Guarantor (the "Debenture Issuer") and _________________, as trustee,
and any indenture supplemental thereto pursuant to which the Debentures are to
be issued to the Property Trustee (as defined in the Declaration) of the Issuer.
3
<PAGE> 4
"Majority in Liquidation Amount of the Preferred Securities" means,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Preferred Securities, voting separately
as a class, who are the record holders of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Preferred Securities. In determining whether the Holders of the requisite amount
of Preferred Securities have voted, Preferred Securities which are owned by the
Guarantor or any Affiliate of the Guarantor or any other obligor on the
Preferred Securities shall be disregarded for the purpose of any such
determination.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers (as defined in the Declaration) of
such Person. Any Officers' Certificate delivered with respect to compliance with
a condition or covenant provided for in this Preferred Securities Guarantee
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means _______________, until a
Successor Preferred Guarantee Trustee- has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee. including any vice-president, any assistant vice-president,
the secretary, any assistant secretary, the treasurer, any assistant treasurer
or other officer of the Corporate Trust Office of the Preferred Guarantee
4
<PAGE> 5
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the provisions
of the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with
a list, in such form as the Preferred Guarantee Trustee may reasonably require,
of the names and addresses of the Holders of the Preferred Securities ("List of
Holders"), (i) within one Business Day after January 1 and June 30 of each year
and current as of such date, and (ii) at any other time, within 30 days of
receipt by the Guarantor of a written request from the Preferred Guarantee
Trustee for a List of Holders as of a date no more than 14 days before such List
of Holders is given to the Preferred Guarantee Trustee; provided, that the
Guarantor shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee
Trustee shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it, provided that it may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Section 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
5
<PAGE> 6
SECTION 2.3 Reports by Preferred Guarantee Trustee.
Within 60 days after May 15 of each year (commencing with the year
of the first anniversary of the issuance of the Preferred Securities), the
Preferred Guarantee Trustee shall provide to the Holders of the Preferred
Securities such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Preferred Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) of the
Trust Indenture Act and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6 Guarantee Event of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Guarantee Event of Default and its consequences. Upon
such waiver, any such Guarantee Event of Default shall cease to exist, and any
Guarantee Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Preferred Securities Guarantee, but no such waiver
shall extend to any subsequent or other default or Guarantee Event of Default or
impair any right consequent thereon.
SECTION 2.7 Guarantee Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of a Guarantee Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Preferred Securities, notices of all
Guarantee Events of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee, unless such defaults have been cured before the
giving of such notice; provided, that the Preferred Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of
the Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Preferred Securities.
6
<PAGE> 7
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Guarantee Event of Default unless the Preferred Guarantee
Trustee shall have received written notice thereof or a Responsible Officer of
the Preferred Guarantee Trustee charged with the administration of the
Declaration shall have obtained actual knowledge thereof.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
provision contained in Section 310(b) of the Trust Indenture Act.
SECTION 2.9 Disclosure of Information.
The disclosure of information as to the names and addresses of the
Holders of the Preferred Securities in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such information was derived,
shall not be deemed to be a violation of any existing law, or any law hereafter
enacted which does not specifically refer to Section 312 of the Trust Indenture
Act, nor shall the Preferred Guarantee Trustee be held accountable by reason of
mailing any material pursuant to a request made under Section 312(b) of the
Trust Indenture Act.
SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim.
Upon the occurrence of a Guarantee Event of Default, the Preferred
Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name
and as trustee of an express trust, against the Guarantor for the whole amount
of any Guarantee Payments remaining unpaid and (b) file such proof of claim and
other papers or documents as may be necessary or advisable in order to have its
claims and those of the Holders of the Preferred Securities allowed in any
judicial proceedings relative to the Guarantor, its creditors or its property.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of Preferred Guarantee Trustee.
(a) The Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee on behalf of the Issuer for the benefit of the
Holders of the Preferred Securities, and the Preferred Guarantee Trustee shall
not transfer this Preferred Securities Guarantee to any Person except a Holder
of Preferred Securities exercising his or her rights pursuant to Section 5.4(b)
or to a Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee of its appointment to act as Successor Preferred
Guarantee Trustee. The right, title and interest of the Preferred Guarantee
Trustee in and to this
7
<PAGE> 8
Preferred Securities Guarantee shall automatically vest in any Successor
Preferred Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Preferred Guarantee Trustee.
(b) If a Guarantee Event of Default actually known to a Responsible
Officer of the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee
for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Guarantee Event of Default of all Guarantee Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Preferred Securities Guarantee, and no implied covenants shall be
read into this Preferred Securities Guarantee against the Preferred Guarantee
Trustee. In case a Guarantee Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee
shall exercise such of the rights and powers vested in it by this Preferred
Securities Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Guarantee Event of Default and
after the curing or waiving of all such Guarantee Events of Default that
may have occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions
of this Preferred Securities Guarantee, and the Preferred
Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Preferred Securities Guarantee. and no
implied covenants or obligations shall be read into this
Preferred Securities Guarantee against the Preferred Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein upon any
certificates or opinions furnished to the Preferred Guarantee
Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically
required to be furnished to the Preferred Guarantee Trustee,
the Preferred Guarantee Trustee shall be
8
<PAGE> 9
under a duty to examine the same to determine whether or not
they conform to the requirements of this Preferred Securities
Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Preferred Guarantee Trustee, or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability
is not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and shall
be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed
by it to be genuine and to have been signed, sent or presented by
the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Preferred Securities
Guarantee, the Preferred Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting any action
9
<PAGE> 10
hereunder, the Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see to
any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel, and
the written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its Affiliates and
may include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court
of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred
Securities Guarantee at the request or direction of any Holder,
unless such Holder shall have provided to the Preferred Guarantee
Trustee such security and indemnity, reasonably satisfactory to the
Preferred Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Preferred
Guarantee Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by
the Preferred Guarantee Trustee; provided, that nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of a Guarantee Event of
Default, of its obligation to exercise the rights and powers vested
in it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly
or by or through agents, nominees, custodians or attorneys, and the
Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
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<PAGE> 11
(ix) Any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred Securities,
and the signature of the Preferred Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action.
No third party shall be required to inquire as to the authority of
the Preferred Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Preferred Securities
Guarantee, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred Securities
Guarantee the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right
or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of a Majority
in Liquidation Amount of the Preferred Securities, (ii) may refrain
from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected
in conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal or
in which the Preferred Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Preferred Securities Guarantee shall
be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
ARTICLE 4
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall be at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
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<PAGE> 12
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to
act as an institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section
4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
12
<PAGE> 13
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts owing for fees and reimbursement of expenses which have accrued to the
date of such termination, removal or resignation.
ARTICLE 5
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full
to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to (i) extend the
interest payment period on the Debentures and the Guarantor shall not be
obligated hereunder to make any Guarantee Payments during any Extended Interest
Payment Period (as defined in the Indenture) with respect to the Distributions
(as defined in the Declaration) on the Preferred Securities, and (ii) change the
maturity date of the Debentures to the extent permitted by the Indenture.
SECTION 5.3 Obligations Not Affected.
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<PAGE> 14
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall be absolute and unconditional
and shall remain in full force and effect until the entire liquidation amount of
all outstanding Preferred Securities shall have been paid and such obligation
shall in no way be affected or impaired by reason of the happening from time to
time of any event, including without limitation, the following, whether or not
with notice to, or the consent of the Guarantor:
(a) The release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;
(b) The extension of time for the payment by the Issuer of all or
any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the
Preferred Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with,
the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution
or other sum payable that results from the extension of any interest
payment period on the Debentures or any change to the maturity date
of the Debentures permitted by the Indenture);
(c) Any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise
any right, privilege, power or remedy conferred on the Property
Trustee or the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting
indulgence or extension of any kind;
(d) The voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) Any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) The settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) Any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any
and all circumstances.
14
<PAGE> 15
There shall be no obligation of the Preferred Guarantee Trustee or
the Holders to give notice to, or obtain consent of the Guarantor or any other
Person with respect to the happening of any of the foregoing.
No setoff, counterclaim, reduction or diminution of any obligation,
or any defense of any kind or nature that the Guarantor has or may have against
any Holder shall be available hereunder to the Guarantor against such Holder to
reduce the payments to it under this Preferred Securities Guarantee.
SECTION 5.4 Rights of Holders.
(a) The Holders of a Majority in Liquidation Amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce this
Preferred Securities Guarantee, then any Holder of Preferred Securities may
institute a legal proceeding directly against the Guarantor to enforce the
Preferred Guarantee Trustee's rights under this Preferred Securities Guarantee
without first instituting a legal proceeding against the Issuer, the Preferred
Guarantee Trustee or any other person or entity. Notwithstanding the foregoing,
if the Guarantor has failed to make a Guarantee Payment, a Holder of Preferred
Securities may directly institute a proceeding against the Guarantor for
enforcement of the Preferred Securities Guarantee for such payment to the Holder
of the Preferred Securities of the principal of or interest on the Debentures on
or after the respective due dates specified in the Debentures, and the amount of
the payment will be based on the Holder's pro rata share of the amount due and
owing on all of the Preferred Securities. The Guarantor hereby waives any right
or remedy to require, that any action on this Preferred Securities Guarantee be
brought first against the Issuer or any other person or entity before proceeding
directly against the Guarantor.
SECTION 5.5 Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of payment
and not of collection.
SECTION 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Preferred Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Preferred
Securities Guarantee, if, at
15
<PAGE> 16
the time of any such payment, any amounts are due and unpaid under this
Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount in
trust for the Holders and to pay over such amount to the Preferred Guarantee
Trustee for the benefit of the Holders.
SECTION 5.7 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if there
shall have occurred a Guarantee Event of Default or an event of default under
the Declaration, then (a) the Guarantor shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock, (b) the
Guarantor shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities (including guarantees)
issued by the Guarantor which rank pari passu with or junior to the Debentures
and (c) the Guarantor shall not make any guarantee payments with respect to the
foregoing (other than pursuant to this Preferred Securities Guarantee);
provided, however, the Guarantor may declare and pay a stock dividend where the
dividend stock is the same stock as that on which the dividend is being paid.
SECTION 6.2 Ranking.
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank: (i) subordinate and junior in right
of payment to all other liabilities of the Guarantor, except those liabilities
of the Guarantor made pari passu or subordinate by their terms, (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
If an Event of Default has occurred and is continuing under the
Declaration, the rights of the holders of the Common Securities to receive any
payments under the Common Securities Guarantee Agreement shall be subordinated
to the rights of the Holders of Preferred Securities to receive Guarantee
Payments hereunder.
16
<PAGE> 17
ARTICLE 7
TERMINATION
SECTION 7.1 Termination.
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Preferred Securities, (ii) upon the
distribution of the Debentures to the Holders of all of the Preferred Securities
or (iii) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Preferred Securities
might properly be paid.
SECTION 8.2 Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and
to hold each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection
17
<PAGE> 18
with the exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 8.2 shall survive the
termination of this Preferred Securities Guarantee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely affect the
rights of the Holders (in which case no consent of the Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in Liquidation Amount of
the Preferred Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of, and action by written consent of the Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Preferred Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other
address as the Preferred Guarantee Trustee may give notice of to the
Guarantor and the Holders of the Preferred Securities):
________________________
________________________
________________________
________________________
(b) If given to the Guarantor, at the Guarantor's mailing addresses
set forth below (or such other address as the Guarantor may give
notice of to the Preferred Guarantee Trustee and the Holders of the
Preferred Securities):
18
<PAGE> 19
American Annuity Group, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: General Counsel
Telecopy No. (513) 357-3397
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by: first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE.
19
<PAGE> 20
IN WITNESS WHEREOF, this Preferred Securities Guarantee is executed as of
the day and year first above written.
AMERICAN ANNUITY INC.,
as Guarantor
By:_________________________________________
Name:_______________________________________
Title:______________________________________
___________________________________________,
as Preferred Guarantee Trustee
By:_________________________________________
Name:_______________________________________
Title:______________________________________
(Signature Page to the Preferred Securities Guarantee Agreement)
20
<PAGE> 21
PREFERRED SECURITIES GUARANTEE AGREEMENT
AMERICAN ANNUITY GROUP CAPITAL TRUST I
Dated as of September __, 1996
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 INTERPRETATION AND DEFINITIONS......................................... 1
SECTION 1.1 Interpretation and Definitions............................. 1
ARTICLE 2 TRUST INDENTURE ACT.................................................... 5
SECTION 2.1 Trust Indenture Act; Application........................... 5
SECTION 2.2 Lists of Holders of Securities............................. 5
SECTION 2.3 Reports by Preferred Guarantee Trustee..................... 6
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee............ 6
SECTION 2.5 Evidence of Compliance with Conditions Precedent........... 6
SECTION 2.6 Guarantee Event of Default; Waiver......................... 6
SECTION 2.7 Guarantee Event of Default; Notice......................... 6
SECTION 2.8 Conflicting Interests...................................... 7
SECTION 2.9 Disclosure of Information.................................. 7
SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim....... 7
ARTICLE 3 POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE............................................ 7
SECTION 3.1 Powers and Duties of Preferred Guarantee Trustee........... 7
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.............. 9
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee...... 11
ARTICLE 4 PREFERRED GUARANTEE TRUSTEE............................................ 11
SECTION 4.1 Preferred Guarantee Trustee; Eligibility................... 11
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee
Trustee.................................................... 12
ARTICLE 5 GUARANTEE.............................................................. 13
SECTION 5.1 Guarantee.................................................. 13
SECTION 5.2 Waiver of Notice and Demand................................ 13
SECTION 5.3 Obligations Not Affected................................... 13
SECTION 5.4 Rights of Holders.......................................... 15
SECTION 5.5 Guarantee of Payment....................................... 15
SECTION 5.6 Subrogation................................................ 15
SECTION 5.7 Independent Obligations.................................... 16
ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION.............................. 16
SECTION 6.1 Limitation of Transactions................................. 16
SECTION 6.2 Ranking.................................................... 16
</TABLE>
i
<PAGE> 23
<TABLE>
<S> <C>
ARTICLE 7 TERMINATION............................................................ 17
SECTION 7.1 Termination................................................ 17
ARTICLE 8 INDEMNIFICATION........................................................ 17
SECTION 8.1 Exculpation................................................ 17
SECTION 8.2 Indemnification............................................ 17
ARTICLE 9 MISCELLANEOUS.......................................................... 18
SECTION 9.1 Successors and Assigns..................................... 18
SECTION 9.2 Amendments................................................. 18
SECTION 9.3 Notices.................................................... 18
SECTION 9.4 Benefit.................................................... 19
SECTION 9.5 Governing Law.............................................. 19
</TABLE>
ii
<PAGE> 24
CROSS REFERENCE TABLE*
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
310(a)..................................................................4.1(a)
310(b)..................................................................4.1(c)
310(c)............................................................Inapplicable
311(a)..................................................................2.2(b)
311(b)..................................................................2.2(b)
311(c)............................................................Inapplicable
312(a)..................................................................2.2(a)
312(b)..................................................................2.2(b)
312(c).....................................................................2.9
313(a).....................................................................2.3
313(b).....................................................................2.3
313(c).....................................................................2.3
313(d).....................................................................2.3
314(a).....................................................................2.4
314(b)............................................................Inapplicable
314(c).....................................................................2.5
314(d)............................................................Inapplicable
314(e).....................................................................2.5
314(f)............................................................Inapplicable
315(a)..........................................................3.1(d); 3.2(a)
315(b)..................................................................2.7(a)
315(c)..................................................................3.1(c)
315(d)..................................................................3.1(d)
316(a).............................................................2.6; 5.4(a)
317(a)...............................................................2.10; 5.4
318(a)..................................................................2.1(b)
- ------------------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not have any bearing upon the interpretation of any of
its terms or provisions.
iii
<PAGE> 1
This Preferred Security is a Global Certificate within the meaning of the
Declaration hereinafter referred to and is registered in the name of The
Depositry Trust Company, a New York corporation (the "Depositary"), or a nominee
of the Depositary. This Preferred Security is exchangeable for Preferred
Securities registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Declaration and no
transfer of this Preferred Security (other than a transfer of this Preferred
Security as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Preferred Security Certificate is presented by an authorized
representative of the Depositary to the Trust or its agent for registration of
transfer, exchange or payment, and any Preferred Security Certificate issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of the Depositary (and any payment hereon is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
- 1 - - _____________ -
CUSIP NO. ________________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
AMERICAN ANNUITY GROUP CAPITAL TRUST I
____% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPrS"(SM))
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
AMERICAN ANNUITY GROUP CAPITAL TRUST I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
Cede & Co. (the "Holder") is the registered owner of preferred securities of the
Trust representing undivided beneficial interests in the assets of the Trust
designated the __% Trust Originated Preferred Securities(sm) (liquidation amount
$25 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities represented hereby are issued and shall in all respects by subject to
the provisions of the Declaration of Trust of the Trust dated as of September
__, 1996, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Preferred Securities as set forth
in Annex I to the Declaration. Capitalized terms used herein but not defined
shall have the meaning given them in the
<PAGE> 2
Declaration. The Holder is entitled to the benefits of the Preferred Securities
Guarantee to the extent provided therein. The Sponsor will provide a copy of the
Declaration, the Preferred Securities Guarantee and the Indenture to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred Securities
as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this _______ day of
September, 1996.
AMERICAN ANNUITY GROUP
CAPITAL TRUST I
By:_________________________________
Name:_______________________________
Title: Regular Trustee
By:_________________________________
Name:_______________________________
Title: Regular Trustee
<PAGE> 3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocable appoints
________________________________________________________________________________
________________________________________________________________________________
_________________agent to transfer this Preferred Security Certificate on the
books of the Trust. The agent may substitute another to act for him or her.
Date:_____________
Signature:_______________________________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
<PAGE> 1
Certificate Number Number of Common Securities
-1- -___________-
Certificate Evidencing Common Securities
of
AMERICAN ANNUITY GROUP CAPITAL TRUST I
___% Trust Originated Common Securities
(liquidation amount $25 per Common Security)
American Annuity Group Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that AAG
Holding Company, Inc. (the "Holder") is the registered owner of common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the ___% Trust Originated Common Securities
(liquidation amount $25 per Common Security) (the "Common Securities"). The
Common Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Declaration of Trust of the Trust dated as of September
__, 1996, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration. Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Common Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Common Securities Guarantee
and the Indenture to a Holder without charge upon written request to the Sponsor
at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
<PAGE> 2
IN WITNESS WHEREOF, the Trust has executed this certificate this ______
day of September, 1996.
AMERICAN ANNUITY GROUP CAPITAL
TRUST I
By:_____________________________________
Name:___________________________________
Title: Regular Trustee
By:_____________________________________
Name:___________________________________
Title: Regular Trustee
<PAGE> 3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________agent to transfer this
Common Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date:_________________
Signature:____________________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
<PAGE> 1
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as
of _________, 1996, is executed and delivered by American Annuity Group, Inc., a
Delaware corporation (the "Guarantor"), and _______________, as trustee (the
"Common Guarantee Trustee"), for the benefit of the Holders (as defined herein)
of the Common Securities (as defined herein) of American Annuity Group Capital
Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to the Declaration (as defined herein), the Issuer is
issuing on the date hereof 3,000,000 preferred securities, having an aggregate
liquidation amount of $75,000,000, designated the ____% Trust Originated
Preferred Securities (the "Preferred Securities") and 90,000 common securities,
having an aggregate liquidation amount of $2,250,000, designated the ___% Trust
Originated Common Securities (the "Common Securities");
WHEREAS, as incentive for the Holders to purchase the Common Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Common Securities Guarantee, to pay to the Holders of the
Common Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (as amended, modified or supplemented from time to time, the
"Preferred Securities Guarantee") in substantially identical terms to this
Common Securities Guarantee for the benefit of the holders of the Preferred
Securities, except that if an Event of Default (as defined in the Declaration)
has occurred and is continuing, the rights of Holders of the Common Securities
to receive Guarantee Payments under this Common Securities Guarantee are
subordinated to the rights of holders of the Preferred Securities to receive
payments under the Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Common Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Common Securities Guarantee
for the benefit of the Holders.
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Interpretation and Definitions.
In this Common Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Common Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
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<PAGE> 2
(b) a term defined anywhere in this Common Securities Guarantee has the
same meaning throughout;
(c) all references to "the Common Securities Guarantee" or "this Common
Securities Guarantee" are to this Common Securities Guarantee as
modified, supplemented or amended from time to time;
(d) all references in this Common Securities Guarantee to Articles and
Sections are to Articles and Sections of this Common Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Common Securities Guarantee, unless otherwise defined in
this Common Securities Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
"AAG Holding" means AAG Holding Company, Inc., an Ohio corporation.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Common Guarantee Trustee" means _____________________, until a
Successor Common Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Common Securities Guarantee and
thereafter means each such Successor Common Guarantee Trustee.
"Corporate Trust Office" means the office of the Common Guarantee
Trustee at which the corporate trust business of the Common Guarantee Trustee
shall at any particular time, be principally administered, which office at the
date of execution of this Common Securities Guarantee is located at
_______________________________, Attention: Corporate Trust Services Division;
telecopy no. ___________________.
"Covered Person" means any Holder or beneficial owner of Common
Securities.
"Debentures" means the series of subordinated deferrable interest
debentures to be issued by AAG Holding or designated the ____% Junior
Subordinated Debentures due 2026 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Declaration" means the Declaration of Trust, dated as of September __,
1996, as amended, modified or supplemented from time to time, among the trustees
of the Issuer named therein, the
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<PAGE> 3
Guarantor, as sponsor, and the holders from time to time of undivided beneficial
interests in the assets of the Issuer.
"Guarantee Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Common Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Common Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) that are required to be paid on such Common Securities to
the extent the Issuer shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds available therefor,
with respect to any Common Securities called for redemption by the Issuer, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Issuer (other than in connection with the distribution of Debentures to the
Holders in exchange for Common Securities as provided in the Declaration or the
redemption of all the Common Securities upon maturity or redemption of the
Debentures as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Common
Securities to the date of payment, to the extent the Issuer shall have funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution"). If an Event of Default (as defined in the
Declaration) has occurred and is continuing, the rights of Holders of the Common
Securities to receive Guarantee Payments under this Common Securities Guarantee
are subordinated to the rights of holders of the Preferred Securities to receive
payments under the Preferred Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer of any Common Securities.
"Indemnified Person" means the Common Guarantee Trustee, any Affiliate
of the Common Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Common Guarantee Trustee.
"Indenture" means the Indenture dated as of _____, 1996, among AAG
Holding (the "Debenture Issuer") and ____________________, as trustee, and any
indenture supplemental thereto pursuant to which the Debentures are to be issued
to the Property Trustee (as defined in the Declaration) of the Issuer.
"Majority in Liquidation Amount of the Common Securities" means, except
as provided in the terms of the Common Securities or by the Trust Indenture Act,
Holder(s) of outstanding Common Securities, voting separately as a class, who
are the record holders of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Common Securities.
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<PAGE> 4
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers (as defined in the Declaration) of such
Person. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Common Securities Guarantee shall
include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Common Guarantee
Trustee, any officer within the Corporate Trust Office of the Common Guarantee
Trustee, including any vice president, any assistant vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer or
other officer of the Corporate Trust Office of the Common Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Successor Common Guarantee Trustee" means a successor Common Guarantee
Trustee possessing the qualifications to act as Common Guarantee Trustee under
Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
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<PAGE> 5
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Common Securities Guarantee is subject to the provisions of the
Trust Indenture Act that are required to be part of this Common Securities
Guarantee and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Common Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Common Guarantee Trustee with a
list, in such form as the Common Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Common Securities ("List of
Holders"), (i) within one Business Day after January 1 and June 30 of each year
and current as of such date, and (ii) at any other time, within 30 days of
receipt by the Guarantor of a written request from the Common Guarantee Trustee
for a List of Holders as of a date no more than 14 days before such List of
Holders is given to the Common Guarantee Trustee; provided, that the Guarantor
shall not be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most recent List of Holders given to the Common
Guarantee Trustee by the Guarantor. The Common Guarantee Trustee shall preserve,
in as current a form as is reasonably practicable, all information contained in
Lists of Holders given to it, provided that it may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Common Guarantee Trustee shall comply with its obligations under
Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by Common Guarantee Trustee.
Within 60 days after May 15 of each year (commencing with the year of
the first anniversary of the issuance of the Common Securities), the Common
Guarantee Trustee shall provide to the Holders of the Common Securities such
reports as are required by Section 313 of the Trust Indenture Act; if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Common Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Common Guarantee Trustee.
The Guarantor shall provide to the Common Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) of the
Trust Indenture Act and the compliance
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<PAGE> 6
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Common Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Common Securities Guarantee that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)( 1) may be given in the
form of an Officers' Certificate.
SECTION 2.6 Guarantee Event of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Common Securities
may, by vote, on behalf of the Holders of all of the Common Securities, waive
any past Guarantee Event of Default and its consequences. Upon such waiver, any
such Guarantee Event of Default shall cease to exist, and any Guarantee Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Common Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Guarantee Event of Default or impair any right
consequent thereon.
SECTION 2.7 Guarantee Event of Default; Notice.
(a) The Common Guarantee Trustee shall, within 90 days after the
occurrence of a Guarantee Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Common Securities, notices of all
Guarantee Events of Default actually known to a Responsible Officer of the
Common Guarantee Trustee, unless such defaults have been cured before the giving
of such notice; provided, that the Common Guarantee Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer of the Common
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders of the Common Securities.
(b) The Common Guarantee Trustee shall not be deemed to have knowledge
of any Guarantee Event of Default unless the Common Guarantee Trustee shall have
received written notice thereof or a Responsible Officer of the Common Guarantee
Trustee charged with the administration of the Declaration shall have obtained
actual knowledge thereof.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described in this
Common Securities Guarantee for the purposes of clause (i) of the first
provision contained in Section 310(b) of the Trust Indenture Act.
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<PAGE> 7
SECTION 2.9 Disclosure of Information.
The disclosure of information as to the names and addresses of the
Holders of the Common Securities in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such information was derived,
shall not be deemed to be a violation of any existing law, or any law hereafter
enacted which does not specifically refer to Section 312 of the Trust Indenture
Act, nor shall the Common Guarantee Trustee be held accountable by reason of
mailing any material pursuant to a request made under Section 312(b) of the
Trust Indenture Act.
SECTION 2.10 Common Guarantee Trustee May File Proofs of Claim.
Upon the occurrence of a Guarantee Event of Default, the Common
Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name
and as trustee of an express trust, against the Guarantor for the whole amount
of any Guarantee Payments remaining unpaid and (b) file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have its
claims and those of the Holders of the Common Securities allowed in any judicial
proceedings relative to the Guarantor, its creditors or its property.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF
COMMON GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of Common Guarantee Trustee.
(a) This Common Securities Guarantee shall be held by the Common
Guarantee Trustee on behalf of the Issuer for the benefit of the Holders of the
Common Securities, and the Common Guarantee Trustee shall not transfer this
Common Securities Guarantee to any Person except a Holder of Common Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor Common
Guarantee Trustee on acceptance by such Successor Common Guarantee Trustee of
its appointment to act as Successor Common Guarantee Trustee. The right, title
and interest of the Common Guarantee Trustee in and to this Common Securities
Guarantee shall automatically vest in any Successor Common Guarantee Trustee,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Common Guarantee Trustee.
(b) If a Guarantee Event of Default actually known to a Responsible
Officer of the Common Guarantee Trustee has occurred and is continuing, the
Common Guarantee Trustee shall enforce this Common Securities Guarantee for the
benefit of the Holders of the Common Securities.
(c) The Common Guarantee Trustee, before the occurrence of any Guarantee
Event of Default and after the curing of all Guarantee Events of Default that
may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Common Securities Guarantee, and no implied
covenants shall be read into this Common Securities Guarantee against
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<PAGE> 8
the Common Guarantee Trustee. In case a Guarantee Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) and is actually
known to a Responsible Officer of the Common Guarantee Trustee, the Common
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Common Securities Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Common Securities Guarantee shall be construed
to relieve the Common Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Guarantee Event of Default and
after the curing or waiving of all such Guarantee Events of
Default that may have occurred:
(A) the duties and obligations of the Common Guarantee
Trustee shall be determined solely by the express provisions
of this Common Securities Guarantee, and the Common
Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Common Securities Guarantee,
and no implied covenants or obligations shall be read into
this Common Securities Guarantee against the Common
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Common
Guarantee Trustee, the Common Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Common Guarantee
Trustee and conforming to the requirements of this Common
Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Common
Guarantee Trustee, the Common Guarantee Trustee shall be
under a duty to examine the same to determine whether or not
they conform to the requirements of this Common Securities
Guarantee;
(ii) the Common Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of
the Common Guarantee Trustee, unless it shall be proved that the
Common Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Common Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Common Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Common Guarantee
Trustee, or
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<PAGE> 9
exercising any trust or power conferred upon the Common Guarantee
Trustee under this Common Securities Guarantee; and
(iv) no provision of this Common Securities Guarantee shall
require the Common Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Common Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of
this Common Securities Guarantee or indemnify, reasonably
satisfactory to the Common Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Common Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Common Guarantee Trustee may conclusively rely, and shall
be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed
by it to be genuine and to have been signed, sent or presented by
the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Common Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Common Securities
Guarantee, the Common Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Common Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and conclusively
rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor.
(iv) The Common Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Common Guarantee Trustee may consult with counsel, and the
written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Common Guarantee Trustee
shall have the
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right at any time to seek instructions concerning the
administration of this Common Securities Guarantee from any court
of competent jurisdiction.
(vi) The Common Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Common
Securities Guarantee at the request or direction of any Holder,
unless such Holder shall have provided to the Common Guarantee
Trustee such security and indemnity, reasonably satisfactory to
the Common Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Common Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Common Guarantee Trustee; provided, that nothing
contained in this Section 3.2(a)(vi) shall be taken to relieve the
Common Guarantee Trustee, upon the occurrence of a Guarantee Event
of Default, of its obligation to exercise the rights and powers
vested in it by this Common Securities Guarantee.
(vii) The Common Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Common Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit.
(viii)The Common Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or
attorneys, and the Common Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Common Guarantee Trustee or its
agents hereunder shall bind the Holders of the Common Securities,
and the signature of the Common Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such
action. No third party shall be required to inquire as to the
authority of the Common Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Common
Securities Guarantee, both of which shall be conclusively
evidenced by the Common Guarantee Trustee's or its agent's taking
such action.
(x) Whenever in the administration of this Common Securities
Guarantee the Common Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right
or taking any other action hereunder, the Common Guarantee Trustee
(i) may request instructions from the Holders of a Majority in
Liquidation Amount of the Common Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until
such instructions
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are received, and (iii) shall be protected in conclusively relying
on or acting in accordance with such instructions.
(b) No provision of this Common Securities Guarantee shall be deemed to
impose any duty or obligation on the Common Guarantee Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or imposed on
it in any jurisdiction in which it shall be illegal, or in which the Common
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Common Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Common Securities Guarantee shall be
taken as the statements of the Guarantor, and the Common Guarantee Trustee does
not assume any responsibility for their correctness. The Common Guarantee
Trustee makes no representation as to the validity or sufficiency of this Common
Securities Guarantee.
ARTICLE 4
COMMON GUARANTEE TRUSTEE
SECTION 4.1 Common Guarantee Trustee; Eligibility.
(a) There shall be at all times be a Common Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of
this Section 4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published.
(b) If at any time the Common Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Common Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
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(c) If the Common Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Common Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Common Guarantee Trustee.
(a) Subject to Section 4.1(b), the Common Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Common Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Common Guarantee Trustee has been appointed and
has accepted such appointment by written instrument executed by such Successor
Common Guarantee Trustee and delivered to the Guarantor.
(c) The Common Guarantee Trustee appointed to office shall hold office
until a Successor Common Guarantee Trustee shall have been appointed or until
its removal or resignation. The Common Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Common Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Common Guarantee Trustee has
been appointed and has accepted such appointment by instrument in writing
executed by such Successor Common Guarantee Trustee and delivered to the
Guarantor and the resigning Common Guarantee Trustee.
(d) If no Successor Common Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning Common
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Common Guarantee Trustee. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper, appoint a
Successor Common Guarantee Trustee.
(e) No Common Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Common Guarantee Trustee.
(f) Upon termination of this Common Securities Guarantee or removal or
resignation of the Common Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Common Guarantee Trustee all amounts owing for fees
and reimbursement of expenses which have accrued to the date of such
termination, removal or resignation.
12
<PAGE> 13
ARTICLE 5
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Common
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to (i) extend the
interest payment period on the Debentures and the Guarantor shall not be
obligated hereunder to make any Guarantee Payments during any Extended Interest
Payment Period (as defined in the Indenture) with respect to the Distributions
(as defined in the Declaration) on the Common Securities, and (ii) change the
maturity date of the Debentures to the extent permitted by the Indenture.
SECTION 5.3 Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Common Securities Guarantee shall be absolute and unconditional and shall
remain in full force and effect until the entire liquidation amount of all
outstanding Common Securities shall have been paid and such obligation shall in
no way be affected or impaired by reason of the happening from time to time of
any event, including without limitation, the following, whether or not with
notice to, or the consent of, the Guarantor:
(a) The release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Common Securities
to be performed or observed by the Issuer;
(b) The extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Common Securities or
the extension of time for the performance of any other obligation under,
arising out of, or in connection with the Common Securities (other than
an extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the
extension of any interest payment
13
<PAGE> 14
period on the Debentures or any change to the maturity date of the
Debentures permitted by the Indenture);
(c) Any failure, omission, delay or lack of diligence on the part of the
Property Trustee or the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Property Trustee or
the Holders pursuant to the terms of the Common Securities, or any
action on the part of the Issuer granting indulgence or extension of any
kind;
(d) The voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) Any invalidity of, or defect or deficiency in, the Common
Securities;
(f) The settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) Any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Common Guarantee Trustee or the
Holders to give notice to, or obtain consent of the Guarantor or any other
Person with respect to the happening of any of the foregoing.
No setoff, counterclaim, reduction or diminution of any obligation, or
any defense of any kind or nature that the Guarantor has or may have against any
Holder shall be available hereunder to the Guarantor against such Holder to
reduce the payments to it under this Common Securities Guarantee.
SECTION 5.4 Rights of Holders.
(a) The Holders of a Majority in Liquidation Amount of the Common
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Common Guarantee Trustee in respect
of this Common Securities Guarantee or exercising any trust or power conferred
upon the Common Guarantee Trustee under this Common Securities Guarantee.
(b) If the Common Guarantee Trustee fails to enforce this Common
Securities Guarantee, then any Holder of Common Securities may, subject to the
subordination provisions of Section 6.2, institute a legal proceeding directly
against the Guarantor to enforce the Common
14
<PAGE> 15
Guarantee Trustee's rights under this Common Securities Guarantee without first
instituting a legal proceeding against the Issuer, the Common Guarantee Trustee
or any other person or entity. Notwithstanding the foregoing, if the Guarantor
has failed to make a Guarantee Payment, a Holder of Common Securities may,
subject to the subordination provisions of Section 6.2, directly institute a
proceeding against the Guarantor for enforcement of the Common Securities
Guarantee for such payment to the Holder of the Common Securities of the
principal of or interest on the Debentures on or after the respective due dates
specified in the Debentures, and the amount of the payment will be based on the
Holder's pro rata share of the amount due and owing on all of the Common
Securities. The Guarantor hereby waives any right or remedy to require that any
action on this Common Securities Guarantee be brought first against the Issuer
or any other person or entity before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment.
This Common Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders
of Common Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Common Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Common Securities
Guarantee, if at the time of any such payment, any amounts are due and unpaid
under this Common Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Common
Guarantee Trustee for the benefit of the Holders.
SECTION 5.7 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Common
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections 5.3(a) through 5.3(g), inclusive, hereof.
15
<PAGE> 16
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Common Securities remain outstanding, if there shall have
occurred a Guarantee Event of Default or an event of default under the
Declaration, then (a) the Guarantor shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, (b) the Guarantor
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Guarantor which rank pari passu with or junior to the Debentures and (c) the
Guarantor shall not make any guarantee payments with respect to the foregoing
(other than pursuant to this Common Securities Guarantee); provided, however,
the Guarantor may declare and pay a stock dividend where the dividend stock is
the same stock as that on which the dividend is being paid.
SECTION 6.2 Ranking.
This Common Securities Guarantee will constitute an unsecured obligation
of the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, except those liabilities of the
Guarantor made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect of any preferred or preference stock of any Affiliate of the
Guarantor, and (iii) senior to the Guarantor's common stock.
If an Event of Default has occurred and is continuing under the
Declaration, the rights of the Holders of the Common Securities to receive
Guarantee Payments under this Common Securities Guarantee shall be subordinated
to the rights of the holders of the Preferred Securities to receive payment of
all amounts due and owing under the terms of the Preferred Securities Guarantee.
ARTICLE 7
TERMINATION
SECTION 7.1 Termination.
This Common Securities Guarantee shall terminate upon (i) full payment
of the Redemption Price of all Common Securities, (ii) upon the distribution of
the Debentures to the Holders of all of the Common Securities or (iii) upon full
payment of the amounts payable in accordance with the Declaration upon
liquidation of the Issuer. Notwithstanding the foregoing, this Common Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Common Securities must restore payment of any
sums paid under the Common Securities or under this Common Securities Guarantee.
16
<PAGE> 17
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Common Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Common Securities Guarantee or by law, except that an Indemnified Person shall
be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Common Securities might properly be paid.
SECTION 8.2 Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Common Securities Guarantee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Common Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Common Securities then outstanding.
17
<PAGE> 18
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely affect the
rights of the Holders (in which case no consent of the Holders will be
required), this Common Securities Guarantee may only be amended with the prior
approval of the Holders of at least a Majority in Liquidation Amount of the
Common Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of, and action by written consent of the Holders of the
Common Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Common Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Common Guarantee Trustee, at the Common Guarantee
Trustee's mailing address set forth below (or such other address as the
Common Guarantee Trustee may give notice of to the Guarantor and the
Holders of the Common Securities):
_____________________________
_____________________________
_____________________________
_____________________________
_____________________________
(b) If given to the Guarantor, at the Guarantor's mailing addresses set
forth below (or such other address as the Guarantor may give notice of
to the Common Guarantee Trustee and the Holders of the Common
Securities):
American Annuity Group, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: General Counsel
Telecopy No. (513) 357-3397
(c) If given to any Holder of Common Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
18
<PAGE> 19
SECTION 9.4 Benefit.
This Common Securities Guarantee is solely for the benefit of the
Holders of the Common Securities and, subject to Section 3.1(a), is not
separately transferable from the Common Securities.
SECTION 9.5 Governing Law.
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
IN WITNESS WHEREOF, this Common Securities Guarantee is executed as of
the day and year first above written.
AMERICAN ANNUITY GROUP, INC.,
as Guarantor
By:_________________________________________
Name:_______________________________________
Title:______________________________________
___________________________________________,
as Common Guarantee Trustee
By:_________________________________________
Name:_______________________________________
Title:______________________________________
19
<PAGE> 20
COMMON SECURITIES GUARANTEE AGREEMENT
AMERICAN ANNUITY GROUP CAPITAL TRUST I
Dated as of September __, 1996
<PAGE> 21
CROSS REFERENCE TABLE*
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
310(a)..................................................................4.1(a)
310(b)..................................................................4.1(c)
310(c)............................................................Inapplicable
311(a)..................................................................2.2(b)
311(b)..................................................................2.2(b)
311(c)............................................................Inapplicable
312(a)..................................................................2.2(a)
312(b)..................................................................2.2(b)
312(c).....................................................................2.9
313(a).....................................................................2.3
313(b).....................................................................2.3
313(c).....................................................................2.3
313(d).....................................................................2.3
314(a).....................................................................2.4
314(b)............................................................Inapplicable
314(c).....................................................................2.5
314(d)............................................................Inapplicable
314(e).....................................................................2.5
314(f)............................................................Inapplicable
315(a)..........................................................3.1(d); 3.2(a)
315(b)..................................................................2.7(a)
315(c)..................................................................3.1(c)
315(d)..................................................................3.1(d)
316(a).............................................................2.6; 5.4(a)
317(a)...............................................................2.10; 5.4
318(a)..................................................................2.1(b)
- ------------------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not have any bearing upon the interpretation of any
of its terms or provisions.
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 INTERPRETATION AND DEFINITIONS........................................... 1
SECTION 1.1 Interpretation and Definitions.................................... 1
ARTICLE 2 TRUST INDENTURE ACT...................................................... 5
SECTION 2.1 Trust Indenture Act; Application.................................. 5
SECTION 2.2 Lists of Holders of Securities.................................... 5
SECTION 2.3 Reports by Common Guarantee Trustee............................... 5
SECTION 2.4 Periodic Reports to Common Guarantee Trustee...................... 5
SECTION 2.5 Evidence of Compliance with Conditions Precedent.................. 6
SECTION 2.6 Guarantee Event of Default; Waiver................................ 6
SECTION 2.7 Guarantee Event of Default; Notice................................ 6
SECTION 2.8 Conflicting Interests............................................. 6
SECTION 2.9 Disclosure of Information......................................... 7
SECTION 2.10 Common Guarantee Trustee May File Proofs of Claim................. 7
ARTICLE 3 POWERS, DUTIES AND RIGHTS OF
COMMON GUARANTEE TRUSTEE................................................. 7
SECTION 3.1 Powers and Duties of Common Guarantee Trustee..................... 7
SECTION 3.2 Certain Rights of Common Guarantee Trustee........................ 9
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee............. 11
ARTICLE 4 COMMON GUARANTEE TRUSTEE................................................. 11
SECTION 4.1 Common Guarantee Trustee; Eligibility............................. 11
SECTION 4.2 Appointment, Removal and Resignation of Common Guarantee Trustee.. 12
ARTICLE 5 GUARANTEE................................................................ 13
SECTION 5.1 Guarantee......................................................... 13
SECTION 5.2 Waiver of Notice and Demand....................................... 13
SECTION 5.3 Obligations Not Affected.......................................... 13
SECTION 5.4 Rights of Holders................................................. 14
SECTION 5.5 Guarantee of Payment.............................................. 15
SECTION 5.6 Subrogation....................................................... 15
SECTION 5.7 Independent Obligations........................................... 15
ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION................................ 16
SECTION 6.1 Limitation of Transactions........................................ 16
SECTION 6.2 Ranking........................................................... 16
</TABLE>
i
<PAGE> 23
<TABLE>
<S> <C>
ARTICLE 7 TERMINATION............................................................ 16
SECTION 7.1 Termination..................................................... 16
ARTICLE 8 INDEMNIFICATION........................................................ 17
SECTION 8.1 Exculpation..................................................... 17
SECTION 8.2 Indemnification................................................. 17
ARTICLE 9 MISCELLANEOUS.......................................................... 17
SECTION 9.1 Successors and Assigns.......................................... 17
SECTION 9.2 Amendments...................................................... 18
SECTION 9.3 Notices......................................................... 18
SECTION 9.4 Benefit......................................................... 19
SECTION 9.5 Governing Law................................................... 19
</TABLE>
ii
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of American Annuity
Group, Inc. for the registration of 3,450,000 Preferred Securities of American
Annuity Group Capital Trust I and to the incorporation by reference therein of
our report dated February 29, 1996, with respect to the consolidated financial
statements and schedules of American Annuity Group, Inc. for the year ended
December 31, 1995 included in its Form 10-K, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Cincinnati, Ohio
September 20, 1996
<PAGE> 1
EXHIBIT 25.1
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
AAG HOLDING COMPANY, INC.
(Exact name of obligor as specified in its charter)
Ohio Applied For
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
250 East Fifth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
----------------------
AMERICAN ANNUITY GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware 06-1356481
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
250 East Fifth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
----------------------
% Subordinated Debentures due 2026
(Title of the indenture securities)
==============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 16th day of September, 1996.
THE BANK OF NEW YORK
By: /s/ Paul J. Schmalzel
-----------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a
member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS ............................................ in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 2,461,550
Interest-bearing balances ....................... 835,563
Securities:
Held-to-maturity securities ..................... 802,064
Available-for-sale securities ................... 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,820,159
LESS: Allowance for loan and
lease losses ..............509,817
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income, allowance, and reserve ................ 27,309,342
Assets held in trading accounts ................... 837,118
Premises and fixed assets (including
capitalized leases) ............................. 614,567
Other real estate owned ........................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 225,158
Customers' liability to this bank on
acceptances outstanding ......................... 800,375
Intangible assets ................................. 436,668
Other assets ...................................... 1,247,908
-----------
Total assets ...................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ............................. $18,851,327
Noninterest-bearing .......7,102,645
Interest-bearing .........11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing ..........37,855
Interest-bearing .........10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ......................... 1,224,886
Securities sold under agreements
to repurchase ................................. 29,728
Demand notes issued to the U.S. ...................
Treasury ........................................ 118,870
Trading liabilities ............................... 673,944
Other borrowed money:
With original maturity of one year
or less ....................................... 2,713,248
With original maturity of more than
one year ...................................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding ........................... 803,292
Subordinated notes and debentures ................. 1,022,860
Other liabilities ................................. 1,590,564
-----------
Total liabilities ................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... 3,197
Cumulative foreign currency transla-
tion adjustments ................................ ( 5,765)
-----------
Total equity capital .............................. 3,543,579
-----------
Total liabilities and equity
capital ......................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25.2
=============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
AMERICAN ANNUITY GROUP CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Delaware Applied For
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
250 East Fifth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
----------------------
% Trust Originated Preferred Securities
(Title of the indenture securities)
=============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 16th day of September, 1996.
THE BANK OF NEW YORK
By: /s/ Paul J. Schmalzel
----------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a
member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS ............................................ in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 2,461,550
Interest-bearing balances ....................... 835,563
Securities:
Held-to-maturity securities ..................... 802,064
Available-for-sale securities ................... 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,820,159
LESS: Allowance for loan and
lease losses ..............509,817
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income, allowance, and reserve ................ 27,309,342
Assets held in trading accounts ................... 837,118
Premises and fixed assets (including
capitalized leases) ............................. 614,567
Other real estate owned ........................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 225,158
Customers' liability to this bank on
acceptances outstanding ......................... 800,375
Intangible assets ................................. 436,668
Other assets ...................................... 1,247,908
-----------
Total assets ...................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ............................. $18,851,327
Noninterest-bearing .......7,102,645
Interest-bearing .........11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing ..........37,855
Interest-bearing .........10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ......................... 1,224,886
Securities sold under agreements
to repurchase ................................. 29,728
Demand notes issued to the U.S. ...................
Treasury ........................................ 118,870
Trading liabilities ............................... 673,944
Other borrowed money:
With original maturity of one year
or less ....................................... 2,713,248
With original maturity of more than
one year ...................................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding ........................... 803,292
Subordinated notes and debentures ................. 1,022,860
Other liabilities ................................. 1,590,564
-----------
Total liabilities ................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... 3,197
Cumulative foreign currency transla-
tion adjustments ................................ ( 5,765)
-----------
Total equity capital .............................. 3,543,579
-----------
Total liabilities and equity
capital ......................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 25.3
=============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
AMERICAN ANNUITY GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware Applied For
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
250 East Fifth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Preferred Securities of
American Annuity Group Capital Trust I
(Title of the indenture securities)
=============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 16th day of September, 1996.
THE BANK OF NEW YORK
By: /s/ Paul J. Schmalzel
------------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a
member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS ............................................ in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 2,461,550
Interest-bearing balances ....................... 835,563
Securities:
Held-to-maturity securities ..................... 802,064
Available-for-sale securities ................... 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,820,159
LESS: Allowance for loan and
lease losses ..............509,817
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income, allowance, and reserve ................ 27,309,342
Assets held in trading accounts ................... 837,118
Premises and fixed assets (including
capitalized leases) ............................. 614,567
Other real estate owned ........................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 225,158
Customers' liability to this bank on
acceptances outstanding ......................... 800,375
Intangible assets ................................. 436,668
Other assets ...................................... 1,247,908
-----------
Total assets ...................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ............................. $18,851,327
Noninterest-bearing .......7,102,645
Interest-bearing .........11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing ..........37,855
Interest-bearing .........10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ......................... 1,224,886
Securities sold under agreements
to repurchase ................................. 29,728
Demand notes issued to the U.S. ...................
Treasury ........................................ 118,870
Trading liabilities ............................... 673,944
Other borrowed money:
With original maturity of one year
or less ....................................... 2,713,248
With original maturity of more than
one year ...................................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding ........................... 803,292
Subordinated notes and debentures ................. 1,022,860
Other liabilities ................................. 1,590,564
-----------
Total liabilities ................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... 3,197
Cumulative foreign currency transla-
tion adjustments ................................ ( 5,765)
-----------
Total equity capital .............................. 3,543,579
-----------
Total liabilities and equity
capital ......................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
