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As filed with the Securities and Exchange Commission on May 15, 1997
Registration No. 333-26171
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN ANNUITY GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1356481
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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 II
(Exact name of Registrant as specified in its charter)
DELAWARE 31-6554645
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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)
OHIO 31-1475936
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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)
---------------------------------
MARK F. MUETHING, ESQ.
Senior Vice President, General Counsel
and Secretary
American Annuity Group, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
(513) 333-5515
---------------------------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
-------------------
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
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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.
<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 jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION, DATED MAY 15, 1997
PROSPECTUS
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AMERICAN ANNUITY GROUP CAPITAL TRUST II
OFFER TO EXCHANGE ITS 8-7/8% CAPITAL TRUST PREFERRED SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ITS OUTSTANDING
8-7/8% CAPITAL TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AMERICAN ANNUITY GROUP, INC.
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American Annuity Group Capital Trust II, a Delaware statutory business
trust (the "Trust"), hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus (as the same may be amended or supplemented from
time to time, the "Prospectus") and in the accompanying Letter of Transmittal
(which together constitute the "Exchange Offer"), to exchange up to $75,000,000
aggregate liquidation amount of its 8-7/8% Capital Trust Preferred Securities
(the "New Preferred Securities") which have been registered under the Securities
Act of 1933 (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for a like
liquidation amount of its outstanding 8-7/8% Capital Trust Preferred Securities
(the "Old Preferred Securities"), of which $75,000,000 aggregate liquidation
amount is outstanding. As soon as practicable after the Exchange Offer: American
Annuity Group, Inc., a Delaware corporation ("AAG" or the "Company"), will
exchange its guarantee of the payment of distributions and payments on
liquidation or redemption of the Old Preferred Securities (the "Old Trust
Guarantee") for a like guarantee of the New Preferred Securities (the "New Trust
Guarantee"); all of the 8-7/8% Subordinated Debentures of AAG Holding Company,
Inc., a wholly-owned subsidiary of the Company and an Ohio corporation ("AAG
Holding"), (the "Old Subordinated Debentures"), of which $77,320,000 aggregate
principal amount is outstanding will be exchanged for a like aggregate principal
amount of AAG Holding's 8-7/8% Subordinated Debentures (the "New Subordinated
Debentures"); and the Company will exchange its guarantee of the Old
Subordinated Debentures (the "Old Debt Guarantee") for a guarantee of the New
Subordinated Debentures (the "New Debt Guarantee"). The New Trust Guarantee, the
New Subordinated Debentures and the New Debt Guarantee also have been registered
under the Securities Act (the exchange of the Old Preferred Securities for the
New Preferred Securities, the exchange of the Old Trust Guarantee for the New
Trust Guarantee, the exchange of the Old Subordinated Debentures for the New
Subordinated Debentures and the exchange of the Old Debt Guarantee for the New
Debt Guarantee are referred to collectively herein as the "Exchange"). The Old
Preferred Securities, the Old Trust Guarantee, the Old Subordinated Debentures
and the Old Debt Guarantee are collectively referred to herein as the "Old
Securities" and the New Preferred Securities, the New Trust Guarantee, the New
Subordinated Debentures and the New Debt Guarantee are collectively referred to
herein as the "New Securities."
The terms of the New Securities are identical in all material respects to
the terms of the Old Securities, except that the New Securities have been
registered under the Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the Old Securities. See
"Description of the Old Securities."
The New Preferred Securities and the Old Preferred Securities (together,
the "Preferred Securities") represent undivided beneficial ownership interests
in the assets of the Trust. The Company indirectly owns all of the beneficial
ownership interests represented by common securities of the Trust (the "Common
Securities"; together with the Preferred Securities, the "Trust Securities").
The Trust exists for the sole purposes of issuing the Trust Securities and
investing the proceeds thereof in the Old Subordinated Debentures, which will
be exchanged for New Subordinated Debentures (together, the "Subordinated
Debentures").
(continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 13 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.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May __, 1997
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(cover page continued)
The Subordinated Debentures will mature on January 15, 2027. The terms of the
Preferred Securities provide that they will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of Preferred Securities -- Subordination of Common Securities."
Holders of the Preferred Securities are entitled to receive cumulative
cash distributions at an annual rate of 8-7/8% of the liquidation amount of
$1,000 per Preferred Security, accruing from the date of original issuance and
payable semi-annually in arrears on January 15 and July 15 of each year,
commencing July 15, 1997 ("distributions"). The distribution rate and the
distribution and other payment dates for the Preferred Securities correspond to
the interest rate and interest and other payment dates on the Subordinated
Debentures, which, together with the Old Debt Guarantee and New Debt Guarantee
(collectively, the "Debt Guarantee") and interest and principal payments
received on the Subordinated Debentures, are 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 as evidenced by the Old Trust Guarantee and the New Trust Guarantee
(collectively, the "Trust Guarantee") if and to the extent the Trust has funds
available therefor. The Company's obligations under the Trust Guarantee, 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 March 31, 1997, 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 $6.5
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 10 consecutive semi-annual
periods (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 8-7/8% per annum compounded semi-annually, 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 not redeemable prior to March 1, 2007
unless a Special Event (as defined herein) has occurred. The Subordinated
Debentures are redeemable prior to maturity at the option of AAG Holding, (i)
on or after March 1, 2007, in whole or in part, at a redemption price equal to
104.44% of the principal amount thereof on March 1, 2007, declining ratably on
each March 1 thereafter to 100% on or after March 1, 2017, or (ii) at any time,
in whole (but not in part), upon the occurrence and continuation of a Special
Event at a redemption price equal to 100% of the principal amount thereof. The
Subordinated Debentures mature on January 15, 2027, which date may be extended
at any time at the election of AAG Holding, but in no event later than the
earlier of (i) January 15, 2046 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
March 1, 2007 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 January 15, 2007, or extend the maturity of such
Subordinated Debentures to a date not later than the earlier of (i) January 15,
2046 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 Trust Securities, AAG Holding will use its
best efforts to have the Subordinated Debentures listed on the exchange, if
any, on which 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
$1,000 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."
2
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(cover page continued)
The Trust is making the Exchange Offer of the New Preferred Securities in
reliance on the position of the Staff of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions
relating to the transferability of the exchanged securities following
registration. However, none of the Company, AAG Holding nor the Trust has
sought its own interpretive letter and there can be no assurance that the Staff
of the Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the Staff of the
Division of Corporation Finance, and subject to the two immediately following
sentences, the Company, AAG Holding and the Trust believe that New Preferred
Securities issued pursuant to this Exchange Offer in exchange for Old Preferred
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Preferred Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Preferred Securities. However, any holder of Old Preferred Securities
who is an "affiliate" of the Company, AAG Holding or the Trust (within the
meaning of Rule 405 under the Securities Act) or who intends to participate in
the Exchange Offer for the purpose of distributing New Preferred Securities, or
any broker-dealer who purchased Old Preferred Securities from the Trust to
resell them pursuant to Rule 144A under the Securities Act ("Rule 144A") or any
other available exemption under the Securities Act, (a) will not be able to
rely on the interpretations of the Staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (b)
will not be permitted or entitled to tender such Old Preferred Securities in
the Exchange Offer and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
other transfer of such Old Preferred Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Preferred Securities acquired for its own
account as a result of market-making or other trading activities and exchanges
such Old Preferred Securities for New Preferred Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Preferred Securities.
Each holder of Old Preferred Securities who wishes to exchange Old
Preferred Securities for New Preferred Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company, AAG
Holding or the Trust, (ii) any New Preferred Securities to be received by it
are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such New Preferred Securities,
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such New Preferred Securities. In addition, the Company, AAG
Holding and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company,
AAG Holding and the Trust (or an agent thereof) in writing information as to
the number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act")) on behalf of whom such
holder holds the Preferred Securities to be exchanged in the Exchange Offer.
Each broker-dealer that receives New Preferred Securities for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Old
Preferred Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Preferred Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Company, AAG Holding and the Trust believe that broker-dealers who
acquired Old Preferred Securities for their own accounts, as a result of
market-making activities or other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery requirements with
respect to the New Preferred Securities received upon exchange of such Old
Preferred Securities with this Prospectus, as it may be amended or supplemented
from time to time. Subject to certain exceptions, the Company, AAG Holding and
the Trust have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Preferred Securities for a period ending
180 days after the Registration Statement of which this Prospectus constitutes
a part is declared effective. Any Participating Broker-Dealer who is an
"affiliate" of the Trust (within the meaning of Rule 405 under the Securities
Act) may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Resales of
New Preferred Securities" and "--Broker-Dealer Considerations."
Any Old Preferred Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the
Declaration (except for those rights relating to the Exchange Offer which
terminate upon consummation of the Exchange Offer). Following consummation of
the Exchange Offer, the holders of Old Preferred Securities will not be
entitled to any increase in the distribution rate thereon and will continue to
be subject to all of the existing restrictions upon transfer thereof and none
of the Company, AAG Holding nor the Trust will have any further obligation to
such holders (other than under certain limited circumstances) to provide for
registration under the Securities Act of the Old Preferred Securities held by
them. To the extent that Old Preferred Securities are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Preferred
Securities could be adversely affected. See "Risk Factors--Consequences of a
Failure to Exchange Old Preferred Securities."
The New Preferred Securities will be a new issue of securities for which
there currently is no established trading market. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New
Preferred Securities.
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(cover page continued)
Old Preferred Securities may be tendered for exchange on or prior to 5:00
p.m., Eastern Daylight Time, on June 18, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company, AAG Holding and the Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended.) Tenders of Old Preferred Securities may be withdrawn at any
time on or prior to the Expiration Date. The Exchange Offer is not conditioned
upon any minimum liquidation amount of Old Preferred Securities being tendered
for exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company or the Trust. The Company has
agreed to pay all expenses of the Exchange Offer. See "The Exchange Offer--Fees
and Expenses." This Prospectus, together with the Letter of Transmittal, is
being sent to all registered holders of Old Preferred Securities as of May 19,
1997.
None of the Company nor the Trust will receive any cash proceeds from the
issuance of the New Preferred Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds."
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS 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 OFFERED HEREBY 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 Commission. The Company, AAG Holding and the Trust have
filed a Registration Statement on Form S-4 (the "Registration Statement") with
the Commission under the Securities Act of 1933 (the "Securities Act") with
respect to the New 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 New York Stock
Exchange, 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 are owned 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 the Company. 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 is owned 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 Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and the Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997 of AAG (File No. 1-11632) are hereby incorporated
by reference into this Prospectus.
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
Exchange Offer 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
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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.
THIS PROSPECTUS INCORPORATED DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
AAG AT THE ADDRESS AND TELEPHONE NUMBER SET FORTH ABOVE. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NO LATER THAN FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
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PROSPECTUS SUMMARY
This summary is qualified by the more detailed information and financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus.
THE COMPANY
AAG is a holding company which, through it 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, 1996, GALIC
had statutory assets in excess of $5.7 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 for the pre-need industry, (ii) Annuity
Investors Life Insurance Company ("AILIC"), which markets group and individual
variable annuities, and (iii) Loyal American Life Insurance Company ("Loyal"),
which markets various forms of supplemental life insurance and health insurance
through payroll deduction plans and financial institutions.
American Financial Group, Inc. and its subsidiaries ("AFG") collectively
own approximately 81% of the Company's outstanding Common Stock.
AAG HOLDING COMPANY
AAG Holding is a wholly-owned subsidiary of the Company that owns all of
the stock of GALIC. AAG Holding also owns all of the Common Securities and will
issue the New 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 March 4, 1997.
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
(iii) engaging in only those other activities necessary or incidental thereto.
All of the Common Securities are owned by AAG Holding. The Common Securities
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.
The Trust's affairs will be conducted by the trustees (the "Trustees")
appointed by AAG Holding as the owner of all of the Common Securities. The
holder of the Common Securities is 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") are employees or officers of or otherwise affiliated with AAG. A
third Trustee (the "Property Trustee") of the Trust is a financial institution
that is not affiliated with AAG Holding and has a minimum amount of combined
capital and surplus of not less that $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 is 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.
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<PAGE> 9
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer..................... Up to $75,000,000 aggregate liquidation amount of New Preferred
Securities are being offered in exchange for a like aggregate
liquidation amount of Old Preferred Securities. The Company will issue,
promptly after the Expiration Date, $1,000 liquidation amount of New
Preferred Securities in exchange for each $1,000 liquidation amount of
outstanding Old Preferred Securities tendered and accepted in connection
with the Exchange Offer. For a description of the procedures for
tendering Old Preferred Securities, see "The Exchange Offer--Procedures
for Tendering Old Preferred Securities."
Expiration Date........................ 5:00 p.m., Eastern Daylight Time on June 18, 1997 (such time on such date
being hereinafter called the Expiration Date") unless the Exchange
Offer is extended by the Company and the Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended). See "The Exchange Offer-Expiration Date;
Extensions; Amendments."
Withdrawal Rights...................... Tenders of Old Preferred Securities may be withdrawn at any time prior to the
Expiration Date by delivering a written notice of such withdrawal to
the Exchange Agent which conforms with the procedures set forth below under
"The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Old Preferred Securities............... Tendering holders of Old Preferred Securities must complete and sign a Letter of
Transmittal in accordance with the instructions contained therein and forward the
same by mail, facsimile or hand delivery, together with any other required
documents, to the Exchange Agent, either with the Old Preferred Securities to be
tendered or in compliance with the specified procedures for guaranteed delivery of
Old Preferred Securities. Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect tenders by book-entry transfer.
Holders of Old Preferred Securities registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are urged to contact such person
promptly if they wish to tender Old Preferred Securities pursuant to the Exchange
Offer. See "The Exchange Offer--Procedures for Tendering Old Preferred
Securities."
Letters of Transmittal and certificates representing Old Preferred Securities should
not be sent to the Company, AAG Holding, or the Trust. Such documents should
only be sent to the Exchange Agent. Questions regarding how to tender and
requests for information should be directed to the Exchange Agent. See "The
Exchange Offer-Exchange Agent."
Accrued Distributions.................. Each New Preferred Security will pay cumulative distributions from March 11,
1997. Holders of the Old Preferred Securities whose Old Preferred Securities are
accepted for exchange will not receive any accumulated distributions on such Old
Preferred Securities and will be deemed to have waived the right to receive any
distributions on such Old Preferred Securities accumulated from and after March
11, 1997.
Conditions to
the Exchange Offer................... The Exchange Offer is subject to certain conditions, which may be waived by the
Company and the Trust in their sole discretion. The Exchange Offer is not
conditioned upon any minimum liquidation amount of Old Preferred Securities
being tendered. See "The Exchange Offer--Conditions to the Exchange Offer."
Exchange Agent......................... The Company will serve as the Exchange Agent for the Exchange Offer (the
Company, in such capacity, is referred to as the "Exchange Agent"). The
addresses, and telephone and facsimile numbers, of the Exchange Agent are set
forth below under "The Exchange Offer--Exchange Agent" and in the Letter of
Transmittal.
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<PAGE> 10
<TABLE>
<S> <C>
Use of Proceeds........................ None of the Company, AAG Holding nor the Trust will receive any cash proceeds
from the issuance of the New Preferred Securities offered hereby. The New
Preferred Securities will be exchanged for Old Preferred Securities in like
liquidation amount which will be retired and canceled. The cash proceeds from the
sale of the Old Preferred Securities were used to purchase Old Subordinated
Debentures. See "Use of Proceeds.
Certain United States
Federal Income Tax
Considerations....................... Holders of Old Preferred Securities should review the information set forth under
"Certain United States Federal Income Tax Considerations" prior to tendering Old
Preferred Securities in the Exchange Offer.
Consequences of
Failure to Exchange.................. Any Old Preferred Securities not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Declaration (except for those
rights which terminate upon consummation of the Exchange Offer) . Following
consummation of the Exchange Offer, the holders of Old Preferred Securities will
not be entitled to any increase in the distribution rate thereon and will continue to
be subject to all of the existing restrictions upon transfer thereof and neither the
Company nor the Trust will have any further obligation to such holders to provide
for registration under the Securities Act of the Old Preferred Securities held by
them. To the extent that Old Preferred Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Preferred Securities could
be adversely affected. See "Risk Factors--Consequences of a Failure to Exchange
Old Preferred Securities."
THE NEW SECURITIES
The Trust.............................. American Annuity Group Capital Trust II, a Delaware statutory business trust. The
sole assets of the Trust are the Subordinated Debentures, the Debt Guarantee and
principal and interest payments on the Subordinated Debentures .
Securities Offered..................... Up to $75,000,000 aggregate liquidation amount of the Trust's 8-7/8% Capital Trust
Preferred Securities which have been registered under the Securities Act
(liquidation amount $1,000 per Preferred Security) . The terms of the New
Preferred Securities are identical in all material respects to the terms of the Old
Preferred Securities, except that the New Preferred Securities have been registered
under the Securities Act and therefore are not subject to certain restrictions on
transfer applicable to the Old Preferred Securities. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer," "Description of Capital Securities" and
"Description of the Old Securities." The Holders of the New Preferred Securities
will be entitled to a preference in certain circumstances with respect to distributions
and amounts payable on redemption, liquidation or otherwise over the Common
Securities.
Distributions.......................... Holders of the New Preferred Securities will be entitled to receive cumulative cash
distributions at an annual rate of 87/8% of the liquidation amount of $1,000 per
New Preferred Security, accruing from March 11, 1997 and payable semi-annually
in arrears on the January 15 and July 15 of each year commencing on July 15,
1997. The distribution rate and the distribution and other payment dates for the
New Preferred Securities will correspond to the interest rate and interest and other
payment dates on the New Subordinated Debentures. See "Description of Preferred
Securities."
Subordinated Debentures.............. The Trust has invested the proceeds from the issuance of the Old Preferred
Securities and the Old Common Securities in an equivalent amount of Old
Subordinated Debentures of AAG Holding. The Subordinated Debentures are
guaranteed by the Company. The Subordinated Debentures mature on January 15,
2027. The Subordinated Debentures are unsecured and will be subordinate and
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C>
junior in right of payment, to the extent set forth herein, to all 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. See "Risk Factors--
Ranking of Subordinated Obligations Under the Trust Guarantee, Debt Guarantee
and Subordinated Debentures", "Risk Factors--Status of Company as Holding
Company" and "Description of Subordinated Debentures and Debt Guarantee--
Subordination."
Guarantee.............................. 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 as evidenced by the Old Trust Guarantee
and the New Trust Guarantee (collectively, the "Trust Guarantee") if and to the
extent the Trust has funds available therefor. The Company's obligations under the
Trust Guarantee, 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. 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. See "Description of Guarantee" and "Effect of
Obligations under the Subordinated Debentures, the Debt Guarantee and the Trust
Guarantee." The obligations of the Company under the Guarantees are subordinate
and junior in right of payment to all Senior Indebtedness of the Company. See
"Risk Factors--Ranking of Subordinated Obligations Under the Guarantee and the
Subordinated Debentures" and "Description of Guarantee."
Right to Defer Interest................ AAG Holding has the right to defer payment of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures, from time to time, for up to 10 consecutive semi-annual periods,
provided that no Extension Period may extend beyond the Maturity Date. There
could be multiple Extension Periods of varying lengths throughout the term of the
Subordinated Debentures. If interest payments on the Subordinated Debentures are
so deferred, distributions on the Preferred Securities will also be deferred. During
an Extension Period, interest on the Subordinated Debentures will continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
annual rate of 8-7/8% per annum, compounded semi-annually. During an 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
payment. See "Description of Subordinated Debentures and Debt Guarantee--
Option to Extend Interest Payment Period" and "Certain United States Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
Redemption............................. The Subordinated Debentures are not redeemable prior to March 1, 2007 unless a
Special Event (as defined herein) has occurred. The Subordinated Debentures are
redeemable prior to maturity at the option of AAG Holding, (i) on or after March
1, 2007, in whole or in part, at a redemption price equal to 104.44% of the principal
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C>
amount thereof on March 1, 2007, declining ratably on each March 1 thereafter to 100%
on or after March 1, 2017, or (ii) at any time, in whole (but not in part), upon the
occurrence and continuation of a Special Event at a redemption price equal to 100% of
the principal amount thereof. The Trust Securities will be redeemed upon maturity of
the Subordinated Debentures. See "Description of Preferred Securities-Redemption" and
"--Special Event Redemption."
Option to Extend Maturity Date.......... The Subordinated Debentures mature on January 15, 2027, which date may be
extended at any time at the election of AAG Holding, but in no event later than the
earlier of (i) January 15, 2046 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 March 1, 2007 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."
Liquidation of the Trust................ 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
cause 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 later than the earlier of
(i) January 15, 2046 or (ii) the Interest Deduction Date, provided that it can extend
the maturity only if certain conditions are met. See "Description of the Preferred
Securities-Distribution of the Subordinated Debentures."
Ratings ............................... The Preferred Securities have been assigned an investment grade rating of "BBB-"
by Standard & Poor's Ratings Group, a division of McGraw-Hill ("S&P") and an
investment grade rating of "BBB-" by Duff & Phelps Credit Rating Co. ("Duff &
Phelps"). Moody's Investors Service, Inc. ("Moody's") has assigned the Preferred
Securities a rating of "bal."
An explanation of the significance of ratings may be obtained from S&P, Duff & Phelps
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.
Absence of Market for the
New Preferred Securities.............. The New Preferred Securities will be a new issue of securities for which there
currently is no established trading market. Accordingly, there can be no assurance
as to the development or liquidity of any market for the New Preferred Securities.
The Company currently is obligated to apply for listing of the New Preferred
Securities on The New York Stock Exchange, or such other exchange on which
similar securities of AAG are listed, upon request of the holders of a majority in
aggregate liquidation amount of the New Preferred Securities, provided that the
New Preferred Securities so qualify for listing.
</TABLE>
10
<PAGE> 13
SUMMARY FINANCIAL INFORMATION
The following summary financial data 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
Quarterly Report on Form 10-Q for the three months ended March 31, 1997 and the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which are incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA: (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Total revenues............................... $149.7 $ 139.0 577.3 439.6 372.7
====== ======== ======== ======== ========
Income from continuing operations(1)......... $ 18.0 $ 14.7 $ 61.1 $ 58.7 $ 40.9
Loss from discontinued operations............ -- -- -- (3.2) (2.6)
Extraordinary items.......................... -- (1.6) (6.0) (0.2) (1.7)
Change in accounting principle............... -- -- -- -- (0.5)
------ -------- -------- -------- --------
Net income................................... $ 18.0 $ 13.1 $ 55.1 $ 55.3 $ 36.1
====== ======== ======== -------- --------
Earnings (loss) per common share:
Continuing operations(1)................ $ 0.39 $ 0.33 $ 1.39 $ 1.45 $ 1.05
Discontinued operations................. -- -- -- (0.08) (0.07)
Extraordinary items..................... -- (0.04) (0.14) -- (0.05)
Change in accounting principle.......... -- -- -- -- (0.01)
------ -------- -------- -------- --------
Net income.............................. $ 0.39 $ 0.29 $ 1.25 $ 1.37 $ 0.92
====== ======== -------- -------- --------
Cash dividends per common share -- -- $ 0.08 $ 0.07 $ 0.06
BALANCE SHEET DATA:
Total assets................................. 7,164.9 $6,711.9 $7,024.1 $6,611.0 $5,089.9
Notes payable................................ 121.8 166.1 114.9 167.7 183.3
Net unrealized gains (losses) included
in stockholders' equity................... 22.5 37.7 61.8 89.3 (29.0)
Total stockholders' equity................... 416.4 390.8 486.5 429.3 204.4
- --------------
</TABLE>
(1) Reported amounts include realized gains and losses on sales of investments
and equity in an affiliate's earnings. 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>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Income from continuing operations before realized
investment gains (losses) and equity in net earnings
(loss) of affiliate $16.6 $13.8 $61.7 $48.4 $42.8
Realized investment gains (losses), after tax 0.2 0.2 0.8 10.2 (0.1)
Equity in net earnings (loss) of affiliate, after tax 1.2 0.7 (1.4) 0.1 (1.8)
----- ----- ----- ----- -----
Income from continuing operations $18.0 $14.7 $61.1 $58.7 $40.9
===== ===== ===== ===== =====
Earnings per share:
Continuing operations before realized investment
gains (losses) and equity in net earnings (loss)
of affiliate $0.36 $0.31 $1.40 $1.20 $1.10
Realized investment gains (losses), after tax -- -- 0.02 0.25 --
Equity in net earnings (loss) of affiliate, after tax 0.03 0.02 (0.03) -- (0.05)
----- ----- ----- ----- -----
From continuing operations $0.39 $0.33 $1.39 $1.45 $1.05
===== ===== ===== ===== =====
</TABLE>
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RISK FACTORS
Prospective purchasers of New 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 New Preferred Securities. To the extent any of the information
herein or incorporated by reference in this Prospectus constitutes a
"forward-looking statement" as defined in Section 21E(i)(1) of the Exchange Act,
the risk factors set forth below are cautionary statements identifying important
factors that could cause actual results to differ materially from those in the
forward-looking statement.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE TRUST GUARANTEE, DEBT GUARANTEE
AND SUBORDINATED DEBENTURES
The Company's obligations under the Trust Guarantee are unsecured and
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 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.
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
AAG Holding under the Subordinated Debentures will at all times be senior to
common and preferred equity of AAG Holding.
At March 31, 1997, 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
$6.5 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."
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
The Company and AAG Holding are insurance holding companies whose
operations are conducted through GALIC, their principal subsidiary, and other
subsidiaries. AAG Holding's cash flow is derived principally from dividends on
the capital stock of GALIC and tax allocation payments from 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 department of Ohio, 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 liquidations would be
conducted by or under the supervision of the Ohio Insurance Commissioner as the
receiver with respect to GALIC's property and business.
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
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<PAGE> 15
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 Debt Guarantee. 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, semi-annual 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 semi-annually) 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 10 consecutive semi-annual periods,
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. If 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 10 consecutive semi-annual
periods 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
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<PAGE> 16
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 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
January 15, 2007 or extend the maturity of such Subordinated Debentures to a
date which is not later than the earlier of (i) January 15, 2046 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 acquire,
whether pursuant to the Exchange 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 Old Preferred Securities. 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-
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
14
<PAGE> 17
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") was introduced in the 104th Congress which would have, among other
things, generally denied interest deductions for interest or OID on an
instrument issued by a corporation that has a maximum term of more than 20
years and that is not shown as indebtedness on the consolidated balance sheet
of the issuer. The above-described provisions of the Bill were proposed to be
effective generally for instruments issued on or after December 7, 1995. If
these provisions were to apply to the Subordinated Debentures, AAG Holding
would not be able to deduct interest on the Subordinated Debentures. However,
leaders of the Senate Finance and House Ways and Means Committees opposed
application of any such provisions, if adopted, to instruments issued prior to
the date of appropriate congressional action. The 104th Congress adjourned
without enacting the Bill. On February 7, 1997, as part of its 1998 budget
proposal, the Administration made proposals similar to those of March 19, 1996,
except that the denial of interest or OID deductions would apply to instruments
with maximum terms of over 15 years. However, the proposals would be effective
only for instruments issued on or after the date of first Committee action. No
such committee action has taken place. There can be no assurance, however, that
current or future legislative or administrative proposals or final legislation
will not adversely affect the ability of AAG Holding to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment described herein.
Such a change, therefore, could give rise to a Tax Event, which would permit
AAG Holding to cause a redemption of the Preferred Securities or to dissolve
the Trust and distribute the Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust. See "Description of the Preferred
Securities-Special Event Redemption" and "United States Federal Income
Taxation."
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."
ABSENCE OF PUBLIC MARKET FOR SECURITIES
Although the New Preferred Securities will generally be permitted to
be resold or otherwise transferred by the holders (who are not affiliates of
the Company, AAG Holding or the Trust) without compliance with the registration
requirements under the Securities Act, they will constitute a new issue of
securities with no established trading market. Accordingly, no assurance can be
given that an active public or other market will develop for the New Preferred
Securities or as to the liquidity of or the trading market for the New
Preferred Securities. The New Preferred Securities will be a new issue of
securities for which there currently is no established trading market.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the New Preferred Securities. The Company currently is obligated
to apply for listing of the New Preferred Securities on The New York Stock
Exchange, or such other exchange on which similar securities of AAG are listed,
upon request of the holders of a majority in aggregate liquidation amount of
the New Preferred Securities, provided that the New Preferred Securities so
qualify for listing. If an active public market does not develop, the market
price and liquidity of the New Preferred Securities may be adversely affected.
If a public trading market develops for the New Preferred Securities,
future trading prices of such securities will depend on many factors,
including, among other things, prevailing interest rates, results of operations
and the market for similar securities. Depending on prevailing interest rates,
the market for similar securities and other factors, including the financial
condition of the Company, the New Preferred Securities may trade at a discount.
Notwithstanding the registration of the New Preferred Securities,
holders who are "affiliates" (as defined under Rule 405 of the Securities Act)
of the Company, AAG Holding or the Trust may publicly offer for sale or resell
the New Preferred Securities only in compliance with the provisions of Rule 144
under the Securities Act.
15
<PAGE> 18
Each broker-dealer that receives New Preferred Securities for its own
account in exchange for Old Preferred Securities, where such Old Preferred
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Preferred Securities.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD PREFERRED SECURITIES
The Old Preferred Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions. Old
Preferred Securities that remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting such restrictions on transfer.
In addition, upon consummation of the Exchange Offer, holders of Old Preferred
Securities that remain outstanding will not be entitled to any increase in the
distribution rate thereon or any rights to have such old Preferred Securities
registered under the Securities Act by the Company. The Company, AAG Holding
and the Trust do not intend to register under the Securities Act any Old
Preferred Securities that remain outstanding after consummation of the Exchange
Offer (subject to such limited exceptions, if applicable).
EXCHANGE OFFER PROCEDURES
Issuance of the New Preferred Securities in exchange for Old Preferred
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Preferred Securities, a properly completed and
duly executed Letter of Transmittal and all other required documents.
Therefore, holders of the Old Preferred Securities desiring to tender such Old
Preferred Securities in exchange for New Preferred Securities should allow
sufficient time to ensure timely delivery. The Trust is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Preferred Securities for exchange.
USE OF PROCEEDS
None of the Company, AAG Holding nor the Trust will receive any cash
proceeds from the issuance of the New Preferred Securities offered hereby. The
New Preferred Securities will be exchanged for Old Preferred Securities in like
liquidation amount, which will be retired and canceled. The cash proceeds from
the sale of the Old Preferred Securities were used to purchase Old Subordinated
Debentures.
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 March 4, 1997. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). AAG Holding directly or indirectly owns all of the issued and
outstanding Common Securities of the Trust which represent over 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
(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") are persons who are
employees or officers of, or who are affiliated with, AAG. The third trustee is
a financial institution that is not affiliated with AAG 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 is 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 acts as the Property Trustee and The
Bank of New York (Delaware), an affiliate of the Property Trustee, acts as the
Delaware Trustee, in each case until removed or replaced by the holder of the
Common Securities. The Bank of New York also acts as indenture trustee under the
Trust Guarantee (the "Preferred Securities Guarantee Trustee") and as Exchange
Agent. See "Description of Trust Guarantee" and "The Exchange Offer."
The Property Trustee holds 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
16
<PAGE> 19
"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 holder of all the Common Securities, has 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 pays all fees, expenses 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
AAG is a holding company which, through its subsidiaries, is engaged
principally in 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, 1996, GALIC had statutory
assets in excess of $5.7 billion.
GALIC has several life insurance subsidiaries including (i) American
Memorial Life Insurance Company ("American Memorial"), which markets individual
life insurance and annuity policies for the pre-need industry, (ii) Annuity
Investors Life Insurance Company ("AILIC"), which markets group and individual
variable annuities, and (iii) Loyal American Life Insurance Company ("Loyal"),
which markets various forms of supplemental life insurance and health insurance
through payroll deduction plans and financial institutions.
American Financial Group, Inc. and its subsidiaries ("AFG")
collectively own approximately 81% of the Company's outstanding Common Stock.
CAPITALIZATION
The following table sets forth the historical capitalization of the
Company at March 31, 1997 (in millions).
<TABLE>
<S> <C>
Notes payable ................................................................................... $121.8
Mandatorily redeemable preferred securities of subsidiary trusts................................. 150.0
Stockholders' equity:
Common Stock, $1.00 par value .......................................................... 43.2
Capital surplus ........................................................................ 358.8
Accumulated deficit at December 31, 1992 ............................................... (212.6)
Retained earning since January 1, 1993 ................................................. 204.5
Unrealized gain on marketable securities, net........................................... 22.5
-------
Total stockholders' equity .................................................... 416.4
------
Total capitalization ............................................................................ $688.2
======
</TABLE>
17
<PAGE> 20
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>
THREE MONTHS ENDED MARCH 31 YEAR ENDED DECEMBER 31,
--------------------------- -------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (1) ...... 4.6 5.6 5.4 6.0 3.8
</TABLE>
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<PAGE> 21
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Preferred Securities, the Company,
AAG Holding and the Trust entered into a Registration Rights Agreement (the
"Registration Rights Agreement") with the purchasers of the Old Preferred
Securities (the "Purchasers"), pursuant to which the Company, AAG Holding and
the Trust agreed to file and to use their reasonable efforts to cause to become
effective with the Commission a registration statement with respect to the
exchange of the Old Preferred Securities for preferred securities with terms
identical in all material respects to the terms of the Old Preferred
Securities. A copy of the Registration Rights Agreement is an exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company, AAG Holding and the Trust under the Registration Rights Agreement.
The form and terms of the New Preferred Securities are the same as the form and
terms of the Old Preferred Securities except that the New Preferred Securities
have been registered under the Securities Act and therefore will not be subject
to certain restrictions on transfer applicable to the Old Preferred Securities
Upon consummation of the Exchange Offer, holders of Old Preferred Securities
will not be entitled to any increase in the distribution rate thereon or any
further registration rights under the Registration Rights Agreement, except
under limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Old Preferred Securities" and "Description of Preferred Securities."
As soon as practicable after the Expiration Date, and as an integral part
of their obligations under the Registration Rights Agreement, the Company (or
AAG Holding, as the case may be) will exchange the Old Trust Guarantee for the
New Trust Guarantee, all of the Old Subordinated Debentures, of which
$77,320,000 aggregate principal amount is outstanding, for a like aggregate
principal of the New Subordinated Debentures and the Old Debt Guarantee for the
New Debt Guarantee. The New Trust Guarantee, the New Subordinated Debentures
and the New Debt Guarantee have been registered under the Securities Act.
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Preferred Securities in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
Holders of Old Preferred Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Preferred Securities
are registered on the books of the Company or any other person who has obtained
a properly completed bond power from the registered holder.
TERMS OF THE EXCHANGE
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $75,000,000 aggregate liquidation amount of New Preferred
Securities for a like aggregate liquidation amount of Old Preferred Securities
properly tendered on or prior to the Expiration Date (as defined below) and not
properly withdrawn in accordance with the procedures described below. The
Company will issue, promptly after the Expiration Date, $1,000 liquidation
amount of New Preferred Securities in exchange for each $1,000 liquidation
amount of outstanding Old Preferred Securities tendered and accepted in
connection with the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum liquidation amount
of Old Preferred Securities being tendered. As of the date of this Prospectus,
$75,000,000 aggregate liquidation amount of the Old Preferred Securities is
outstanding.
If any tendered Old Preferred Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Preferred
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Old Preferred Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Preferred Securities
19
<PAGE> 22
in connection with the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
Each holder who tenders Old Preferred Securities will warrant and agree in
the Letter of Transmittal that it has full power and authority to tender,
exchange, sell, assign and transfer Old Preferred Securities, that the Trust
will acquire good, marketable and unencumbered title to the tendered Old
Preferred Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Old Preferred Securities tendered for exchange are not
subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Trust or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment, and transfer of the Old Preferred
Securities tendered pursuant to the Exchange Offer.
The Trust reserves the right in its sole discretion to (a) purchase or
make offers for any Old Preferred Securities that remain outstanding subsequent
to the Expiration Date, (b) as set forth under "--Expiration Date; Extensions;
Amendments," to terminate the Exchange Offer and (c) to the extent permitted by
applicable law, purchase Old Preferred Securities in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers may differ from the terms of the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on June
18, 1997 unless the Exchange Offer is extended by the Company and the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company, AAG Holding and the Trust expressly reserve the right in
their sole and absolute discretion, subject to applicable law, at any time and
from time to time, (i) to delay the acceptance of the Old Preferred Securities
for exchange or to terminate the Exchange Offer (whether or not any Old
Preferred Securities have theretofore been accepted for exchange) if the
Company, AAG Holding and the Trust determine, in their sole and absolute
discretion, that any of the events or conditions referred to under
"--Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (ii) to extend the Expiration Date of the Exchange Offer and retain
all Old Preferred Securities tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Preferred Securities to withdraw their
tendered Old Preferred Securities as described under "--Withdrawal Rights," and
(iii) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect deemed by them to be advantageous to the holders of the Old
Preferred Securities. If the Exchange Offer is amended in a manner determined
by the Company, AAG Holding and the Trust to constitute a material change, or
if the Company, AAG Holding and the Trust waive a material condition of the
Exchange Offer, the Trust will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Old Preferred Securities, and the Company , AAG Holding and the Trust will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Trust may choose to make any public
announcement and subject to applicable law, the Trust shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a release to an appropriate news agency.
RESALES OF NEW PREFERRED SECURITIES
The Trust is making the Exchange Offer for the Old Preferred Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain interpretive letters addressed to third
parties in other transactions relating to the transferability of the exchanged
securities following registration. However, none of the Company, AAG Holding
nor the Trust sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the Commission would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Company, AAG Holding and the Trust believe
that New Preferred Securities issued pursuant to this Exchange Offer in
exchange for Old Preferred Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Preferred
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New
20
<PAGE> 23
Preferred Securities. However, any holder of Old Preferred Securities who is an
"affiliate" of the Company, AAG Holding or the Trust (within the meaning of Rule
405 under the Securities Act ) or who intends to participate in the Exchange
Offer for the purpose of distributing New Preferred Securities, or any
broker-dealer who purchased Old Preferred Securities from the Trust to resell
them pursuant to Rule 144A or any other available exemption under the Securities
Act, (a) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (b) will not be permitted or entitled to
tender such Old Preferred Securities in the Exchange Offer and (c) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such Old Preferred Securities
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Preferred
Securities acquired for its own account as a result of market-making or other
trading activities and exchanges such Old Preferred Securities for New Preferred
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Preferred Securities.
Each holder of Old Preferred Securities who desires to exchange Old
Preferred Securities for New Preferred Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company, AAG
Holding or the Trust, (ii) any New Preferred Securities to be received by it
are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such New Preferred Securities,
and (iv) if such holder is not a broker-dealer, such holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such New Preferred Securities. In addition, the Company, AAG
Holding and the Trust may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company,
AAG Holding and the Trust (or an agent thereof) in writing information as to
the number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Exchange Act) on behalf of whom such holder holds the Preferred Securities to
be exchanged in the Exchange Offer. Each broker-dealer that receives New
Preferred Securities for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Preferred Securities for its own account
as the result of market-making activities or other trading activities and must
agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Preferred Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company, AAG Holding and the
Trust believe that broker-dealers who acquired Old Preferred Securities for
their own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the New Preferred Securities received
upon exchange of such Old Preferred Securities (other than Old Preferred
Securities which represent an unsold allotment from the original sale of the
Old Preferred Securities) with this Prospectus, as it may be amended or
supplemented from time to time. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company, AAG Holding and the Trust have
agreed that this Prospectus as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales
of such New Preferred Securities for a period ending 180 days after the
Registration Statement of which this Prospectus constitutes a part is declared
effective. See "Plan of Distribution." Any Participating Broker-Dealer who is
an "affiliate" of the Company or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each Participating Broker-Dealer who surrenders Old Preferred Securities
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company, AAG
Holding or the Trust of the occurrence of any event or the discovery of any
fact which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain
other events specified in the Registration Rights Agreement, such Participating
Broker Dealer will suspend the sale of New Preferred Securities pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Preferred
Securities may be resumed, as the case may be.
BROKER-DEALER CONSIDERATIONS
Each broker-dealer that receives New Preferred Securities for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Preferred
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by Participating Broker-Dealers during the period referred to
below in connection with resales of New Preferred Securities received in
exchange for Old Preferred Securities if such Old Preferred Securities were
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acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. The Company has
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales
of such New Preferred Securities for a period ending 180 days after the
Registration Statement of which this Prospectus constitutes a part is declared
effective. See "Resales of New Preferred Securities". The Company will not
receive any cash proceeds from the issuance of the New Preferred Securities
offered hereby. New Preferred Securities received by broker-dealers for their
own accounts in connection with the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Preferred Securities or
a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchases of
any such New Preferred Securities. Any broker-dealer that resells New
Preferred Securities that were received by it for its own account in connection
with the Exchange Offer and any broker or dealer that participates in a
distribution of such New Securities may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of New
Preferred Securities and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW PREFERRED SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, New Preferred
Securities for Old Preferred Securities validly tendered and not withdrawn
(pursuant to the withdrawal rights described under "--Withdrawal Rights")
promptly after the Expiration Date.
Subject to the terms and conditions of the Exchange Offer, the Trust will
be deemed to have accepted for exchange, and thereby exchanged, Old Preferred
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Old Preferred Securities for exchange pursuant to the Exchange Offer. The
Exchange Agent will act as agent for the Trust for the purpose of receiving
tenders of Old Preferred Securities, Letters of Transmittal and related
documents, and as agent for tendering holders for the purpose of receiving Old
Preferred Securities, Letters of Transmittal and related documents and
transmitting New Preferred Securities to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Preferred
Securities tendered pursuant to the Exchange Offer is delayed (whether before
or after the Trust's acceptance for exchange of Old Preferred Securities) or
the Company, AAG Holding and the Trust extend the Exchange Offer or they are
unable to accept for exchange or exchange Old Preferred Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Trust's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Trust
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old
Preferred Securities and such Old Preferred Securities may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "--Withdrawal Rights."
PROCEDURES FOR TENDERING OLD PREFERRED SECURITIES
Valid Tender. Except as set forth below, in order for Old Preferred
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at one of its addresses set forth under Exchange
Agent," and one of the following must apply: (i) tendered Old Preferred
Securities must be received by the Exchange Agent, or (ii) the guaranteed
delivery procedures set forth below must be complied with.
If less than all of the Old Preferred Securities represented by a
certificate are tendered, a tendering holder should fill in the amount of Old
Preferred Securities being tendered in the appropriate box on the Letter of
Transmittal. The entire amount of Old Preferred Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL,
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<PAGE> 25
RETURN RECEIPT REQUESTED, PROPERTY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. Certificates for the Old Preferred Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Preferred Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Old Preferred Securities
must be duly endorsed or accompanied by a properly executed bond power, with
the endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule l7Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein) : (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association
or clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Preferred
Securities pursuant to the Exchange Offer and the certificates for such Old
Preferred Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or before the Expiration
Date, such Old Preferred Securities may nevertheless be tendered, provided that
all of the following guaranteed delivery procedures are complied with.
(i) such tenders are made by or through an Eligible
Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent, as provided below, on or
prior to Expiration Date; and
(iii) the certificates representing all tendered Old Preferred
Securities, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other documents required by
the Letter of Transmittal, are received by the Exchange Agent within five
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, transmitted by
facsimile or mailed to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provisions hereof, the delivery of New Preferred
Securities in exchange for Old Preferred Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Preferred Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
New Preferred Securities might not be made to all tendering holders at the same
time, and will depend upon when Old Preferred Securities, book-entry
confirmations with respect to Old Preferred Securities and other required
documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Old Preferred Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Old Preferred Securities will be determined by the Trust, in
its sole discretion, whose determination shall be final and binding on all
parties. The Trust reserves the absolute right, in its sole and absolute
discretion, to reject any and all tenders determined by it not to be in proper
form or the acceptance of which, or exchange for, may, in the view of counsel
to the Trust, be unlawful. The Trust also reserves the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Preferred Securities of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders.
The Trust's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding. No tender of Old Preferred Securities will be deemed to
have been validly made until all irregularities
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with respect to such tender have been cured or waived. Neither the Trust, any
affiliates or assigns of the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Trust,
proper evidence satisfactory to the Trust, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Preferred Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Preferred Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Preferred Securities to be
withdrawn, the aggregate principal amount of Old Preferred Securities to be
withdrawn, and (if certificates for such Old Preferred Securities have been
tendered) the name of the registered holder of the Old Preferred Securities as
set forth in the Old Preferred Securities, if different from that of the person
who tendered such Old Preferred Securities. If Old Preferred Securities have
been delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Old Preferred Securities, the tendering holder must
submit the serial numbers shown on the particular Old Preferred Securities to
be withdrawn and the signature on the notice of withdrawal must be guaranteed
by an Eligible Institution, except in the case of Old Preferred Securities
tendered for the account of an Eligible Institution. Withdrawals of tenders of
Old Preferred Securities may not be rescinded. Old Preferred Securities
properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under
"--Procedures for Tendering Old Preferred Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Trust, any affiliates or assigns of the Trust, the Exchange Agent
nor any other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any Old Preferred Securities which have been
tendered but which are withdrawn will be returned to the holder thereof
promptly after withdrawal.
DISTRIBUTIONS ON THE NEW PREFERRED SECURITIES
Each New Preferred Security will pay cumulative distributions from the most
recent date distributions were made on the Old Preferred Securities surrendered
in exchange for such New Preferred Securities or, if no distributions have been
paid on such Old Preferred Securities, from March 11, 1997. Holders of the Old
Preferred Securities whose Old Preferred Securities are accepted for exchange
will not receive accumulated distributions on such Old Preferred Securities for
any period from and after the last date distributions were made on such Old
Preferred Securities prior to the original issue date of the New Preferred
Securities or, if no such distributions have been paid, will not receive any
accumulated distributions on such Old Preferred Securities, and will be deemed
to have waived the right to receive any distributions on such Old Preferred
Securities accumulated from and after March 11, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Trust will not be required to accept for
exchange, or to exchange, any Old Preferred Securities for any New Preferred
Securities, and, as described below, may terminate the Exchange Offer (whether
or not any Old Preferred Securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the Exchange Offer, if any of
the following conditions have occurred or exists or have not been satisfied:
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(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Preferred Securities issued
pursuant to the Exchange Offer in exchange for Old Preferred Securities to
be offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an "affiliate" of
the Company, AAG Holding or the Trust within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
New Preferred Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Preferred
Securities;
(b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect
to the Exchange Offer which, in the Trust's judgment, would reasonably be
expected to impair the ability of the Trust to proceed with the Exchange
Offer;
(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Trust's judgment, would reasonably be expected to
impair the ability of the Trust to proceed with the Exchange Offer;
(d) a banking moratorium shall have been declared by United States
federal or Ohio state authorities which, in the Company's judgment, would
reasonably be expected to impair the ability of the Trust to proceed with
the Exchange Offer;
(e) trading on the New York Stock Exchange or generally in the
over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in the Trust's
judgment, would reasonably be expected to impair the ability of the Trust
to proceed with the Exchange Offer;
(f) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose any governmental
approval has not been obtained, which approval the Trust shall, in its
sole discretion, deem necessary for the consummation of the Exchange Offer
as contemplated hereby;
(g) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its
subsidiaries has occurred which, in the sole judgment of the Trust, might
materially impair the ability of the Trust to proceed with the Exchange
Offer; or
(h) after conferring with counsel, a Tax Event has occurred after the
date of original issuance of the Old Preferred Securities or there is more
than an insubstantial risk that a Tax Event will occur prior to the time
that the Exchange Offer is consummated.
If the Company, AAG Holding and the Trust determine in their sole and
absolute discretion that any of the foregoing events or conditions has occurred
or exists or has not been satisfied, the Company, AAG Holding and the Trust
may, subject to applicable law, terminate the Exchange Offer (whether or not
any Old Preferred Securities have theretofore been accepted for exchange) or
may waive any such condition or otherwise amend the terms of the Exchange Offer
in any respect. If such waiver or amendment constitutes a material change to the
Exchange Offer, the Company, AAG Holding and the Trust will promptly disclose
such waiver by means of a prospectus supplement that will be distributed to the
registered holders of the Old Preferred Securities, and the Company, AAG Holding
and the Trust will extend the Exchange Offer to the extent and in the manner
required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Company will serve as Exchange Agent for the Exchange Offer. Delivery
of the Letters of Transmittal and any other required documents, questions,
requests for assistance, and requests for additional copies of this Prospectus
or of the Letter of Transmittal should be directed to the Exchange Agent as
follows:
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By Registered or Certified Mail, Overnight Delivery or Hand Delivery
American Annuity Group, Inc.
250 East Fifth Street
10th Floor, Chiquita Center
Cincinnati, Ohio 45202
Attention: Mark F. Muething
Telephone: (513) 333-5515
Facsimile: (513) 357-3397
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Preferred Securities, and in handling
or tendering for their customers.
Holders who tender their Old Preferred Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Preferred Securities are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Preferred Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Preferred Securities in connection with the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
None of the Company, AAG Holding nor the Trust will make any payment to
brokers, dealers or others soliciting acceptances of the Exchange Offer.
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<PAGE> 29
DESCRIPTION OF THE PREFERRED SECURITIES
The Old Preferred Securities are, and the New 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 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 are owned, directly or
indirectly, by AAG Holding. The Common Securities will have equivalent terms to
and 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, 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 8-7/8% of the stated liquidation amount of $1,000 per Preferred
Security. Distributions in arrears for more than one semi-annual period will
(to the extent permitted by applicable law) bear interest thereon from and
including the last day of such semi-annual period at the rate per annum of
8-7/8% thereof compounded semi-annually. The term "distributions" as used herein
includes any such interest payable unless otherwise stated. The amount of
distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full
semi-annual period, on the basis of the actual number of days elapsed in such
180 day period.
Distributions on the Preferred Securities will be cumulative, will accrue
from March 11, 1997 and will be payable semi-annually in arrears on January 15
and July 15 of each year, commencing July 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 semi-annual 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 10 consecutive semi-annual periods, 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. If that AAG Holding
exercises this right, then during any Extension Period (a) neither the Company
nor AAG Holding shall declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or
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make a liquidation payment with respect to, any of their 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 10 consecutive semi-annual periods 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, the Indenture, the
Subordinated Debentures issued to the Trust and the Subordinated Debt
Guarantee, provide 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. Such 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. 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. Such record date is currently fifteen days
prior to the applicable payment date. 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
Unless a Special Event has occurred, the Preferred Securities will not be
redeemable prior to March 1, 2007. Upon the repayment or redemption, in whole
or in part, of the Subordinated Debentures, whether at Stated Maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem
Preferred Securities and Common Securities, on a pro rata basis, upon not less
than 30 nor more than 60 days' notice prior to the date fixed for repayment or
redemption. If less than all of the Subordinated Debentures are to repaid or
redeemed on a Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption pro rata of the Preferred
Securities and Common Securities.
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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 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."
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 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 March 1, 2007 or extend the maturity of such Subordinated
Debentures to a date not later than the earlier of (a) January 15, 2046 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 acquire,
whether pursuant to the Exchange 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.
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On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill")
was introduced in the 104th Congress which would have, among other things,
generally denied interest deductions for interest or OID on an instrument
issued by a corporation that has a maximum term of more than 20 years and that
is not shown as indebtedness on the consolidated balance sheet of the issuer.
The above-described provisions of the Bill were proposed to be effective
generally for instruments issued on or after December 7, 1995. If these
provisions were to apply to the Subordinated Debentures, AAG Holding would not
be able to deduct interest on the Subordinated Debentures. However, leaders of
the Senate Finance and House Ways and Means Committees opposed application of
any such provisions, if adopted, to instruments issued prior to the date of
appropriate congressional action. The 104th Congress adjourned without enacting
the Bill. On February 7, 1997, as part of its 1998 budget proposal, the
Administration made proposals similar to those of March 19, 1996, except that
the denial of interest or OID deductions would apply to instruments with
maximum terms of over 15 years. However, the proposals would be effective only
for instruments issued on or after the date of first Committee action. No such
committee action has taken place. There can be no assurance, however, that
current or future legislative or administrative proposals or final legislation
will not adversely affect the ability of AAG Holding to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment described herein.
Such a change, therefore, could give rise to a Tax Event, which would permit
AAG Holding to cause a redemption of the Preferred Securities or to dissolve
the Trust and distribute the Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust. 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 semi-annual 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 fails in the next calendar year,
such payment will be made on the immediately preceding Business Day. If 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.
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all semi-annual distribution periods terminating on or
prior to the date of redemption. If less than all of the Preferred Securities
and Common Securities issued by the Trust are to be redeemed on a Redemption
Date, then the aggregate amount of such Preferred Securities and Common
Securities to be redeemed shall be allocated pro rata among the Preferred
Securities and the Common Securities. The particular Preferred Securities to be
redeemed shall be selected on a pro rata basis not more than 60 days prior to
the Redemption Date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method as the Property
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (equal to $1,000 or an integral multiple of $1,000
in excess thereof) of the liquidation amount of Preferred Securities of a
denomination larger than $1,000. The Property Trustee shall promptly notify the
Trust registrar in writing of the Preferred Securities selected for redemption
and, in the case of any Preferred Security selected for partial redemption, the
liquidation amount thereof to be redeemed. For all purposes relating to the
redemption of Preferred Securities shall relate, in the case of any Preferred
Security redeemed or to be redeemed only in part, to the portion of the
aggregate liquidation amount of Preferred Securities which has been or is to be
redeemed.
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.
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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 then 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 $1,000 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.
DISSOLUTION AND TERMINATION
Pursuant to the Declaration, the Trust shall dissolve upon the earliest of
(i) March 1, 2046, (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 consent of the holders of at least a majority in
liquidation amount of the Trust Securities to the filing of a certificate of
cancellation with respect to the Trust 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) upon satisfaction of the
liabilities of creditors of the Trust as provided by applicable law, in the
event the Subordinated Debentures shall have been distributed to holders of the
Preferred Securities in liquidation of 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. Pursuant to the Declaration, as soon as
practicable after the dissolution of the Trust and upon completion of the
winding of the Trust, the Trustee shall file a certificate of cancellation
terminating the Trust.
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 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
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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.
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.
If 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 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.
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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.
Holders of the Preferred Securities will have no rights to appoint or
remove the Trustees, who may be appointed, removed or replaced solely by AAG
Holding 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, (il) 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.
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
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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.
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
The Property Trustee acts 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
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
The Old Trust Guarantee was executed and delivered by the Company
concurrently with the issuance of the Old Preferred Securities for the benefit
of the holders from time to time of the Preferred Securities. As soon as
practicable after the Expiration Date, the Old Trust Guarantee will be
exchanged by the Company for the New Trust Guarantee. The New 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 New 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 New 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 New 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 ail 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 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.
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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 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 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
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<PAGE> 39
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 New York.
DESCRIPTION OF THE SUBORDINATED DEBENTURES AND DEBT GUARANTEE
The Old Subordinate Debentures were issued and the New Subordinated
Debentures are to be issued under the Indenture, dated as of March 11, 1997
(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. The following description does not purport to be complete and
is subject to, and is qualified in its entirely by reference to, 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."
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 $77.3 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 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 January 15,
2027, 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.
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 be issued in
definitive certificated form, such Subordinated Debentures will be in
denominations of $1,000 and integral multiples thereof and may be transferred
or exchanged at the offices described below. Principal and interest are
payable, the transfer of the Subordinated Debentures is registrable and
Subordinated Debentures is 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
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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 other entities affiliated with the Company in
connection with an issuance of securities similar to the Preferred Securities.
The term "Senior Indebtedness" means (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
The Subordinated Debentures are not redeemable prior to March 1, 2007
unless a Special Event has occurred. The Subordinated Debentures are redeemable
prior to maturity at the option of the Company on or after March 1, 2007, in
whole or in part at any time at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest, if any,
to the date of redemption, if redeemed during the twelve-month period beginning
on March 1 of the years indicated below:
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2007 104.44%
2008 103.99%
2009 103.55%
2010 103.11%
2011 102.66%
2012 102.22%
2013 101.77%
2014 101.33%
2015 100.89%
2016 100.43%
</TABLE>
On or after March 1, 2017, the redemption price will be 100%, plus
accrued and unpaid interest, if any, to the date of redemption.
The Subordinated Debentures are also redeemable at any time in whole
(but not in part), within 90 days of the occurrence of a Special Event, at a
redemption price equal to 100% of the principal amount of such Subordinated
Debentures.
INTEREST
Each Subordinated Debenture shall bear interest at the rate of 87/8%
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
semi-annually in arrears on January 15 and July 15 of each year (each, an
"Interest Payment Date"), commencing July 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. 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 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 semi-annual period for which interest is
computed, will be computed on the basis of the actual number of days elapsed in
such 180 day period. 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 January
15, 2027. AAG Holding, however, may, extend such maturity date (January 15,
2027 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) January 15, 2046 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
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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 March 1, 2007 and (ii) any date elected by AAG Holding
which is not later than the earlier of (a) January 15, 2046 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 10 consecutive semi-annual
periods, 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 semi-annually 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 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 10
consecutive semi-annual periods 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 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 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 New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Subordinated Debentures of the record or
payment date of such related interest payment
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COVENANTS
The Indenture requires AAG Holding: (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.
In addition, AAG Holding has also covenanted, 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
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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 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 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."
MISCELLANEOUS
The Indenture will provide that the AAG Holding will pay all fees and
expenses related to (i) the sale 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.
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED
DEBENTURES, THE DEBT GUARANTEE AND THE TRUST GUARANTEE
As set forth in the Declaration, the sole purposes of the Trust are 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.
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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 Trust 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 (il) 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, (il) 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 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.
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. 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.
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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 purchased 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 March 1, 2007. See "-Proposed
Tax Law Changes."
EXCHANGE OF PREFERRED SECURITIES
The issuance of New Preferred Securities in exchange for Old Preferred
Securities will not be a taxable event, and the federal income tax
characteristics of the New Preferred Securities (e.g., tax basis and holding
period) will be the same as those of the Old Preferred Securities surrendered
in exchange therefor.
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, has rendered 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 certain 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 has rendered its opinion generally to the effect that under current law
and assuming full compliance with the terms of the Declaration and other
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. AAG Holding has concluded
that the likelihood of its exercising its option to defer payments of interest
is remote because exercising that option would prevent AAG Holding and the
Company from declaring dividends on its stock. Based upon this conclusion, and
although not entirely 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.
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Under the new regulations, however, if AAG Holding 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 AAG
Holding 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.
Accordingly, application of the OID Rules would result in acceleration of
income to the holder. 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 AAG Holding 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 AAG
Holding 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 AAG
Holding 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 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
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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 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 in income as
ordinary income, accrued and unpaid interest on the Subordinated Debentures
through the date of disposition, and to add such amount to such holder's
adjusted tax basis in such holder's 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 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 tax
consequences, U.S. federal and otherwise, of the purchase, ownership and
disposition of Preferred Securities. For purposes of this discussion, a "United
States Alien Holder" includes 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 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
"Bill") was introduced in the 104th Congress which would have, among other
things, generally denied interest deductions for interest or OID on an
instrument issued by a corporation that has a maximum term of more than 20
years and that is not shown as indebtedness on the consolidated balance sheet
of the issuer. The above-described provisions of the Bill were proposed to be
effective generally for instruments issued on or after December 7, 1995. If
these provisions were to apply to the Subordinated Debentures, AAG Holding
would not be able to deduct interest on the Subordinated Debentures. However,
leaders of the Senate Finance and House Ways and Means Committees opposed
application of any such provisions, if adopted, to instruments issued prior to
the date of appropriate congressional action. The 104th Congress adjourned
without enacting the Bill. On February 7, 1997, as part of its 1998 budget
proposal, the Administration made proposals similar to those of March 19, 1996,
except that the denial of interest or OID deductions would apply to instruments
with maximum terms of over 15 years. However, the proposals would be effective
only for instruments issued on or after the date of first Committee action. No
such committee action has taken place. There can be no assurance, however, that
current or future legislative or administrative proposals or final legislation
will not adversely affect the ability of AAG Holding to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment described herein.
Such a change, therefore, could give rise to a Tax Event, which would permit
AAG Holding to cause a redemption of the Preferred Securities or to dissolve
the Trust and distribute the Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust.
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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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 Mark F. Muething, Esq. Senior
Vice President and General Counsel of the Company who beneficially owns 28,158
shares of AAG Common Stock.
EXPERTS
The consolidated financial statements of AAG appearing in AAG's Annual
Report (Form 10-K) for the year ended December 31, 1996, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
included therein and incorporated herein by reference. 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 other individual has been authorized to give any
information or make any representation not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by AAG, AAG Holding or the Trust. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Notes in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of AAG, AAG Holding or the Trust since the date hereof.
------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Available Information............................................4
Incorporation of Certain Documents by Reference..................4
Prospectus Summary...............................................6
Risk Factors....................................................13
Use of Proceeds.................................................17
The Trust.......................................................17
The Company.....................................................18
Capitalization..................................................18
Accounting Treatment............................................19
Ratio of Earnings to Fixed Charges..............................19
The Exchange Offer..............................................20
Description of the Preferred Securities.........................28
Description of Trust Guarantee..................................36
Description of the Subordinated Debentures
and Debt Guarantee............................................38
Effect of Obligations under the Subordinated
Debentures, the Debt Guarantee and the
Trust Guarantee...............................................43
United States Federal Income Taxation...........................45
Legal Matters...................................................48
Experts.........................................................48
</TABLE>
UNTIL AUGUST 15, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
AMERICAN ANNUITY GROUP
CAPITAL TRUST II
OFFER TO EXCHANGE ITS 8-7/8% CAPITAL TRUST
PREFERRED SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933
FOR ITS OUTSTANDING
8-7/8% CAPITAL TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL TRUST PREFERRED
SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AMERICAN ANNUITY GROUP, INC.
----------
PROSPECTUS
----------
May __, 1997
===============================================================================
<PAGE> 51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 the Registrant's 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 the
Registrant's 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.
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 Code of Regulations extends such indemnification.
The Declaration of American Annuity Group Capital Trust II (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
II-1
<PAGE> 52
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 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 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.
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<PAGE> 53
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
<S> <C>
*4.1 Indenture for 87/8% Subordinated Debentures due January 15, 2027 by and among AAG Holding Company,
Inc., as issuer, The Bank of New York, as Indenture Trustee, and American Annuity Group, Inc., as Guarantor
*4.2 Certificate of Trust of American Annuity Group Capital Trust II
*4.3 Amended and Restated Declaration of Trust of American Annuity Group Capital Trust II
*4.4 Form of Preferred Securities Guarantee Agreement to be entered into by American Annuity Group, Inc. and
The Bank of New York, as Trustee
*4.5 Form of 87/8% Subordinated Debenture (contained in Exhibit 4.1)
*4.6 Form of Preferred Security (contained in Exhibit 4.3)
*4.7 Form of Subordinated Debenture Guarantee by American Annuity Group, Inc. (contained in Exhibit 4.1)
*4.8 Securities Purchase Agreements dated March 11, 1997 by and among American Annuity Group, Inc., AAG
Holding Company, Inc., American Annuity Group Capital
Trust II and the several purchasers named therein *4.9 Registration
Rights Agreement dated March 11, 1997 by and among American Annuity
Group, Inc., AAG Holding Company, Inc., American Annuity Group Capital Trust II and the several purchasers
of the Preferred Securities
*4.10 Common Securities Guarantee Agreement
*5.1 Opinion of Keating, Muething & Klekamp, P.L.L. relating to the 87/8% Subordinated Debentures due January
15, 2027
*5.2 Opinion of Mark F. Muething, Esq., Senior Vice President and General Counsel of American Annuity Group,
Inc. relating to the legality of the Preferred Securities and the Common Securities to be issued by American
Annuity Group Capital Trust II
*8.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to United States Federal income tax matters
*23.1 Consent of Ernst & Young, LLP
*23.2 Consent of Keating, Muething & Klekamp, P.L.L. (Contained on Exhibit 5.1)
*23.3 Consent of Mark F. Muething, Esq. (contained on Exhibit 5.2)
*23.4 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (Contained on Exhibit 8.1)
*24 Powers of Attorney (contained on the signature pages)
*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 Subordinated Debenture 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 Property Trustee for the Amended and Restated Declaration of Trust of American Annuity Group
Capital Trust II
*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 Guarantee Trustee for the Preferred Securities Guarantee Agreement of American Annuity Group
Capital Trust II
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
</TABLE>
* Previously filed.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by section 10(a)(3) of the Securities Act,
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
II-3
<PAGE> 54
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement., and (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant 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 Registrant 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
Securities Act and will be governed by the final adjudication of such issue.
(c) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's Annual Report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
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.
(d) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it
became effective.
II-4
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has duly caused this Amendment to 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 15th day of May, 1997.
AMERICAN ANNUITY GROUP, INC.
By: /s/CARL H. LINDNER
-------------------------
Carl H. Lindner
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
* Chairman of the Board of Directors (Principal May , 1997
- ----------------------------------- Executive Officer) --
Carl H. Lindner
* Director May , 1997
- ----------------------------------- --
S. Craig Lindner
* Director May , 1997
- ----------------------------------- --
Robert A. Adams
* Director May , 1997
- ----------------------------------- --
A. Leon Fergenson
* Director May , 1997
- ----------------------------------- --
Ronald G. Joseph
* Director May , 1997
- ----------------------------------- --
John T. Lawrence III
* Director May , 1997
- ----------------------------------- --
William R. Martin
</TABLE>
II-5
<PAGE> 56
<TABLE>
<S> <C> <C>
* Senior Vice President, Treasurer and Chief May , 1997
- ----------------------------------- Financial Officer (Principal Financial Officer and --
William J. Maney Principal Accounting Officer)
*By: /s/MARK F. MUETHING Attorney-in-Fact May 15, 1997
-----------------------------
Mark F. Muething
</TABLE>
II-6
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has duly caused this Amendment to 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 15th day of May, 1997.
AAG HOLDING COMPANY, INC.
By: /s/CARL H. LINDNER
-------------------------
Carl H. Lindner
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
* Chairman of the Board of Directors (Principal May , 1997
- ----------------------------------- Executive Officer) --
Carl H. Lindner
* Director May , 1997
- ----------------------------------- --
S. Craig Lindner
* Director May , 1997
- ----------------------------------- --
Robert A. Adams
* Senior Vice President, Chief Financial Officer May , 1997
- ----------------------------------- and Treasurer --
William J. Maney (Principal Financial Officer and
Principal Accounting Officer)
*By: /s/MARK F. MUETHING Attorney-in-Fact May 15, 1997
----------------------------
Mark F. Muething
</TABLE>
II-7
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, American
Annuity Group Capital Trust II has duly caused this Amendment to 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 __th day of May,
1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
AMERICAN ANNUITY GROUP CAPITAL TRUST II
By:/s/MARK F. MUETHING
----------------------------------
Mark F. Muething, as Trustee
By:*
----------------------------------
Christopher P. Miliano, as Trustee
*By:/s/MARK F. MUETHING
-------------------------------------
Mark F. Muething, as Attorney-in-Fact
