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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN FINANCIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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OHIO
(State or other jurisdiction of incorporation or 31-1422526
organization) (IRS Employer Identification Number)
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ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-2121
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
AMERICAN FINANCIAL CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE
(State or other jurisdiction of incorporation or 31-6538554
organization) (IRS Employer Identification Number)
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ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-2121
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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JAMES C. KENNEDY, ESQ.
Deputy General Counsel and Secretary
with copies to: American Financial Group, Inc. with copies to:
One East Fourth Street
Gary P. Kreider, Esq. Cincinnati, Ohio 45202 Timothy E. Hoberg, Esq.
Keating, Muething & Klekamp, P.L.L. (513) 579-2538 Taft, Stettinius & Holliser
1800 Provident Tower (Name, address, including zip code, 1800 Star Bank Center
One East Fourth Street and telephone number, 425 Walnut Street
Cincinnati, Ohio 45202 including area code, of agent for Cincinnati, Ohio 45202
(513) 579-6411 service) (513) 357-9308
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the date this registration statement becomes effective.
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
AGGREGATE OFFERING PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SECURITY(2) PRICE(2) FEE(2)
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% Trust Originated Preferred Securities of
American Financial Capital Trust I(3).............. 4,600,000 $25.00 $115,000,000 $39,655
% Subordinated Debentures due , 2026,
of American Financial Group, Inc.(3)...............
Guarantee of Preferred Securities of American
Financial Capital Trust I by American Financial
Group, Inc.(4).....................................
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(1) Includes 600,000 Preferred Securities subject to an Underwriter's
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) The % Subordinated Debentures will be purchased by American Financial
Capital Trust I with the proceeds of the sale of the % Trust Originated
Preferred Securities. No separate consideration will be received for the
issuance of the % Subordinated Debentures. Pursuant to Rule 457(a), no
separate fee is payable with respect to the % Subordinated Debentures.
(4) Includes back-up undertakings, consisting of obligations of American
Financial Group, Inc. to provide certain indemnities in respect of, and pay
and be responsible for certain expenses and debts of, American Financial
Capital Trust I. No separate consideration will be received for the
Guarantee or any back-up undertakings.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1996
PROSPECTUS
4,000,000 PREFERRED SECURITIES
AMERICAN FINANCIAL CAPITAL TRUST I
% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPRS (SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AMERICAN FINANCIAL GROUP, INC.
------------------------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby (the "Offering") represent preferred undivided beneficial
interests in the assets of American Financial Capital Trust I, a statutory
business trust formed under the laws of the State of Delaware (the "Trust").
American Financial Group, Inc., an Ohio corporation ("AFG" or the "Company"),
will directly or indirectly own all the common securities (the "Common
Securities" and,
(continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. ("NYSE"). If approved, trading of the Preferred Securities
on the NYSE is expected to commence within a 30-day period after the initial
delivery of the Preferred Securities. See "Underwriting."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSIONS(2) TRUST(3)(4)
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Per Preferred Security....................... $25.00 (3) $25.00
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Total(5)..................................... $100,000,000 (3) $100,000,000
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(1) Plus accrued distributions, if any, from , 1996.
(2) The Trust and the Company have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(3) As all of the proceeds of the sale of the Preferred Securities will be
invested in Subordinated Debentures, the Company has agreed to pay to the
Underwriters as compensation ("Underwriters' Compensation") for arranging
the investment therein of such proceeds, $ per Preferred Security
(or $ in the aggregate); provided, that such compensation for sales
of 10,000 or more Preferred Securities to a single purchaser will be $
per Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence. See "Underwriting."
(4) Expenses of the Offering, which are payable by the Company, are estimated to
be $ .
(5) The Trust and the Company have granted to the Underwriters an option
exercisable for 30 days to purchase up to an additional 600,000 Preferred
Securities at the initial public offering price per Preferred Security
solely to cover over-allotments, if any. The Company will pay to the
Underwriters, as Underwriters' Compensation, the commission set forth above
in footnote (3) with respect to such additional Preferred Securities. If
such option is exercised in full, the Initial Public Offering Price,
Underwriters' Compensation and Proceeds to the Trust will be $115,000,000,
, , and $115,000,000, respectively. See "Underwriting."
------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about
, 1996.
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MERRILL LYNCH & CO.
------------------------
The date of this Prospectus is , 1996.
(SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE> 3
(continued from cover page)
together with the Preferred Securities, the "Trust Securities") representing
undivided beneficial interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in an equivalent amount of % Subordinated
Debentures due , 2026 ("Subordinated Debentures") of the Company.
Upon a Declaration Event of Default (as defined herein), the holders of the
Preferred Securities will have a preference over the holders of the Common
Securities with respect to payments in respect of distributions and payments
upon redemption, liquidation and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on January 15, April 15, July 15 and October 15 of each
year, commencing January 15, 1997 ("distributions"). The distribution rate and
the distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debentures, which, along with interest and principal payments
received on the Subordinated Debentures, will be the only assets of the Trust.
As a result, if principal or interest is not paid on the Subordinated
Debentures, no amounts will be paid on the Preferred Securities. The payment of
distributions out of moneys held by the Trust and payments on liquidation of the
Trust or the redemption of Preferred Securities, as set forth below, are
guaranteed by the Company (the "Trust Guarantee") if and to the extent the Trust
has funds available therefor. The Company's obligations under the Trust
Guarantee, taken together with its back-up undertakings, consisting of
obligations of the Company as set forth in the Declaration of Trust (including
the obligation to pay expenses of the Trust), the Indenture and any applicable
supplemental indentures, and the Subordinated Debentures issued to the Trust,
provide a full and unconditional guarantee by the Company of payments due on the
Preferred Securities. See "Effect of Obligations Under the Subordinated
Debentures and the Trust Guarantee" herein and "Description of Trust Guarantee."
If the Company does not make principal or interest payments on the Subordinated
Debentures as a result of the Company's election to extend the interest payment
period on the Subordinated Debentures as described below, or otherwise, 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 has made such principal or interest payments.
The obligations of the Company 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
the Company and will be structurally subordinated to all existing and future
liabilities and obligations of the Company's subsidiaries. At June 30, 1996, the
aggregate amount of Senior Indebtedness and liabilities and obligations of the
Company's subsidiaries that would have effectively ranked senior to the
Subordinated Debentures was approximately $13.4 billion.
The Company has the right to defer payments of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures, from time to time, for up to 20 consecutive quarters (each, an
"Extension Period") provided that no Extension Period may extend beyond the
Maturity Date (as defined herein). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During any
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of % per annum
compounded quarterly, and during any Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash distributions with respect to such deferred interest payments. There
could be multiple Extension Periods of varying lengths throughout the term of
the Subordinated Debentures. See "Risk Factors -- Option to Extend Interest
Payment Period or Change Maturity Date," "Risk Factors -- Tax Consequences of
Extension of Interest Payment Period," "Description of the Subordinated
Debentures -- Option to Extend Interest Payment Period," and "United States
Federal Income Taxation -- Interest Income and Original Issue Discount."
(Continued on next page)
2
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(continued from previous page)
The Subordinated Debentures are redeemable prior to maturity at the option
of the Company (i) in whole or in part, from time to time, on or after
, 2001, or (ii) at any time in whole (but not in part) upon the
occurrence and continuation of a Special Event (as defined herein). If the
Company redeems Subordinated Debentures, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debentures so redeemed at $25 per Preferred Security plus
accrued and unpaid distributions thereon to the date fixed for redemption (the
"Redemption Price"). See "Description of the Preferred Securities -- Mandatory
Redemption." The outstanding Preferred Securities will be redeemed upon maturity
of the Subordinated Debentures. The Subordinated Debentures mature on
, 2026, which date may be extended at any time at the election of the
Company, but in no event to a date later than the earlier of (i) , 2045 or
(ii) the "Interest Deduction Date" (as hereinafter defined under "Description
of the Subordinated Debentures -- Option to Change Scheduled Maturity Date"),
provided certain financial conditions are met, and may be shortened to a date
not earlier than , 2001 if the Company exercises its right to
liquidate the Trust and distribute the Subordinated Debentures. See
"Description of the Subordinated Debentures -- Option to Change Scheduled
Maturity Date."
At any time, the Company 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 the Company 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, the Company shall
have the right to shorten the maturity of such Subordinated Debentures, to a
date not earlier than , 2001, or extend the maturity of such
Subordinated Debentures to a date not later than the earlier of (i) , 2045
or (ii) the Interest Deduction Date, provided that it can extend the maturity
only if certain conditions are met. If the Subordinated Debentures are
distributed to the holders of the Preferred Securities, the Company will use its
best efforts to have the Subordinated Debentures listed on the NYSE or on such
other exchange as the Preferred Securities are then listed. See "Description of
the Preferred Securities -- Distribution of the Subordinated Debentures."
In the event of the involuntary or voluntary liquidation, dissolution,
winding up or termination of the Trust, the holders of the Preferred Securities
will be entitled to receive for each Preferred Security a liquidation amount of
$25 plus accrued and unpaid distributions thereon (including interest thereon)
to the date of payment, unless, in connection with such dissolution, the
Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities -- Liquidation
Distribution Upon Dissolution."
------------------------
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
(THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH CAROLINA
INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS
INCORPORATED OR DEEMED INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR
REPRESENTATIONS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST OR BY ANY AGENT, DEALER OR
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
periodic reports, proxy and information statements and other information with
the Securities and Exchange Commission (the "Commission"). The Company and the
Trust have filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Securities. This Prospectus does not
contain all the information, exhibits and undertakings contained in the
Registration Statement, to which reference is hereby made. Statements contained
in this Prospectus as to the terms of any contract or other document are not
necessarily complete with respect to each such contract or other document filed
as an exhibit to the Registration Statement. Reference is made to the exhibits
for a more complete description of the matter involved. Such reports, proxy and
information statements, the Registration Statement and other information filed
with the Commission by AFG may be inspected at and obtained from the Commission
at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices located at Suite 1400, 500 West
Madison Avenue, Chicago, Illinois, and at 7 World Trade Center, 13th Floor, New
York, New York. Copies of such material can also be obtained, at prescribed
rates, by mail from the Public Reference Section of the Commission at its
Washington, D.C. address set forth above. In addition, material filed by the
Company can be obtained and inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005 on which AFG'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 does not believe such financial
statements would be material to holders of the Preferred Securities because (i)
all of the voting securities of the Trust will be owned, directly or indirectly,
by the Company, a reporting company under the Exchange Act, (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 the Company, 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" and "Description of Trust Guarantees."
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 Fred J. Runk, Senior Vice President and
Treasurer, One East Fourth Street, Cincinnati, Ohio 45202, telephone (513)
579-2488. The following documents, which have been filed by the Company with the
Commission, are hereby incorporated by reference in this Prospectus:
American Financial Group, Inc. (File No. 1-11453):
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1995;
(ii) Quarterly Reports on Form 10-Q for the periods ended March 31, 1996
4
<PAGE> 6
and June 30, 1996; and
(iii) Current Reports on Form 8-K dated February 12, 1996 and September 20,
1996.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this Offering
shall be deemed to be incorporated by reference in this Prospectus and to be a
part of this Prospectus from the date of filing thereof. Any statement contained
in a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
5
<PAGE> 7
PROSPECTUS SUMMARY
This summary is qualified by the more detailed information and financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Unless otherwise noted, the material set forth herein does not give
effect to the exercise of the Underwriters' over-allotment option.
THE COMPANY
American Financial Group, Inc. ("AFG" or the "Company") is a holding
company which, through its subsidiaries, is engaged primarily in specialty and
multi-line property and casualty insurance businesses and in the sale of
tax-deferred annuities and life and health insurance. AFG's property and
casualty operations originated in 1872 and are the seventeenth largest property
and casualty group in the United States based on 1995 statutory net premiums
written of $3.1 billion. AFG was formed through the combination of American
Premier Underwriters, Inc. ("APU") and American Financial Corporation ("AFC") in
a merger transaction completed in April 1995 (the "Merger"). At June 30, 1996,
the Company had total assets of $14.8 billion and shareholders' equity of $1.4
billion.
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 the
Company as sponsor for such trust (the "Sponsor"), and the Trustees (as defined
herein) of such trust and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on September 13, 1996. The Trust
exists for the exclusive purposes of (i) issuing and selling the Preferred
Securities and Common Securities (ii) using the gross proceeds from the sale of
the Trust Securities to acquire the Subordinated Debentures and (iii) engaging
in only those other activities necessary, appropriate or incidental thereto. All
of the Common Securities will be directly or indirectly owned by the Company.
The Common Securities will rank pari passu, and payments will be made thereon
pro rata, with the Preferred Securities, except that, if a Declaration Event of
Default (as defined herein) has occurred and is continuing, the rights of the
holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. The Company will directly or
indirectly acquire Common Securities in an aggregate liquidation amount equal to
at least 3% of the total capital of the Trust.
The Trust's affairs will be conducted by the trustees (the "Trustees")
appointed by the Company as the direct or indirect holder of all of the Common
Securities. The holder of the Common Securities will be entitled to appoint,
remove or replace any of, or increase or reduce the number of, the Trustees. The
duties and obligations of the Trustees shall be governed by the Declaration. The
Trust will initially have four Trustees. Two Trustees (the "Regular Trustees")
will be employees or officers of or otherwise affiliated with the Company. The
third Trustee (the "Property Trustee") of the Trust will be a financial
institution that is not affiliated with the Company and has a minimum amount of
combined capital and surplus of not less than $50,000,000, which shall act as
property trustee and as indenture trustee for the purposes of compliance with
the provisions of Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The fourth Trustee of the Trust will be an entity having a principal
place of business in, or a natural person resident of, the State of Delaware
(the "Delaware Trustee"). The Company 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 Financial Group, Inc., the Sponsor of the Trust, at
the Company's corporate headquarters located at One East Fourth Street,
Cincinnati, Ohio 45202, telephone (513) 579-2121.
6
<PAGE> 8
THE OFFERING
Preferred Securities Offered. 4,000,000 % Trust Originated Preferred
Securities evidencing preferred undivided beneficial interests in the assets of
the Trust. Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions at an annual rate of % of the liquidation
amount of $25 per Preferred Security, accruing from the date of original
issuance and payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year commencing on January 15, 1997. The distribution rate
and the distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debentures, which, along with interest and principal payments
received on the Subordinated Debentures, will be the only assets of the Trust.
As a result, if principal or interest is not paid on the Subordinated
Debentures, no amounts will be paid on the Preferred Securities. See "Risk
Factors -- Ranking of Subordinate Obligations Under Trust Guarantee and
Subordinated Debentures" and "Description of the Preferred Securities."
Subordinated Debentures. The Trust will invest the proceeds from the
issuance of the Preferred Securities and Common Securities in an equivalent
amount of % Subordinated Debentures of the Company. The Subordinated
Debentures will rank subordinate and junior in right of payment to all Senior
Indebtedness of AFG. In addition, AFG's obligations under the Subordinated
Debentures will be structurally subordinated to all existing and future
liabilities and preferred stock obligations of its subsidiaries. See
"Description of the Subordinated Debentures -- Subordination."
Guarantee. Payment of distributions out of moneys held by the Trust, and
payments on liquidation of the Trust or the redemption of Preferred Securities,
are guaranteed by AFG to the extent the Trust has funds available therefor. If
the Company does not make principal or interest payments on the Subordinated
Debentures, the Trust will not have sufficient funds to make distributions on
the Preferred Securities, in which event the guarantee shall not apply to such
distribution until the Trust has sufficient funds available therefor. See
"Description of Trust Guarantee" and "Effect of Obligations Under the
Subordinated Debentures and the Trust Guarantee." The obligations of AFG under
the Trust Guarantee are subordinate and junior in right of payment to all other
liabilities of AFG. See "Risk Factors -- Holding Company Structure; Ranking of
Subordinate Obligations Under the Guarantee and Subordinated Debentures" and
"Description of Trust Guarantee."
Right to Defer Interest. The Company has the right to defer payments of
interest on the Subordinated Debentures by extending the interest payment period
on the Subordinated Debentures, from time to time, for up to 20 consecutive
quarters. If interest payments on the Subordinated Debentures are so deferred,
distributions on the Preferred Securities will also be deferred. During any
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable usury or similar law) as described
herein. There could be multiple Extension Periods of varying lengths throughout
the term of the Subordinated Debentures. During an Extension Period, holders of
Preferred Securities will be required to include deferred interest income
allocated to their Preferred Securities in their gross income (as Original Issue
Discount ("OID")) even though the cash payments attributable thereto have not
been made. See "Description of the Subordinated Debentures -- Option to Extend
Interest Payment Period" and "United States Federal Income Taxation -- Interest
Income and Original Issue Discount."
Redemption. The Subordinated Debentures are redeemable by the Company (in
whole or, from time to time, in part) on or after , 2001, or at any
time, in whole but not in part, upon the occurrence of a Special Event. If the
Subordinated Debentures are redeemed, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debentures so redeemed. The Trust Securities will be
redeemed upon maturity of the Subordinated Debentures. See "Description of the
Preferred Securities -- Mandatory Redemption" and "-- Special Event Redemption."
Option to Extend Maturity. The Subordinated Debentures mature on
, 2026, but the maturity may be extended once only for up to an additional
19 years, provided certain financial covenants and conditions are met. If the
maturity of the Subordinated Debentures is extended, the Preferred Securities
will remain outstanding for the same time period. See "Description of the
Subordinated Debentures -- Option to Change Scheduled Maturity Date."
7
<PAGE> 9
Right to Liquidate the Trust. At any time, the Company 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 the
Company 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, the Company shall have the right to shorten the maturity of such
Subordinated Debentures, to a date not earlier than , 2001, or extend
the maturity of such Subordinated Debentures to a date not later than the
earlier of (i) , 2045 or (ii) the Interest Deduction Date, provided
that it can extend the maturity only if certain conditions are met. If the
Subordinated Debentures are distributed to the holders of the Preferred
Securities, the Company will use its best efforts to have the Subordinated
Debentures listed on the NYSE or on such other exchange as the Preferred
Securities are then listed. See "Description of the Preferred
Securities -- Distribution of the Subordinated Debentures."
Use Of Proceeds. The proceeds from the sale of Preferred Securities by the
Trust will be invested in the Subordinated Debentures of the Company. The
Company expects to use a portion of the net proceeds from the sale of such
Subordinated Debentures to the Trust to retire $50 million of outstanding debt
of subsidiaries and the remainder for general corporate purposes, which may
include the retirement of additional fixed rate securities of Company
subsidiaries and investment in insurance businesses. Until the net proceeds are
used for these purposes, the Company will deposit them in interest-bearing
accounts or invest them in short-term marketable securities.
Offering by Subsidiary. American Annuity Group, Inc., an 81% owned
subsidiary of the Company ("AAG") is planning an offering of up to $75 million
of trust originated preferred securities similar to those being offered by the
Company. This Offering is not conditioned on the offering by the trust to be
established by a wholly-owned subsidiary of AAG. See "Capitalization."
Ratings of Securities. The Preferred Securities have been assigned a rating
of "BBB-" by Standard & Poor's Ratings Group, a division of McGraw-Hill ("S&P").
The Company has also sought a rating from Moody's Investors Service, Inc.
("Moody's").
An explanation of the significance of ratings may be obtained from S&P and
Moody's. Generally, rating agencies base their ratings on such material and
information and such of their own investigations, studies and assumptions as
they deem appropriate. A credit rating of a security is not a recommendation to
buy, sell or hold securities. There is no assurance that any rating will apply
for any given period of time or that a rating may not be adjusted or withdrawn.
RECENT DEVELOPMENTS
On September 20, 1996, the Company announced in a news release the
following three third quarter actions which will result in a significant net
gain to be recorded in the quarter.
Citicasters Gain. AFG reported that its subsidiaries had received
approximately $220 million in gross cash proceeds and expect to realize a pretax
gain of approximately $160 million from the closing of the merger involving
Jacor Communications, Inc. and Citicasters Inc. on September 18, 1996. In the
merger, each Citicasters shareholder, including AFG's subsidiaries, received
$29.50 per share in cash plus warrants to purchase Jacor common stock. See "The
Company -- Investments."
Reserve Strengthening. AFG also reported that it had decided to strengthen
its insurance reserves relating to asbestos and other environmental matters
("A&E"). Based upon recent insurance industry studies of A&E exposure and
revised standards for reserving such claims, AFG has determined that an increase
of its A&E reserves is appropriate. AFG estimates that its reserves for A&E at
September 30, 1996 will be about $340 million, an amount expected to be
approximately 11 times the preceding three years' average claim payments. This
action with respect to A&E reserves will result in a third quarter, non-cash,
pretax charge of approximately $80 million. See "Risk Factors -- Adequacy of
Insurance Loss Reserves."
Hurricane Fran. While it is too soon to report the ultimate loss, AFG
estimated that its loss from Hurricane Fran will be between $30 million and $40
million, net of reinsurance. However, third quarter underwriting results, aside
from Hurricane Fran, are expected to be improved from the second quarter. See
"Risk Factors -- Cyclicality of the Insurance Industry; Impact of Catastrophes."
8
<PAGE> 10
SUMMARY FINANCIAL INFORMATION (UNAUDITED)
The summary pro forma financial information set forth below gives effect to
(i) the Merger assuming it was consummated on January 1, 1995 for purposes of
the income statement data and (ii) the AFG Offering and the offering being
planned by AAG for purposes of the balance sheet data. The pro forma effect of
the Offering on AFG's net earnings is not expected to be material. This
information should be read in conjunction with the separate historical financial
statements and related Management's Discussion and Analysis of Financial
Condition and Results of Operations of AFG, which are incorporated herein by
reference.
The pro forma financial information does not necessarily reflect the
Company's results of operations which would have actually resulted had the
Merger occurred as of the dates indicated above, nor should it be taken as
indicative of the future results of operations of the Company.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER
------------------------ 31,
1995 1995
1996 PRO FORMA PRO FORMA
HISTORICAL FOR MERGER FOR MERGER
---------- ---------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Property and casualty premiums......................... $1,443.8 $1,484.7 $ 3,030.6
Total revenues......................................... 2,063.7 1,978.2 4,048.7
Property and casualty loss, loss adjustment and
underwriting expense and policyholder dividends...... 1,448.4 1,526.0 3,064.7
Interest on borrowed money............................. 43.4 60.3 116.3
Earnings from continuing operations before income
taxes................................................ 204.8 115.6 280.1
Net earnings from continuing operations (a)............ 122.0 86.3 216.5
Net earnings per common share from continuing
operations(a)........................................ $ 2.01 $ 1.65 $ 4.03
</TABLE>
- ---------------
(a) Includes gains and losses on sales of investments. Management believes that
reported results which include these transactions are not indicative of
future results of operations. Excluding these transactions, pro forma
earnings from continuing operations were as follows (in millions, except per
share amounts).
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE YEAR ENDED
30, DECEMBER
----------------------- 31,
1996 1995 1995
---------- --------- -----------
<S> <C> <C> <C>
Net earnings from continuing operations............ $108.0 $ 75.9 $ 146.3
Net earnings per common share from
continuing operations............................ $ 1.78 $ 1.44 $ 2.72
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------------
ADJUSTED PRO FORMA
HISTORICAL FOR OFFERING
HISTORICAL (B) (C)
---------- ----------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................................... $14,820.9 $14,958.4 $15,030.5
Long-term debt....................................... 678.0 665.3 565.3
Minority interest.................................... 301.9 307.9 307.9
Preferred securities of trust subsidiaries........... -- -- 175.0
Shareholders' equity................................. 1,395.5 1,539.7 1,536.8
Long-term debt as a percentage of total
capitalization..................................... 21.9 % 26.5% 21.9%
</TABLE>
- ---------------
(b) Adjusted to reflect the retirement of $12.7 million in debt during July and
August 1996, and a net gain of approximately $145 million on AFG's sale of
Citicasters Inc. in September 1996.
(c) Assumes $52.9 million of the proceeds from this Offering are used to retire
$50 million of AFC debt and $50 million of the proceeds from AAG's planned
sale of $75 million of Trust Originated Preferred Securities are used to
retire its debt and the balance of proceeds from the offerings are used for
general corporate purposes. See "Capitalization."
9
<PAGE> 11
RISK FACTORS
Prospective purchasers of Preferred Securities should consider carefully
all of the information contained in this Prospectus including the information in
the documents incorporated by reference and, in particular, should evaluate the
specific factors set forth below for risks involved with an investment of the
Preferred Securities.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE TRUST GUARANTEE AND SUBORDINATED
DEBENTURES
The Company's obligations under the Trust Guarantee are unsecured and will
rank (i) subordinate and junior in right of payment to all other liabilities of
the Company 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 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 the
Company and will be structurally subordinated to all existing and future
liabilities and obligations of the Company's subsidiaries. The obligations of
the Company under the Subordinated Debentures will at all times be senior to
common and preferred equity of the Company. At June 30, 1996, the aggregate
amount of Senior Indebtedness and liabilities and obligations of the Company's
subsidiaries that would have effectively ranked senior to the Subordinated
Debentures was approximately $13.4 billion. There are no terms in the Preferred
Securities, the Subordinated Debentures or the Trust Guarantee that limit the
ability of the Company or any of its subsidiaries to incur additional
indebtedness, liabilities or obligations, including indebtedness, liabilities or
obligations that rank senior to the Subordinated Debentures and the Trust
Guarantee. See "Description of Trust Guarantee -- Status of the Trust Guarantee"
and "Description of the Subordinated Debentures -- Subordination."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Subordinated Debentures against the Company. The holders of a majority in
liquidation amount of the Preferred Securities will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Property Trustee or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee to exercise the remedies available to it as a holder of the
Subordinated Debentures. 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 the
Company 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 the Company to pay interest, principal or other required payments on
the Subordinated Debentures issued to the Trust on the date such interest,
principal or other payment is otherwise payable, then a record holder of
Preferred Securities may institute a proceeding directly against the Company for
enforcement of payment of 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. The record holder in the case of the issuance of
one or more global Preferred Securities certificates will be The Depository
Trust Company acting at the direction of the beneficial owners of the Preferred
Securities. The holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated
Debentures unless the Property Trustee fails to do so. See "Description of the
Preferred Securities -- Declaration Events of Default" and "Description of the
Subordinated Debentures -- Indenture Events of Default."
10
<PAGE> 12
TRUST DISTRIBUTIONS DEPENDENT ON THE COMPANY'S PAYMENTS ON SUBORDINATED
DEBENTURES
The Trust's ability to make distributions and other payments on the
Preferred Securities is entirely dependent upon the Company making interest and
other payments on the Subordinated Debentures. If the Company were not to make
payments on the Subordinated Debentures for any reason, including as a result of
the Company's election to defer the payment of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures, 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 and the Trust Guarantee."
OPTION TO EXTEND INTEREST PAYMENT PERIOD OR CHANGE MATURITY DATE
The Company 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 -- Option to Change Scheduled Maturity Date" and
"Description of the Subordinated Debentures -- Option to Extend Interest Payment
Period." As a consequence of an extension of the interest payment period,
quarterly distributions on the Preferred Securities would be deferred (but
despite such deferral, to the extent permitted by law, would continue to accrue
with interest thereon compounded quarterly) by the Trust during any such
Extension Period. The Company has the right to defer payments of interest on the
Subordinated Debentures, from time to time, but no Extension Period may be more
than 20 consecutive quarters or extend beyond the Maturity Date (as defined
herein) of the Subordinated Debentures. There could be multiple Extension
Periods of varying lengths during the term of the Subordinated Debentures. In
the event that the Company exercises this right to defer interest payments,
then, prior to the payment of all accrued interest on outstanding Subordinated
Debentures, (a) the Company 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 shall not, directly or indirectly, and will not allow any of its
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 that
rank pari passu with or junior to the Subordinated Debentures; provided,
however, that the restriction in clause (a) above does not apply to any stock
dividends paid by the Company where the dividend stock is the same stock as that
on which the dividend is being paid. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period;
provided that each Extension Period, if any, may not exceed 20 consecutive
quarters or extend beyond the Maturity Date of the Subordinated Debentures. Upon
the termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the above
requirements. Consequently, there could be multiple Extension Periods of varying
lengths prior to the Maturity Date of the Subordinated Debentures. The Company
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 the Company 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 -- Option to Extend Interest Payment Period."
TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIOD
Should the Company 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
11
<PAGE> 13
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 the Company'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, the Company 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, the Company 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 the Company 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, the Company shall have the right to shorten the
maturity of such Subordinated Debentures to a date not earlier than
, 2001 or extend the maturity of such Subordinated Debentures to a
date which is not later than the earlier of (i) , 2045 or (ii) the
Interest Deduction Date, provided that it can extend the maturity only if
certain conditions are met. See "Description of the Subordinated
Debentures -- Option to Change Scheduled Maturity Date."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Debentures that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby. In
addition, because the Company 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 the Company 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 Debentures upon
any election by the Company to liquidate the Trust and cause the Subordinated
Debentures to be distributed to the holders of the Preferred Securities,
prospective purchasers of Preferred Securities are also making an investment
decision with regard to the Subordinated Debentures and should review carefully
all the information regarding the Subordinated Debentures and the Company
contained herein and in the accompanying Prospectus. See "Description of the
Preferred Securities -- Distribution of the Subordinated Debentures" and
"Description of the Subordinated Debentures."
PROPOSED TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"),
the revenue portion of President Clinton's fiscal 1997 budget proposal, was
released. The Bill would, among other things, generally
12
<PAGE> 14
deny interest deductions for interest or OID on an instrument issued by a
corporation that has a maximum weighted average maturity of more than 40 years.
The Bill would also treat as equity, instruments issued by a corporation that
have a maximum term of more than 20 years and that are not shown as indebtedness
on the consolidated balance sheet of the issuer. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill were
proposed to be effective generally for instruments issued on or after December
7, 1995. However, on March 29, 1996, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement (the "Joint Statement")
to the effect that it was their intention that the effective date of the
President's legislative proposals, if adopted, would be no earlier than the date
of appropriate Congressional action. In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials
concurring with the views expressed in the Joint Statement. Under current law,
it is likely that the Subordinated Debentures will be treated as indebtedness of
the Company and the Company will be able to deduct interest on the Subordinated
Debentures beneficially held by the holders of the Preferred Securities. The
terms of the Subordinated Debentures limit the Company's right to extend the
maturity of the Subordinated Debentures to a date which is six months shorter
than any legislative limit on the length of debt securities for which interest
is deductible. Based on the advice of tax counsel, the Company believes this
will allow it an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, the Company will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no assurance
that current or future legislative proposals, adverse judicial decisions, final
legislation or official administrative pronouncements will not affect the
ability of the Company to deduct interest on the Subordinated Debentures, giving
rise to a Tax Event (as defined below) which would permit the Company to cause
the redemption of the Preferred Securities prior to , 2001 (the
first date on which the Company would otherwise be able to cause a redemption of
the Preferred Securities). See "Description of the Preferred
Securities -- Special Event Redemption" and "United States Federal Income
Taxation."
PREPAYMENT CONSIDERATIONS; OPTION TO CHANGE SCHEDULED MATURITY DATE
At the option of the Company, the Subordinated Debentures may be redeemed,
in whole or in part, at any time on or after , 2001, at a redemption
price equal to 100% of the principal amount to be redeemed plus any accrued and
unpaid interest to the redemption date. See "Description of the Subordinated
Debentures -- Optional Redemption." Investors in the Preferred Securities should
assume that the Company will exercise its redemption option if the Company is
able to refinance at a lower interest rate or it is otherwise in the interest of
the Company to redeem the Subordinated Debentures. If Subordinated Debentures
are redeemed, the Trust must redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of Subordinated
Debentures so redeemed. See "Description of the Preferred
Securities -- Mandatory Redemption."
The Company also has the option to extend the maturity date of the
Subordinated Debentures for one or more periods, but in no event to a date later
than the earlier of (i) , 2045 or (ii) the Interest Deduction Date,
provided certain financial conditions are met. See "Description of the
Subordinated Debentures -- Option to Change Scheduled Maturity Date." Investors
in the Preferred Securities should assume that the Company will exercise its
option to extend the term if the Company is unable to refinance at a lower
interest rate or it is otherwise in the interest of the Company to defer the
maturity of the Subordinated Debentures. The Preferred Securities will not be
redeemed until the Subordinated Debentures have been repaid or redeemed. See
"Description of the Preferred Securities -- Mandatory Redemption."
13
<PAGE> 15
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have only limited voting rights,
primarily in connection with directing the activities of the Property Trustee as
the holder of the Subordinated Debentures. Such holders will not be entitled to
vote to appoint, remove or replace, or to increase or decrease the number of,
the Trustees (as defined herein). Voting rights with respect to Trustee matters
are vested exclusively in the holder of the Common Securities. See "Description
of the Preferred Securities -- Voting Rights."
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. If the Company exercises its right to defer payments of
interest, a holder who disposes of Preferred Securities between record dates for
payments of distributions thereon will be required to include as ordinary income
OID on the Subordinated Debentures accrued through the date of disposition, and
to add such amount to its adjusted tax basis in its pro rata share of the
underlying Subordinated Debentures deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which will include, in the
form of OID, all accrued but unpaid interest), a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. Accrual
basis taxpayers would be subjected to similar treatment without regard to the
Company's election to defer. See "United States Federal Income
Taxation -- Interest Income and Original Issue Discount" and "United States
Federal Income Taxation -- Sales of Preferred Securities."
ABSENCE OF PUBLIC MARKET FOR SECURITIES
Since the Preferred Securities will be newly issued, there is no current
market for them. The Company has applied for listing of the Preferred Securities
on the NYSE, but there can be no assurance that the applicable listing
requirements of any such exchange will be met. There can be no assurance that
there will be an active trading market for the Preferred Securities.
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
The Company and two of its direct subsidiaries, APU and AFC, are organized
as holding companies with almost all of their operations being conducted by
subsidiaries. These parent corporations, however, have continuing expenditures
for administrative expenses, corporate services, the payment of principal and
interest on borrowings and, with respect to AFC, for dividends on AFC preferred
stock. The Company, AFC and APU rely primarily on dividends and tax payments
from their subsidiaries for funds to meet their obligations.
Payments of dividends by the insurance subsidiaries of AFC and APU are
subject to various laws and regulations which limit the amount of dividends that
can be paid without prior approval from the applicable state Department of
Insurance. In June 1996, AFC received a dividend from GAI of $120 million.
Without prior Department of Insurance approval, no additional dividends may be
paid by GAI during 1996. The maximum dividend that can be paid in 1996 by
insurance subsidiaries of APU is approximately $80 million of which $4 million
was paid through June 30, 1996. The maximum dividend permitted by law is not
necessarily indicative of an insurer's actual ability to pay dividends, which
may be further affected by business and regulatory considerations, such as the
impact of dividends on surplus, which could affect an insurer's ratings,
competitive position, the amount of premiums that can be written and the ability
to pay future dividends. Furthermore, each state Department of Insurance has
broad discretion to limit the payment of dividends by insurance companies
domiciled in that state.
The Company believes that the amounts currently available through dividends
and tax payments without approval are sufficient to meet the expenses of the
Company, AFC and APU, including the interest the Company will pay on the
Subordinated Debentures. A prolonged material decline in insurance subsidiary
profits or materially adverse insurance regulatory developments, however, could
subject the Company, AFC or APU to shortages of cash because of their inability
to receive dividends from subsidiaries.
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<PAGE> 16
CYCLICALITY OF THE INSURANCE INDUSTRY; IMPACT OF CATASTROPHES
The Company's insurance subsidiaries operate in a highly competitive
industry that is affected by many factors which can cause significant
fluctuations in their results of operations. The Company's insurance operations
are subject to operating cycles and losses from catastrophes. The property and
casualty insurance industry has historically been subject to pricing cycles
characterized by periods of intense competition and lower premium rates (a
"downcycle") followed by periods of reduced competition, reduced underwriting
capacity and higher premium rates (an "upcycle"). The property and casualty
insurance industry is currently in an extended downcycle, which has lasted
approximately nine years. The underwriting results for the Company's property
and casualty operations have been adversely affected by this downcycle,
particularly resulting in unfavorable pricing in certain standard commercial
lines of business.
As with other property and casualty insurers, the Company's operating
results can be adversely affected by unpredictable catastrophe losses. The
Company's insurance subsidiaries generally seek to reduce their exposure to such
events through individual risk selection and the purchase of reinsurance. Major
catastrophes in recent years have included Hurricane Fran in September 1996,
hailstorms in Texas in the second quarter of 1995; the Northridge earthquake in
Southern California and the winter storms in the South and Northeast in 1994;
winter storms and flooding in the Midwest in 1993; Hurricanes Andrew and Iniki,
Chicago flooding and Los Angeles civil disorder in 1992. Total net losses to the
Company's insurance operations from catastrophes were $44 million during the
first six months of 1996; $70 million in 1995; $56 million in 1994; $30 million
in 1993; and $45 million in 1992. While it is too soon to determine the ultimate
loss from Hurricane Fran, the Company estimates that its loss will be between
$30 million and $40 million, net of reinsurance.
REGULATION
AFG's insurance subsidiaries are regulated under the insurance and
insurance holding company laws of their states of domicile and other states in
which they operate. These laws, in general, require approval of the particular
insurance regulators prior to certain actions by the insurance companies, such
as the payment of dividends in excess of statutory limitations (as discussed
above under "Holding Company Structure; Dividend Restrictions") and certain
transactions and continuing service arrangements with affiliates. Regulation and
supervision of each insurance subsidiary is administered by a state insurance
commissioner who has broad statutory powers with respect to the granting and
revoking of licenses, approvals of premium rates, forms of insurance contracts
and types and amounts of business which may be conducted in light of the
policyholders' surplus of the particular company. The statutes of most states
provide for the filing of premium rate schedules and other information with the
insurance commissioner, either directly or through rating organizations. The
commissioner generally has powers to disapprove such filings or make changes to
the rates if they are found to be excessive, inadequate or unfairly
discriminatory. The determination of rates is based on various factors,
including loss and loss adjustment expense experience. The failure to obtain, or
delay in obtaining, the required approvals could have an adverse impact on the
operations of the Company's insurance subsidiaries.
The National Association of Insurance Commissioners ("NAIC") has adopted
the Risk Based Capital For Insurers Model Act (the "Model Act") which applies to
both life and property and casualty companies. The risk-based capital formulas
determine the amount of capital that an insurance company needs to ensure that
it has an acceptably low expectation of becoming financially impaired. The Model
Act provides for increasing levels of regulatory intervention as the ratio of an
insurer's total adjusted capital and surplus decreases relative to its
risk-based capital, culminating with mandatory control of the operations of the
insurer by the domiciliary insurance department at the so-called "mandatory
control level." The risk-based capital formulas became effective in 1993 for
life companies and in 1994 for property and casualty companies.
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<PAGE> 17
RATINGS; COMPETITION
A.M. Best, publisher of Best's Insurance Reports, Property-Casualty, has
given AFC's principal insurance subsidiary, Great American Insurance Company
("GAI"), a rating of A (Excellent). Although some of the large insurance
companies against which GAI competes have higher ratings, management believes
that the current rating is adequate to enable GAI to compete successfully. A
downgrade in the A.M. Best rating below A (Excellent) could adversely affect the
competitive position of GAI.
The four major operating units in the Company's Non-Standard Automobile
Insurance Group ("NSA Group") are Atlanta Casualty Company ("Atlanta Casualty"),
Windsor Insurance Company ("Windsor"), Infinity Insurance Company ("Infinity")
and Leader National Insurance Company ("Leader National") and their respective
subsidiaries. In November 1995, A.M. Best downgraded its ratings of Atlanta
Casualty, Windsor and Republic Indemnity Company of America, an APU subsidiary
which writes principally workers compensation insurance in California ("Republic
Indemnity") from A+ (Superior) to A (Excellent) and affirmed its ratings of A
(Excellent) for Infinity and A- (Excellent) for Leader National. In announcing
the rating adjustments of these companies, A.M. Best expressed its opinion that
each of these new ratings primarily reflects the significant financial leverage
of AFG. A further downgrade in the A.M. Best rating for any of these companies
could adversely affect the competitive position of such companies.
Great American Life Insurance Company ("GALIC"), the principal insurance
subsidiary of AAG, is rated A (Excellent). Management believes that a rating in
the "A" category is necessary to market successfully tax-deferred annuities to
public education employees and other not-for-profit groups, the markets in which
GALIC competes. A downgrade in the A.M. Best rating below the "A" category could
materially and adversely affect the competitive position of GALIC.
American Memorial Life Insurance Company (formerly Prairie States Life
Insurance Company) and Loyal American Life Insurance Company, which have
recently become subsidiaries of GALIC, are rated B+ (Very Good) and A-
(Excellent) by A.M. Best, respectively. A downgrade in the A.M. Best rating for
either of these companies could adversely affect the competitive position of
such companies.
CALIFORNIA WORKERS' COMPENSATION MARKET
Republic Indemnity's insurance activities are regulated by the California
Department of Insurance for the benefit of policyholders. Prior to January 1,
1995, minimum premium rates for workers' compensation insurance were determined
by the California Insurance Commissioner based in part upon recommendations of
the Workers' Compensation Insurance Rating Bureau of California. In July 1993,
California enacted legislation effecting an immediate overall 7% reduction in
workers' compensation insurance premium rates and replaced the workers'
compensation insurance minimum rate law, effective January 1, 1995, with a
procedure permitting insurers to use any rate within 30 days after its filing
with the California Insurance Commissioner unless the rate is disapproved by the
California Insurance Commissioner. Since December 1, 1993 and before the "open
rating" policy went into effect on January 1, 1995, the California Insurance
Commissioner ordered rate decreases totaling more than 25%. Republic Indemnity's
net written premiums declined 40% for 1995 and 30% during the first six months
of 1996. Republic Indemnity has encountered extremely competitive pricing in the
marketplace. Republic Indemnity has continued to operate on a profitable basis,
but no assurance can be given that it can continue to do so in light of adverse
conditions in the California workers' compensation market.
INVESTMENT PORTFOLIO; EFFECTS OF CHANGES IN INTEREST RATES
The Company's investment portfolio consists primarily of fixed maturity
securities, such as investment grade, publicly traded corporate debt securities
and mortgage-backed securities, including collateralized mortgage obligations
("CMOs"). At June 30, 1996, 94% of the Company's marketable securities was
invested in fixed maturity securities, of which approximately 25% was invested
in mortgage-backed securities. Certain risks are inherent in connection with
fixed maturity securities, including loss upon default and price volatility in
reaction to changes in interest rates and general market factors. Certain
additional risks are inherent with
16
<PAGE> 18
mortgage-backed securities, including the risks associated with reinvestment of
proceeds due to prepayments of such obligations in a period of declining
interest rates.
ANNUITY PRODUCT CONCENTRATION; POTENTIAL IMPACT OF CHANGES IN FEDERAL INCOME TAX
TREATMENT OF ANNUITY PRODUCTS
GALIC's business is primarily the sale of flexible premium deferred
annuities ("FPDAs") and single premium deferred annuities ("SPDAs"). The
majority of the FPDAs issued by GALIC are to employees of qualified
not-for-profit organizations under Section 403(b) of the Internal Revenue Code
of 1986, as amended (the "Code"). These employees are eligible to save for
retirement through tax deductible contributions. The majority of SPDAs issued by
GALIC have resulted from rollovers of tax-deferred funds previously maintained
by policyholders with other insurers.
Current federal income tax laws generally permit the tax-deferred
accumulation of earnings on the premiums paid by an annuitant. Taxes are payable
on the accumulated tax-deferred earnings when those earnings are paid to the
annuitant. If the federal income tax laws were to change so that accumulated
earnings on annuity products do not enjoy the tax deferral described above, or
such that other savings and investment products were to achieve similar tax
deferral status, or such that tax rates were significantly lowered so that the
annuitant's ability to deduct contributions and to defer income tax on annuity
earnings were no longer significant factors for the policyholder, consumer
demand for the affected annuity products could decline materially. From time to
time, proposals to one or more of these effects have been made in Congress and
no assurance can be given that a tax law change will not occur in the future. If
the demand for its annuity products were to decrease significantly for any
reason, GALIC's operations and financial condition could be materially and
adversely affected.
In August 1996, a new federal law became effective which expanded the
ability of not-for-profit organizations to offer non-qualified deferred
compensation plans to their employees. The full impact of this change is
impossible to predict. However, if the increased availability of these plans
reduces the demand for annuities qualified under Section 403(b) of the Code, the
Company's business could be adversely affected.
ADEQUACY OF INSURANCE LOSS RESERVES
The insurance subsidiaries of AFG establish reserves to cover their
estimated liability for losses and loss adjustment expense with respect to both
reported and unreported claims as of the end of each accounting period. By their
nature, such reserves do not represent an exact calculation of liabilities.
Rather, except for reserves related to environmental and asbestos type claims,
such reserves are estimates involving management's projections as to the
ultimate settlement and administration of claims. These expectations are, in
turn, based on facts and circumstances known at the time, predictions of future
events, estimates of future trends in the severity and frequency of claims and
judicial theories of liability as well as inflation.
In recent years, AFG's insurance subsidiaries have increased their premium
writings in specialty commercial lines of business. Estimation of loss reserves
for many specialty commercial lines of business is more difficult than for
certain standard commercial lines because claims may not become apparent for a
number of years (such period of time being referred to as the "tail").
Consequently, in these specialty lines a higher proportion of ultimate losses is
considered incurred but not reported, and fluctuations in loss development are
more likely than in standard commercial lines of business.
Certain of AFG's insurance subsidiaries face liabilities for asbestos and
environmental claims arising out of general liability and commercial multi-peril
policies issued by GAI prior to the early 1980's when providing coverage for
such exposures was not specifically contemplated by GAI's policies ("A&E").
The insurance industry typically includes only claims relating to polluted
waste sites and asbestos in defining environmental exposures. GAI extends its
definition of A&E claims to include claims relating to breast implants,
repetitive stress on keyboards, DES (a drug used in pregnancies years ago
alleged to cause cancer and birth defects) and other latent injuries.
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<PAGE> 19
Establishing reserves for A&E claims is subject to uncertainties that are
greater than those presented by other types of claims. Factors contributing to
those uncertainties include a lack of sufficiently detailed historical data,
long reporting delays, uncertainty as to the number and identity of insureds
with potential exposure, unresolved legal issues regarding policy coverage and
the extent and timing of any such contractual liability. Courts have reached
different and sometimes inconsistent conclusions as to when a loss is deemed to
have occurred, what policies provide coverage, what claims are covered, whether
there is an insured obligation to defend, how policy limits are determined and
other policy provisions. Management believes these issues are not likely to be
resolved in the near future and that, as a result, a reasonable estimate of
ultimate liability for A&E exposure is not possible at this time.
GAI's A&E reserves (net of reinsurance recoverable) at December 31, 1995
were approximately $220 million. In September 1996, AFG reported that it had
decided to strengthen its A&E reserves. Based upon recent insurance industry
studies of A&E exposure and revised standards for reserving such claims, the
Company has determined that an increase of its A&E reserves is appropriate. AFG
estimates that its reserves for A&E at September 30, 1996 will be about $340
million, an amount expected to be approximately 11 times the preceding three
years' average claim payments. This action with respect to A&E reserves will
result in a third quarter, non-cash, pretax charge of approximately $80 million.
AFG regularly reviews its reserving techniques and reserve positions and
believes that adequate provision has been made for loss reserves. Nevertheless,
there can be no assurance that currently established reserves will prove
adequate in light of subsequent actual experience. Future earnings could be
adversely impacted should future loss development require increases in reserves
previously established for prior periods.
REINSURANCE
AFG relies to a certain extent on the use of reinsurance to limit the
amount of risk it retains. The availability and cost of reinsurance are subject
to prevailing market conditions which are beyond the Company's control and which
may affect its level of business and profitability. AFG is subject to credit
risk with respect to its reinsurers, as the ceding of risk to reinsurers does
not relieve AFG of its liability to insureds. As of December 31, 1995, AFG had
reinsurance recoverables of approximately $788 million, representing estimated
amounts recoverable from reinsurers pertaining to paid and unpaid claims, claims
incurred but not reported and prepaid reinsurance premiums.
USX LITIGATION
In May 1994, lawsuits were filed against APU by USX Corporation ("USX") and
its former subsidiary, Bessemer and Lake Erie Railroad Company ("B&LE"), seeking
contribution by APU, as the successor to the railroad business conducted by Penn
Central Transportation Company, APU's predecessor ("PCTC") prior to 1976, for
all or a portion of the approximately $600 million that USX paid in satisfaction
of a judgment against B&LE in 1991 for its participation in an unlawful
antitrust conspiracy among certain railroads commencing in the 1950's and
continuing through the 1970's. The lawsuits argue that USX's liability for that
payment was attributable to PCTC's alleged activities in furtherance of the
conspiracy. APU argued that the lawsuits were barred by an order issued in
connection with PCTC's 1978 bankruptcy reorganization.
In May 1996, the U.S. Supreme Court declined to hear APU's petition with
respect to the bankruptcy bar issue, thereby permitting USX's lawsuits to
proceed. APU and its outside counsel continue to believe that APU has
substantial defenses and should not suffer a material loss as a result of this
litigation.
CONCENTRATION OF CERTAIN EQUITY INVESTMENTS
Because of its significant ownership percentage of the voting stock of
Chiquita Brands International, Inc. ("Chiquita") and Citicasters Inc.
("Citicasters"), AFG utilizes the equity method of accounting for these
companies. Under this method, AFG has included in its results its proportionate
share of the investees' earnings and losses. At June 30, 1996, the carrying
values of AFG's investments in Chiquita and Citicasters were $252.3 million and
$75.5 million, respectively. In September 1996, the Company sold its entire
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<PAGE> 20
investment in Citicasters to Jacor Communications, Inc. ("Jacor") for
approximately $222 million in cash and certain warrants to purchase Jacor common
stock, resulting in a net gain of approximately $145 million.
From 1984 to 1991, Chiquita reported a continuous record of growth in
annual earnings. In 1992, 1993 and 1994, however, Chiquita reported net losses.
In 1995, Chiquita reported net income of $9 million. The following factors
relate to Chiquita's business.
Approximately 60% of Chiquita's consolidated net sales comes from the sale
of bananas. Banana marketing is highly competitive. Prices which sellers receive
for bananas are significantly affected by fluctuations in the available supplies
of bananas and other fresh fruit in each market and by the relative quality and
wholesaler and retailer acceptance of bananas offered by competitors. Excess
supplies may result in increased price competition. Although production of
bananas tends to be relatively stable throughout the year, competition in the
sale of bananas comes not only from bananas sold by others, but also from other
fresh fruit which may be seasonal in nature. The resulting seasonal variations
in demand cause banana pricing to be seasonal. As a result, quarterly results of
Chiquita, and therefore AFG's equity in Chiquita's earnings, are subject to
significant seasonal variations with stronger quarterly results occurring in the
first six months of the calendar year. Chiquita reported net income of $62.0
million for the six months ended June 30, 1996.
On July 1, 1993, the European Union ("EU") implemented a new quota
restricting the volume of Latin American bananas imported into the EU, which had
the effect of decreasing Chiquita's volume and market share in Europe. The quota
regime grants preferred status to producers and importers within the EU and its
former colonies, while imposing quotas and tariffs on bananas imported from
other sources, including Latin America, Chiquita's primary source of fruit. In
March 1994, four countries which had previously filed actions against the EU
banana policy (Costa Rica, Colombia, Nicaragua and Venezuela) reached a
settlement with the EU by signing a "Framework Agreement." The Framework
Agreement authorizes the imposition of additional restrictive and discriminatory
quotas and export licenses on U.S. banana marketing firms, while leaving certain
EU firms exempt. Costa Rica and Colombia began implementing the Framework
Agreement in early 1995, resulting in increased costs to Chiquita to export
bananas from these sources.
Several challenges to the EU regime have resulted in findings that its
practices and regulations are illegal and discriminatory. In February 1996, the
United States Government, joined by Equador, Guatemala, Honduras and Mexico,
commenced a new international trade challenge against the EU regime using the
procedures of the World Trade Organization ("WTO"). A WTO panel is reviewing the
matter and is expected to render its decision by late January, 1997. Subject to
limited appeal procedures, any ruling by the WTO must be implemented within a
"reasonable" time. However, there can be no assurance as to the outcome of these
proceedings or their impact, if any, on the EU quota regime or the Framework
Agreement.
A significant portion of Chiquita's operations are conducted in foreign
countries, and are subject to risks that are inherent in operating in such
foreign countries, including government regulation, fluctuations in exchange
rates, currency restrictions and other restraints, risks of expropriation and
burdensome taxes.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to the Declaration and the filing of a certificate of trust with the Secretary
of State of Delaware on September 13, 1996. The Declaration will be qualified as
an indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the Company will
directly or indirectly acquire Common Securities which will represent at least
3% of the total capital of the Trust and will own all of the issued and
outstanding Common Securities. The Trust exists for the exclusive purposes of
(i) issuing the Trust Securities representing undivided beneficial interests in
the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in 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. The two Regular Trustees will be persons who are employees or officers of,
or who are affiliated with, the Company. The Property Trustee will be a
financial institution unaffiliated with the Company that will serve as property
trustee under
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<PAGE> 21
the Declaration and as indenture trustee for the purposes of the Trust Indenture
Act. The Delaware Trustee will be a natural person who is a resident of the
State of Delaware or a legal entity which maintains its principal place of
business in the State of Delaware. The Bank of New York will act as the Property
Trustee and The Bank of New York (Delaware), an affiliate of the Property
Trustee, will act as the Delaware Trustee, in each case until removed or
replaced by the holder of the Common Securities. The Bank of New York will also
act as indenture trustee under the Trust Guarantee (the "Preferred Securities
Guarantee Trustee"). See "Description of Trust Guarantee."
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the Trust and the holders of the Trust Securities and, so long as the
Subordinated Debentures are held by the Trust, the Property Trustee will have
the power to exercise all rights, powers, and privileges of a holder of
Subordinated Debentures under the Indenture (as defined in "Description of the
Subordinated Debentures" herein). 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.
The Company, as the direct or indirect holder of all the Common Securities,
will have the right to appoint, remove or replace any Trustee (subject to the
limitations set forth in the Declaration) and to increase or decrease the number
of the Trustees. The Company will pay all fees, expenses, debts and obligations
(other than with respect to the Trust Securities) related to the Trust and the
offering of the Trust Securities. See "Description of the Preferred Securities."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"), the
Indenture and the Trust Indenture Act. See "Description of the Preferred
Securities."
THE COMPANY
OVERVIEW
American Financial Group, Inc. is a holding company which, through its
subsidiaries, is engaged primarily in specialty and multi-line property and
casualty insurance businesses and in the sale of tax-deferred annuities. AFG's
property and casualty operations originated in 1872 and are the seventeenth
largest property and casualty group in the United States based on 1995 statutory
net premiums written of $3.1 billion. At June 30, 1996, the Company had total
assets of $14.8 billion and shareholders' equity of $1.4 billion.
The Company's strategy is to build shareholder value as a property and
casualty insurance and annuity specialist by:
- Concentrating on specialty insurance lines. Approximately 35% of
1995 property and casualty statutory net premiums written were from lines
of business which the Company considers to be specialty insurance lines.
Management believes that such lines offer greater profit potential for AFG
and added value for its customers. The Company's annuity business similarly
concentrates on specialty business, marketing annuities principally to
employees of primary and secondary educational institutions and hospitals,
and recently has expanded by acquisition into the financial institution,
payroll deduction and pre-need funeral markets.
- Achieving superior underwriting results. AFG's property and casualty
insurance operations have operated at a lower combined ratio than the
property and casualty insurance industry in each of the last ten years.
Management believes that its record of producing superior underwriting
results can be attributed to its concentration on specialty insurance
lines, pricing discipline, focus on profitability rather than premium
growth and management compensation plans that reward unit managers based
primarily on underwriting results.
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- Operating on a decentralized basis. The Company's insurance business
is conducted through approximately 30 separate business units. Each unit
has independent management with significant operating autonomy to oversee
the important operational functions of the business unit, including
underwriting, pricing, marketing, policy processing and claims service.
Management believes that operating on a decentralized basis promotes
creativity and entrepreneurship within the Company, enhances its ability to
act quickly and opportunistically in each of its insurance markets, enables
the Company to provide a high level of service to its insureds and, as a
result, has contributed to the Company's record of superior underwriting
performance.
- Continuing to strengthen its balance sheet. Since the Merger, the
Company has reduced its debt to capital ratio from 58.4% to 28.5% at June
30, 1996. See "Capitalization."
PROPERTY AND CASUALTY INSURANCE OPERATIONS
The Company manages and operates its property and casualty insurance
business in three major business segments: Non-Standard Automobile Insurance;
Specialty Lines; and Commercial and Personal Lines. Each segment is comprised of
multiple business units which operate autonomously but with strong central
financial controls and full accountability. Decentralized control allows each
unit the autonomy necessary to respond to local and specialty market conditions
while capitalizing on the efficiencies of centralized investment, actuarial,
financial and legal support functions. Management's focus on underwriting
profitability has resulted in a statutory combined ratio averaging 100.9% for
the period 1991 to 1995, as compared to 109.3% for the property and casualty
industry over the same period (Source: A.M. Best Company, Inc. ("A.M. Best")).
The Company's statutory combined ratio for the first six months of 1996 was
99.8%.
NON-STANDARD AUTOMOBILE INSURANCE
AFG's Non-Standard Automobile Insurance group (the "NSA Group") writes
automobile insurance policies for drivers who may represent higher-than-normal
risks due to a record of prior accidents, traffic violations or other factors.
AFG believes that it is the second largest writer of this coverage through
independent agents and the fifth largest overall in the U.S. Management believes
that its careful selection of risks and pricing has contributed to its
underwriting success compared to industry averages. The NSA Group writes
business in 42 states and the United Kingdom.
SPECIALTY LINES
AFG's Specialty Lines insurance operations include a highly diversified
group of over 25 specialty business units offering a wide range of commercial
and specialty coverages. Major lines in this group include California workers'
compensation, executive liability, ocean and inland marine, agricultural-related
coverages, non-profit liability, umbrella and excess and surplus lines.
Specialization is the key element to the underwriting success of these business
units. These specialty lines are opportunistic, and their premium volume will
vary by product based on current market conditions.
COMMERCIAL AND PERSONAL LINES
The Company's Commercial and Personal Lines insurance business consists
primarily of standard automobile and homeowners' insurance and commercial
multi-peril, workers' compensation, umbrella, excess and general liability
insurance. In the Commercial Lines businesses, the Company emphasizes
underwriting profitability by intensely targeting specific customer groups and
markets that have adequate rate level potential and by stressing customer
service and retention of business. In the Personal Lines businesses, the Company
emphasizes the use of market segmentation data to price its products more
accurately for different insureds. In order to improve its underwriting results
in standard personal automobile insurance, the Company is focused on further
refining its market segmentation techniques and implementing selective premium
rate increases where needed. The Company has aggressively reduced exposure to
catastrophes in homeowners' insurance by reducing the number of policies written
in geographic areas that are known to be susceptible to weather-related events
and by increasing policy deductibles.
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ANNUITY OPERATIONS
As a complement to its property and casualty insurance business, the
Company operates an annuity business through its 81% owned subsidiary, American
Annuity Group, Inc. The remaining common stock of AAG is publicly held and
trades on the NYSE. At June 30, 1996, the market capitalization of AAG was
approximately $560 million. AAG's principal insurance subsidiary, GALIC, issues
and services tax-deferred annuities, principally to employees of primary and
secondary educational institutions and hospitals, and, through a subsidiary,
began marketing variable annuities in the fourth quarter of 1995. GALIC had over
$5.6 billion in assets at June 30, 1996, and ranked among the top 5% of all U.S.
stock life insurance companies based on total assets at December 31, 1995.
AAG broadened its distribution channels and product offerings by acquiring
Laurentian Capital Corporation in November 1995. The acquired operations sell
life, accident and health insurance and annuities to the financial institution
and payroll deduction markets and sell individual life insurance and annuity
policies in the pre-need funeral market through AAG's subsidiaries, Loyal
American Life Insurance Company and American Memorial Life Insurance Company
(formerly Prairie States Life Insurance Company).
INVESTMENTS
The Company invests its insurance portfolios in a mix of securities to
balance strong total returns with prudent asset preservation. Investments in
fixed income securities constituted approximately 94% of the Company's
marketable securities at June 30, 1996. Approximately 94% of the bonds and
redeemable preferred stocks held by AFG at that date were rated "investment
grade" (credit rating of AAA to BBB-) by at least one nationally recognized
rating agency.
The Company has generally followed a practice of concentrating its equity
investments in a relatively limited number of issues rather than maintaining
relatively limited positions in a larger number of issues. This practice permits
concentration of attention on a limited number of companies in relatively few
industries. A large equity position is often considered attractive to persons
seeking to control or influence the policies of a company and AFG believes that
a concentration in a relatively small number of companies may permit it to
identify investments with above average potential to increase in value. Because
of its significant ownership percentage of the voting stock of certain
companies, AFG utilizes the equity method of accounting in those companies,
which results in AFG including in its results its proportionate share of the
investee's earnings and losses. At June 30, 1996, AFG utilized the equity method
of accounting with respect to its investments of $252.3 million in Chiquita, a
world leader in marketing, processing and producing fresh fruit and vegetables,
and $75.5 million in Citicasters, an owner and operator of radio and television
stations in major metropolitan markets in the United States. In September 1996,
the Company sold its entire investment in Citicasters to Jacor for approximately
$222 million in cash and warrants to purchase Jacor common stock, leaving
Chiquita as the Company's sole investment accounted for utilizing the equity
method of accounting. As of September 13, 1996, the market value of AFG's
investment in Chiquita on the NYSE was $297 million.
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CAPITALIZATION
The following table sets forth the historical capitalization of the Company
at June 30, 1996, as adjusted to give effect to certain third quarter
transactions discussed below and as further adjusted to give pro forma effect to
the sale of Preferred Securities by AFG and the assumed sale of $75 million of
Trust Originated Preferred Securities by AAG.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------------
HISTORICAL
HISTORICAL ADJUSTED(A) PRO FORMA(B)
---------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Long-term debt:
Direct obligations of AFG..................... $ -- $ -- $ --
Obligations of AFG subsidiaries:
American Financial Corporation (parent
only).................................... 175,324 173,365 123,365
American Premier Underwriters (parent
only).................................... 267,888 267,560 267,560
American Annuity Group, Inc................ 170,397 160,022 110,022
Other subsidiaries......................... 64,366 64,366 64,366
---------- ---------- ----------
Total long-term debt..................... 677,975 665,313 565,313
Minority interest(c)............................ 301,871 307,871 307,871
Preferred securities of trust subsidiaries...... -- -- 175,000
Shareholders' equity:
Common Stock, $1.00 par value................. 60,940 60,940 60,940
Capital surplus............................... 755,336 755,336 755,336
Retained earnings............................. 478,937 623,136 620,236
Net unrealized gain on marketable securities,
net of deferred income taxes............... 100,300 100,300 100,300
---------- ---------- ----------
Total shareholders' equity............... 1,395,513 1,539,712 1,536,812
---------- ---------- ----------
Total capitalization............................ $2,375,359 $2,512,896 $2,584,996
========== ========== ==========
Long-term debt as a percentage of total
capitalization................................ 28.5% 26.5% 21.9%
========== ========== ==========
</TABLE>
- ---------------
(a) Adjusted to reflect the retirement of $12.7 million in debt during July and
August, 1996 and a net gain of approximately $145 million on AFG's sale of
Citicasters in September 1996.
(b) Assumes that $52.9 million of the proceeds from this Offering are used to
retire $50 million of AFC debt and $50 million of the proceeds from the
separate AAG offering of Trust Originated Preferred Securities are used to
retire its debt and the balance of the proceeds from the offerings are used
for general corporate purposes. If the AAG offering is not made, pro forma
amounts would be as follows (dollars in thousands):
<TABLE>
<S> <C>
Total long-term debt................................ $ 615,313
Preferred securities of trust subsidiaries.......... 100,000
Total capitalization................................ 2,559,996
Long-term debt as a percentage of total
capitalization.................................... 24.0%
</TABLE>
(c) Minority interest represents the interests of noncontrolling shareholders in
AFG subsidiaries and includes AFC preferred stock.
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 shareholders' equity.
23
<PAGE> 25
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 discount and
expense, preferred dividend requirements of subsidiaries and a portion of rental
expense deemed to represent the interest factor.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------- ----------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 3.77 2.01 2.60 1.69 2.62 2.15 1.54
</TABLE>
Assuming the Merger and related transactions occurred at the beginning of
each of the following periods, the earnings to fixed charges ratios would have
been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
SIX MONTHS 31,
ENDED ----------------------
JUNE 30, 1995 1995 1994 1993
------------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pro forma ratio of earnings to fixed
charges............................. 2.24 2.93 2.07 3.09
</TABLE>
USE OF PROCEEDS
The proceeds from the sale of Preferred Securities by the Trust will be
invested in the Subordinated Debentures of the Company. The Company expects to
use a portion of the net proceeds from the sale of such Subordinated Debentures
to the Trust to retire $50 million of outstanding debt of subsidiaries and the
remainder for general corporate purposes, which may include the retirement of
additional fixed rate securities of Company subsidiaries and investment in
insurance businesses. Until the net proceeds are used for these purposes, the
Company will deposit them in interest-bearing accounts or invest them in
short-term marketable securities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The Bank of New York, will act as the
indenture trustee for purposes of compliance with the provisions of the Trust
Indenture Act. The terms of the Preferred Securities will include those stated
in the Declaration, including those required to be made part of the Declaration
by the Trust Indenture Act. The following summary of the principal terms and
provisions of the Preferred Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Declaration, a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue, on behalf of the
Trust, the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned by the
Company. The Common Securities will have equivalent terms to and will rank pari
passu, and payments will be made thereon on a pro rata basis, with the Preferred
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default (as defined herein), the rights of the holders of
the Common Securities to receive payment of periodic distributions and payments
upon liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Preferred Securities. In addition, holders of the Common
Securities have the exclusive right (subject to the terms of the Declaration) to
appoint, replace or remove the Trustees and to increase or decrease the number
of the Trustees. The Declaration does not permit the issuance by the Trust of
any securities other than the Trust Securities or the
24
<PAGE> 26
incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the
Property Trustee will hold the Subordinated Debentures purchased by the Trust
for the benefit of the holders of the Trust Securities. The payment of
distributions out of money held by the Trust, and payments upon redemption of
the Preferred Securities or liquidation of the Trust, are guaranteed by the
Company to the extent described under "Description of Trust Guarantee." The
Trust Guarantee, when taken together with the back-up undertakings, consisting
of obligations of the Company as set forth in the Declaration of Trust
(including the obligation to pay expenses of the Trust), the Indenture and the
Subordinated Debentures 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 the Company has made the corresponding
payment of interest or principal on the Subordinated Debentures 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 the
Company. See -- "Declaration Events of Default."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will (to the extent permitted
by applicable law) bear interest thereon from and including the last day of such
quarter at the rate per annum of % thereof compounded quarterly. The term
"distributions" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarter, on the basis of the actual number of days
elapsed in such 90-day quarter.
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1996 and will be payable quarterly in arrears on January 15,
April 15, July 15 and October 15 of each year, commencing January 15, 1997,
when, as and if available for payment by the Property Trustee, except as
otherwise described below.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debentures by extending the interest payment period from
time to time on the Subordinated Debentures, which right, if exercised, would
defer quarterly distributions on the Preferred Securities (although to the
extent permitted by law, such distributions would continue to accrue with
interest since interest would continue to accrue on the Subordinated Debentures)
during any such Extension Period. The Company has the right to defer payments of
interest on the Subordinated Debentures, from time to time, for up to 20
consecutive quarters, provided that no Extension Period may extend beyond the
Maturity Date of the Subordinated Debentures. There could be multiple Extension
Periods of varying lengths during the term of the Subordinated Debentures. In
the event that the Company exercises this right, then during any Extension
Period (a) the Company shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock and (b) the Company shall not,
directly or indirectly, and will not allow any of its 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 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 common stock of the Company as contemplated by any employment arrangement,
benefit plan or 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 capital
stock for common stock, (iii) to the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged or (iv) to
the payment of any stock dividend by the Company payable in common stock. Prior
to the termination of any such Extension Period, the Company may further extend
the interest payment period; provided that each Extension Period, if any, may
not exceed 20 consecutive quarters and may not extend beyond the Maturity Date
of the
25
<PAGE> 27
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may commence a new Extension
Period, subject to the above requirements. See "Description of the Subordinated
Debentures -- Interest" and "Description of the Subordinated
Debentures -- 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 the Company under the Subordinated Debentures. See
"Description of the Subordinated Debentures." The payment of distributions out
of moneys held by the Trust is guaranteed by the Company to the extent set forth
under "Description of Trust Guarantee." The Trust Guarantee, when taken together
with the back-up undertakings, consisting of obligations of the Company as set
forth in the Declaration of Trust of the Trust (including the obligation to pay
expenses of the Trust), the Indenture and the Subordinated Debentures issued to
the Trust, provides a full and unconditional guarantee by the Company of the
Preferred Securities.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in global form,
will be one Business Day (as defined below) prior to the relevant payment dates.
Such distributions will be paid through the Property Trustee, which will hold
amounts received in respect of the Subordinated Debentures in the Property
Account for the benefit of the holders of the Trust Securities. Subject to any
applicable laws and regulations and the provisions of the Declaration, each such
payment will be made as described under "-- Book-Entry Issuance -- The
Depository Trust Company" below. In the event that the Preferred Securities do
not continue to remain in global form, the relevant record dates for the
Preferred Securities shall conform to the rules of any securities exchange on
which the Preferred Securities are listed and, if none, shall be selected by the
Regular Trustees, which dates shall be at least one Business Day but less than
60 Business Days prior to the relevant payment dates. Distributions payable on
any Preferred Securities that are not punctually paid on any distribution
payment date will cease to be payable to the person in whose name such Preferred
Securities are registered on the relevant record date, and such defaulted
distribution will instead be payable to the person in whose name such Preferred
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture. In the event that any date on which
distributions are to be made on the Preferred Securities is not a Business Day,
then payment of the distributions payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such record date. A "Business Day" shall mean any day other than a day on
which banking institutions in New York, New York are authorized or required by
law to close.
MANDATORY REDEMPTION
Upon the repayment of the Subordinated Debentures, whether at maturity or
upon redemption, the proceeds from such repayment or redemption shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debentures so repaid or redeemed at the Redemption Price; provided that, holders
of Trust Securities shall be given not less than 30 nor more than 60 days notice
of such redemption. The Subordinated Debentures will mature on ,
2026 unless the maturity date is changed at the option of the Company (provided
in the case of an extension of the maturity date that certain financial
conditions are met), and may be redeemed, in whole or in part, at any time on or
after , 2001 or at any time, in whole (but not in part), upon the
occurrence of a Special Event. See "Description of the Subordinated
Debentures -- Optional Redemption." In the event that fewer than all of the
outstanding Trust Securities are to be redeemed, the Trust Securities will be
redeemed pro rata to each holder according to the aggregate liquidation amount
of Trust Securities held by the relevant holder in relation to the aggregate
liquidation amount of all Trust Securities outstanding.
26
<PAGE> 28
See "-- Book-Entry Issuance -- The Depository Trust Company" below for a
description of DTC's (as hereinafter defined) procedures in the event of
redemption.
SPECIAL EVENT REDEMPTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of an independent tax counsel experienced in such matters to the effect that, as
a result of (a) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of original issuance
of the Preferred Securities, there is more than an insubstantial risk that (i)
the Trust is, or will be within 90 days after the date thereof, subject to
United States federal income tax with respect to interest accrued or received on
the Subordinated Debentures, (ii) the Trust is, or will be within 90 days after
the date thereof, subject to more than a de minimis amount of taxes, duties or
other governmental charges, or (iii) interest payable to the Trust on the
Subordinated Debentures is not, or within 90 days of the date thereof, will not
be deductible, in whole or in part, by the Company 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, the Company
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, the Company 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 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 should not be a taxable event to holders of the
Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Special Event or other circumstances, however, the
distribution could be a taxable event to the holders of the Preferred
Securities. In addition, a dissolution of the Trust in which holders of the
Preferred Securities receive cash would be a taxable event to such holders. See
"United States Federal Income Taxation -- Receipt of Subordinated Debentures or
Cash Upon Liquidation of the Trust."
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the
Subordinated Debentures to be listed on the NYSE or on such other exchange as
the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be deemed
to be outstanding and (ii) the record holders of the Preferred Securities will
receive a registered global certificate or certificates representing the
Subordinated Debentures to be delivered upon such distribution in exchange for
the Preferred Securities held by such holders.
If the Company 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, the Company shall have the right
27
<PAGE> 29
to shorten the maturity of such Subordinated Debentures to a date not earlier
than , 2001 or extend the maturity of such Subordinated Debentures to
a date not later than the earlier of (a) , 2045 or (b) the Interest
Deduction Date (as defined herein), provided that it can extend the maturity
only if certain conditions are met. See "Description of the Subordinated
Debentures -- Option to Change Scheduled Maturity Date."
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution and liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Debentures that an investor may receive if a dissolution and
liquidation of the Trust were to occur, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"),
the revenue portion of President Clinton's fiscal 1997 budget proposal, was
released. The Bill would, among other things, generally deny interest deductions
for interest or OID on an instrument issued by a corporation that has a maximum
weighted average maturity of more than 40 years. The Bill would also treat as
equity, instruments issued by a corporation that have a maximum term of more
than 20 years and that are not shown as indebtedness on the consolidated balance
sheet of the issuer. For purposes of determining the weighted average maturity
or the term of an instrument, any right to extend would be treated as exercised.
The above-described provisions of the Bill were proposed to be effective
generally for instruments issued on or after December 7, 1995. However, on March
29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees
issued a joint statement (the "Joint Statement") to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, would be no earlier than the date of appropriate Congressional action.
In addition, subsequent to the publication of the Joint Statement, Senator
Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel
wrote letters to Treasury Department officials concurring with the views
expressed in the Joint Statement. Under current law, it is likely that the
Subordinated Debentures will be treated as indebtedness of the Company and the
Company likely will be able to deduct interest on the Subordinated Debentures
beneficially held by the holders of the Preferred Securities. The terms of the
Subordinated Debentures limit the Company's right to extend the maturity of the
Subordinated Debentures to a date which is six months shorter than any
legislative limit on the length of debt securities for which interest is
deductible. Based on the advice of tax counsel, the Company believes this will
allow it an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, the Company will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no assurance
that current or future legislative proposals, adverse judicial decisions, final
legislation or official administrative pronouncements will not affect the
ability of the Company to deduct interest on the Subordinated Debentures, giving
rise to a Tax Event (as defined below) which would permit the Company to cause
the redemption of the Preferred Securities prior to , 2001 (the
first date on which the Company would otherwise be able to cause a redemption of
the Preferred Securities). See "Description of the Preferred
Securities -- Special Event Redemption" and "United States Federal Income
Taxation."
REDEMPTION PROCEDURES
The Trust may not redeem any Preferred Securities unless all accrued and
unpaid distributions have been paid on all Preferred Securities for all
quarterly distribution periods terminating on or prior to the date of
redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided that the Company 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
28
<PAGE> 30
and funds deposited as required, then immediately prior to the close of business
on the date of such deposit, distributions will cease to accrue and all rights
of holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event
that any date fixed for redemption of Preferred Securities is not a Business
Day, then payment of the Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that the Company fails to repay the
Subordinated Debentures on maturity or payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Trust Guarantee,
distributions on such Preferred Securities will continue to accrue at the then
applicable rate from the original redemption date to the actual date of payment,
in which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed as described below
under "-- Book-Entry Issuance -- The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by a national securities exchange or other
organization on which the Preferred Securities are then listed, the Company
pursuant to the Indenture will only redeem the Subordinated Debentures in whole
and, as a result, the Trust may only redeem the Preferred Securities in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the 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 $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (the "Liquidation Distribution"),
unless, in connection with such Liquidation, Subordinated Debentures in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Preferred Securities have been distributed on a pro rata basis to the holders of
the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
The Trust Guarantee, when taken together with the back-up undertakings,
consisting of obligations of the Company as set forth in the Declaration
(including the obligation to pay expenses of the Trust), the Indenture and the
Subordinated Debentures issued to the Trust, provide a full and unconditional
guarantee by the Company of the Preferred Securities.
TERMINATION
Pursuant to the Declaration, the Trust shall terminate upon the earliest of
(i) , 2051, (ii) the bankruptcy of the Company, (iii) the filing of a
certificate of dissolution or its equivalent with respect to the Company, the
filing of a certificate of cancellation with respect to the Trust after
obtaining the consent of the
29
<PAGE> 31
holders of at least a majority in liquidation amount of the Trust Securities
affected thereby voting together as a single class to file such certificate of
cancellation, or the revocation of the charter of the Company and the expiration
of 90 days after the date of revocation without a reinstatement thereof, (iv)
the distribution of all of the Subordinated Debentures from the Trust, (v) the
entry of a decree of a judicial dissolution of the Company or the Trust, or (vi)
the redemption of all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An Event of Default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Event of Default
with respect to the Preferred Securities has been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf of
the holders of the Preferred Securities and only the holders of the Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Indenture
Trustee (as defined herein) or the Property Trustee as the holder of the
Subordinated Debentures will have the right under the Indenture to declare the
principal of and interest on the Subordinated Debentures to be immediately due
and payable. Each of the Company and the Trust 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 held by the Trust, any record holder of Preferred
Securities may institute legal proceedings directly against the Company 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 the
Company to pay interest, principal or other required payments on the
Subordinated Debentures issued to the Trust on the date such interest, principal
or other payment is otherwise payable, then a record holder of Preferred
Securities may institute a proceeding directly against the Company 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, 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. The record holder in the case of the issuance of one or more global
Preferred Securities certificates will be The Depository Trust Company acting at
the direction of the beneficial owners of the Preferred Securities.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of Trust Guarantee -- Modification of the Trust
Guarantee; Assignment," and as otherwise required by law and the Declaration,
the holders of the Preferred Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as holder of
the Subordinated Debentures, to (i) exercise the remedies available under the
Indenture with respect to the Subordinated Debentures, (ii) waive any past
Indenture Event of Default that is waivable under the Indenture (as defined
herein), 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
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of the Indenture or the Subordinated Debentures, where such consent should be
required; provided, however, that, where a consent or action under the Indenture
would require the consent or act of the holders of greater than a majority in
principal amount of Subordinated Debentures affected thereby (a
"Super-Majority"), the Property Trustee may only give such consent or take such
action at the written direction of the holders of at least the proportion in
liquidation amount of the Preferred Securities which the relevant Super-Majority
represents of the aggregate principal amount of the Subordinated Debentures
outstanding. The Property Trustee shall notify all holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Subordinated Debentures. Except with respect to directing the
time, method and place of conducting a proceeding for a remedy, the Property
Trustee shall not take any of the actions described in clauses (i), (ii) or
(iii) above unless the Property Trustee has obtained an opinion of tax counsel
to the effect that, as a result of such action, the Trust will not be classified
as other than a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, 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.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Issuance -- The Depository
Trust Company" below.
Holders of the Preferred Securities will have no rights to appoint or
remove the Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of all of the Common Securities.
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MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of
the Regular Trustees (and in certain circumstances the Property Trustee),
provided that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of the Trust other than pursuant to the terms of the Declaration,
then the holders of the Trust Securities voting together as a single class will
be entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of at least a majority in
liquidation amount of the Trust Securities affected thereby; provided that, if
any amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified as other than a grantor trust for United States federal income tax
purposes, (ii) reduce or otherwise adversely affect the powers of the Property
Trustee or (iii) cause the Trust to be deemed an "investment company" which is
required to be registered under the 1940 Act.
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) the
Company 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, (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
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replace it, if such consolidation, amalgamation, merger or replacement would
cause the Trust or the Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes and each holder of the Trust
Securities not to be treated as owning an undivided interest in the Subordinated
Debentures.
EXPENSES AND TAXES
In the Indenture, the Company 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 the
Company 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 the Company directly against
the Company, and the Company 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 the Company. The Company has also agreed in the
Indenture to execute such additional agreements as may be necessary or desirable
to give full effect to the foregoing.
BOOK-ENTRY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Preferred Securities. The Preferred Securities initially will be issued only
as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities certificates,
representing the total aggregate number of Preferred Securities, will be issued
and will be delivered to DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Preferred
Securities as represented by a global certificate.
DTC has advised the Company and the Trust that DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others, such as securities brokers and dealers, banks and
trust companies that clear transactions through or maintain a direct or indirect
custodial relationship with a Direct Participant ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial
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Owners. Beneficial Owners will not receive certificates representing their
ownership interests in the Preferred Securities, except in the event that use of
the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of Beneficial Owners that are their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount of
the interest of each Direct Participant in such Preferred Securities to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy). The Company and the Trust believe that the arrangements
among DTC, Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street name,"
and such payments will be the responsibility of such Participant and not of DTC,
the Trust or the Company, subject to any statutory or regulatory requirements
that may be in effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depository is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
the Company) may decide to discontinue use of the system of book-entry transfers
through DTC (or any successor depository) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but neither the Company nor the Trust takes responsibility for the
accuracy thereof.
Unless the context otherwise requires, the term "holder of Preferred
Securities" shall refer to Beneficial Owners rather than to DTC.
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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 and the Indenture, in the terms of the Trust
Securities or in the Trust Indenture Act and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The holders of Preferred Securities will not be required to
offer such indemnity in the event such holders, by exercising their voting
rights, direct the Property Trustee to take any action following a Declaration
Event of Default. The Property Trustee also serves as Preferred Securities
Guarantee Trustee.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry
form, the following provisions would apply:
Securities Transfer Company, Cincinnati, Ohio, will act as the initial
paying agent. The Company may designate an additional or substitute paying agent
at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company 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. The Company is authorized and
directed to conduct its affairs so that the Subordinated Debentures will be
treated as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company 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 the
Company, that each of the Company 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.
DESCRIPTION OF TRUST GUARANTEE
Set forth below is a summary of information concerning the Trust Guarantee
that will be executed and delivered by the Company for the benefit of the
holders, from time to time, of Preferred Securities. The Trust Guarantee will be
qualified as an indenture under the Trust Indenture Act. The Bank of New York
will act as independent indenture trustee for Trust Indenture Act purposes under
the Trust Guarantee (the "Preferred Securities Guarantee Trustee"). The terms of
the Trust Guarantee will be those set forth in such Trust Guarantee and those
made part of such Trust Guarantee by the Trust Indenture Act. The summary of
certain provisions of the Trust Guarantee does not purport to be complete and is
subject to and qualified in its entirety by reference to the provisions of the
form of Trust Guarantee, a copy of which has been filed as an exhibit to
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the Registration Statement of which this Prospectus is a part, and the Trust
Indenture Act. The Trust Guarantee will be held by the Preferred Securities
Guarantee Trustee for the benefit of the holders of the Preferred Securities of
the Trust.
GENERAL
Pursuant to the Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay in full to the holders of the Preferred Securities, the
Trust Guarantee Payments (as defined below) (except to the extent paid by the
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which the Trust may have or assert. The following payments or
distributions with respect to the Preferred Securities (the "Trust Guarantee
Payments"), to the extent not paid by the Trust, will be subject to the Trust
Guarantee (without duplication): (i) any accrued and unpaid distributions that
are required to be paid on such Preferred Securities, to the extent the Trust
shall have funds available therefor, (ii) the redemption price, including all
accrued and unpaid distributions to the date of redemption (the "Redemption
Price"), to the extent the Trust has funds available therefor, with respect to
any Preferred Securities called for redemption by the Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debentures to
the holders of Preferred Securities or the redemption of all of the Preferred
Securities upon maturity or redemption of the Subordinated Debentures) the
lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on such Preferred Securities to the date of payment, to the extent
the Trust has funds available therefor or (b) the amount of assets of the Trust
remaining for distribution to holders of such Preferred Securities in
liquidation of the Trust. The Company's obligation to make a Trust Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of Preferred Securities or by causing the Trust to pay
such amounts to such holders.
The Trust Guarantee will not apply to any payment of distributions except
to the extent the Trust shall have funds available therefor. If the Company does
not make interest or principal payments on the Subordinated Debentures purchased
by the Trust, 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, 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 Subordinated Debentures issued to the Trust and (c)
the Company shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Trust Guarantee); provided, however, that the
Company may declare and pay a stock dividend where the dividend is paid in the
form of the same stock as that on which the dividend is being paid.
MODIFICATION OF THE TRUST GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent of such holders
will be required), the Trust Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of such Preferred Securities is set
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forth above under "Description of the Preferred Securities -- Voting Rights."
All guarantees and agreements contained in the Trust Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company and
shall inure to the benefit of the holders of the Preferred Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Trust Guarantee will occur upon the failure
of the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Preferred Securities Guarantee Trustee in respect of
the Trust Guarantee or to direct the exercise of any trust or power conferred
upon the Preferred Securities Guarantee Trustee under the Trust Guarantee.
If the Preferred Securities Guarantee Trustee fails to enforce the Trust
Guarantee, any record holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Preferred Securities
Guarantee Trustee's rights under the Trust Guarantee without first instituting a
legal proceeding against the Trust, the Preferred Securities Guarantee Trustee
or any other person or entity. Notwithstanding the foregoing, if the Company has
failed to make a Trust Guarantee Payment, a record holder of Preferred
Securities may directly institute a proceeding against the Company for
enforcement of the Trust Guarantee for such payment to the record holder of the
Preferred Securities of the principal of or interest on the Subordinated
Debentures on or after the respective due dates specified in the Subordinated
Debentures, and the amount of the payment will be based on the holder's pro rata
share of the amount due and owing on all of the Preferred Securities. The
Company has waived any right or remedy to require that any action be brought
first against the Trust or any other person or entity before proceeding directly
against the Company. The record holder in the case of the issuance of one or
more global Preferred Securities certificates will be DTC acting at the
direction of its Direct Participants, who in turn will be acting at the
direction of the beneficial owners of the Preferred Securities.
The Company will be required to provide annually to the Preferred
Securities Guarantee Trustee a statement as to the performance by the Company of
certain of its obligations under the Trust Guarantee and as to any default in
such performance.
INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE
The Preferred Securities Guarantee Trustee, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth in
the Trust Guarantee and, after default with respect to the Trust Guarantee,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the Preferred
Securities Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Guarantee at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to the Preferred Securities upon full
payment of the Redemption Price of all Preferred Securities, upon distribution
of the Subordinated Debentures held by the Trust to the holders of all of the
Preferred Securities or upon full payment of the amounts payable in accordance
with the Declaration upon liquidation of the Trust. The Trust Guarantee will
continue to be effective or will be 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, including the Subordinated Debentures, except those
liabilities of the Company made pari passu or subordinate by their
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terms, (ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Company and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock of any
affiliate of the Company and (iii) senior to the Company's Common Stock. The
terms of the Preferred Securities provide that each holder of Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Trust Guarantee will be governed by and construed in accordance with
the law of the State of Ohio.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the description in the Indenture, dated as of September , 1996 (the
"Indenture"), between the Company and The Bank of New York, as Trustee (the
"Indenture Trustee"), the form of which is filed as an Exhibit to the
Registration Statement of which this Prospectus is a part, and the Trust
Indenture Act. Certain capitalized terms used herein are defined in the
Indenture.
At any time, the Company will have the right to liquidate the Trust and
cause the Subordinated Debentures to be distributed to the holders of the
Preferred Securities in liquidation of the Trust. See "Description of the
Preferred Securities -- Distribution of the Subordinated Debentures."
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debentures listed on the NYSE or on such other exchange on which
the Preferred Securities are then listed.
GENERAL
The Subordinated Debentures will be issued as unsecured subordinated debt
securities under the Indenture. The Subordinated Debentures will be limited in
aggregate principal amount to approximately $ million, such amount being the
sum of the aggregate stated liquidation amount of the Preferred Securities and
the capital contributed by the Company in exchange for the Common Securities
(the "Company Payment").
The Subordinated Debentures are not subject to a sinking fund provision.
The entire principal amount of the Subordinated Debentures will mature and
become due and payable, together with any accrued and unpaid interest thereon
including Compounded Interest (as hereinafter defined), if any, on ,
2026, subject to the election of the Company 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 the Company's satisfying
certain financial conditions. See "-- Option to Change Scheduled Maturity Date."
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, it is
presently anticipated that such Subordinated Debentures will initially be issued
in the form of one or more Global Securities (as defined below). As described
herein, under certain limited circumstances, Subordinated Debentures may be
issued in definitive certificated form in exchange for a Global Security. See
"-- Book-Entry and Settlement" below. In the event that Subordinated Debentures
are issued in definitive certificated form, such Subordinated Debentures will be
in denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Subordinated Debentures
issued as a Global Security will be made to DTC or its nominee, a successor
depository or its nominee. In the event Subordinated Debentures are issued in
definitive certificated form,
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principal and interest will be payable, the transfer of the Subordinated
Debentures will be registrable and Subordinated Debentures will be exchangeable
for Subordinated Debentures of other denominations of a like aggregate principal
amount at the principal corporate trust office of the Indenture Trustee in New
York, New York; provided that payment of interest may be made at the option of
the Company 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 other similar transaction that may
adversely affect such holders.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated
and junior in right of payment to the prior payment in full of all Senior
Indebtedness of the Company whether now existing or hereafter incurred. In the
event and during the continuation of any default by the Company in the payment
of principal, premium, interest or any other payment due on any Senior
Indebtedness of the Company, or in the event that the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default, then in
either case, no payment will be made by the Company with respect to the
principal (including redemption payments) of or interest on the Subordinated
Debentures. Upon any distribution of assets of 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, premium, if any, and interest due or to become due on all Senior
Indebtedness of the Company (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 paid in full before the holders
of Subordinated Debentures are entitled to receive or retain any payment. In the
event that the Subordinated Debentures are declared due and payable before the
Maturity Date, then all amounts due or to become due on all Senior Indebtedness
shall have been paid in full (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) before holders of the Subordinated
Debentures are entitled to receive or retain any payment. Upon satisfaction of
all claims of all Senior Indebtedness then outstanding, the rights of the
holders of the Subordinated Debentures will be subrogated to the rights of the
holders of Senior Indebtedness of the Company to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Subordinated Debentures are paid in full.
The term "Senior Indebtedness" shall include (i) the principal, premium, if
any, and interest in respect of (A) indebtedness of the Company for money
borrowed and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by the Company; (ii) all capital lease
obligations of the Company; (iii) all obligations of the Company issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of the Company and all obligations of the Company under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of the Company 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
the Company is responsible or liable as obligor, guarantor or otherwise,
including under all support agreements or guarantees by the Company 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 the Company (whether or
not such obligation is assumed by the Company); 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 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.
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The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Subordinated Debentures, (i)
at any time, in whole or in part, from time to time, on or after ,
2001 or (ii) at any time in whole (but not in part) upon the occurrence of a
Special Event as described under "Description of the Preferred
Securities -- Special Event Redemption," upon not less than 30 nor more than 60
days notice, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest to the redemption date. If a
partial redemption of the Preferred Securities resulting from a partial
redemption of the Subordinated Debentures would result in the delisting of the
Preferred Securities, the Company may only redeem the Subordinated Debentures in
whole. The Company may not redeem any Subordinated Debentures if there is
accrued and unpaid interest on the Subordinated Debentures as of the Interest
Payment Date (as defined below) next preceding the redemption date.
INTEREST
Each Subordinated Debenture shall bear interest at the rate of % per
annum from the original date of issuance, or from the most recent interest
payment date to which interest has been paid or provided for, payable quarterly
in arrears on January 15, April 15, July 15 and October 15 of each year (each an
"Interest Payment Date"), commencing January 15, 1997, to the person in whose
name such Subordinated Debenture is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. In the event the Subordinated Debentures shall not continue to
remain in book-entry form, the Company shall have the right to select record
dates, which shall be more than one Business Day but less than 60 Business Days
prior to the Interest Payment Date. Any installment of interest not punctually
paid will cease to be payable to the holders of the Subordinated Debentures on
the regular record date and may be paid to the person in whose name the
Subordinated Debentures are registered at the close of business on a special
record date to be fixed by the Indenture Trustee for the payment of such
defaulted interest, notice of which shall be given to the holders of the
Subordinated Debentures not less than 10 days prior to such special record date,
or may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange, interdealer quotation system or other
organization on which the Subordinated Debentures may be listed, and upon such
notice as may be required by such exchange, system or organization.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
will be computed on the basis of the actual number of days elapsed in such 90
day quarter. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO CHANGE SCHEDULED MATURITY DATE
The "Scheduled Maturity Date" of the Subordinated Debentures is ,
2026. The Company, however, may extend such maturity date ( , 2026 or
the maturity date then in effect, as the case may be, is hereinafter referred to
as the "Maturity Date") for one or more periods, but in no event later than the
earlier of (i) , 2045 or (ii) the "Interest Deduction Date." The
"Interest Deduction Date" shall mean the date which is six months earlier than
the ending date of the maximum term (beginning on the date of issue of the
Subordinated Debentures and including any extensions thereof), as determined
under any federal statute applicable by its terms to the Subordinated Debentures
which is enacted at any time after the
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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. The Company 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 the Company exercises such right and on the Maturity Date
then in effect prior to such proposed extension: (a) the Company is not in
bankruptcy or otherwise insolvent, (b) the Company 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) the Company
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 the Company's election to change the Maturity Date to
the holders of the Preferred Securities.
In addition, if the Company 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 the Company that is no earlier than
, 2001 and (ii) any date elected by the Company which is not later
than the earlier of (a) , 2045 or (b) the "Interest Deduction Date";
provided that on the date the Company exercises such right, and on the Maturity
Date in effect prior to such proposed extension, the conditions specified in the
previous paragraph are satisfied.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right, from time to time, to defer payment of interest
on the Subordinated Debentures for up to 20 consecutive quarters, provided that
no Extension Period may extend beyond the Maturity Date of the Subordinated
Debentures. There could be multiple Extension Periods of varying lengths during
the term of the Subordinated Debentures. At the end of each Extension Period, if
any, the Company shall pay all interest then accrued and unpaid, together with
interest thereon, compounded quarterly at the rate specified for the
Subordinated Debentures to the extent permitted by applicable law ("Compound
Interest"). In the event the Company exercises this right, then during any
Extension Period, (a) the Company 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
shall not, directly or indirectly, and will not allow any of its 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 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 common stock of the Company 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 capital stock for common stock, (iii) to the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged or (iv) to the payment of any stock dividend by the
Company payable in common stock. Prior to the termination of any such Extension
Period, the Company may further defer payments of interest by extending the
interest payment period; provided, however, that each Extension Period,
including all such previous and further extensions if any, may not exceed 20
consecutive quarters or extend beyond the Maturity Date. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company 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. The Company 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
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Subordinated Debentures, the Company shall give the Regular Trustees and the
Property Trustee notice of its selection of such Extension Period one Business
Day prior to the earlier of (i) the date distributions on the Preferred
Securities are payable or (ii) the date the Regular Trustees are required to
give notice to the NYSE (or other applicable self-regulatory organization) or to
holders of the Preferred Securities of the record date or the date such
distribution is payable. The Regular Trustees shall give notice of the Company'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, the Company 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
the Company is required to give notice to the NYSE (or other applicable
self-regulatory organization) or to holders of the Subordinated Debentures of
the record or payment date of such related interest payment.
COVENANTS
The Indenture requires the Company to covenant to the following with
respect to the Subordinated Debentures: (i) to duly and punctually pay the
principal of and interest on the Subordinated Debentures (together with any
additional amounts payable pursuant to the terms thereof) and comply with all
other terms, agreements and conditions contained therein or made in the
Indenture for the benefit of the Subordinated Debentures; (ii) to maintain an
office or agency where the Subordinated Debentures may be presented, surrendered
for payment, transferred or exchanged and where notices to the Company may be
served; (iii) if the Company 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 the Company or a subsidiary that comprise 10% or more
of the combined assets of the Company, other than claims contested in good faith
by the Company. The Indenture also requires the Company 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, the
Company is in compliance with the terms of the Indenture and, if not, the nature
and status of such non-compliance.
In addition, the Company has also covenanted, with respect to the
Subordinated Debentures, that for so long as the Preferred Securities and the
Common Securities remain outstanding the Company will (i) maintain 100% direct
or indirect ownership of the Common Securities, provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company'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 the
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 the Company with, or merger of the Company into,
any other person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety, the successor person formed
by such consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and
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power of, the Company under the Indenture with the same effect as the Company
prior to such transaction, and thereafter, except in the case of a lease, the
Company 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 the
Company 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 for money borrowed by the Company (other than non-recourse
indebtedness) which results in acceleration or nonpayment at maturity (after
giving effect to any applicable grace period) of such indebtedness in an
aggregate amount exceeding $15,000,000; or any such indebtedness exceeding
$15,000,000 shall otherwise be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled prepayment or exercise of an
optional prepayment right), prior to the stated maturity thereof; or any failure
by the Company 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 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,
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.
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
the Company 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 the Company to pay interest or principal on the Subordinated
Debentures issued to the Trust on the date such interest or principal is
otherwise payable, then a record holder of Preferred
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Securities may institute a proceeding directly against the Company for
enforcement of payment to the record holder of the Preferred Securities of the
principal of or interest on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures, and the amount of
the payment will be based on the holder's pro rata share of the amount due and
owing on all of the Preferred Securities. The record holder in the case of the
issuance of one or more global Preferred Securities certificates will be DTC
acting at the direction of its Direct Participants, who in turn will be acting
at the direction of the Beneficial Owners. The holders of Preferred Securities
in certain circumstances have the right to direct the Property Trustee to
exercise its rights, with respect to other than principal and interest payments
on the Subordinated Debentures, as the holder of the Subordinated Debentures.
See "Description of the Preferred Securities -- Declaration Events of Default"
and "Description of the Preferred Securities -- Voting Rights."
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust, it
is presently anticipated that the Subordinated Debentures will be issued in the
form of one or more global certificates (each a "Global Security") registered in
the name of a securities depository or its nominee. Except under the limited
circumstances described below, Subordinated Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by the depository to a nominee of the
depository or by a nominee of the depository to the depository or another
nominee of the depository or to a successor depository or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the Holders (as defined
in the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Debentures shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the depository or its nominee or to a successor depository or its
nominee. Accordingly, each beneficial owner must rely on the procedures of the
depository or, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest to exercise any rights
of a Holder under the Indenture.
THE DEPOSITORY
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will act
as securities depository for the Subordinated Debentures. For a description of
DTC and the specific terms of the depository arrangements, see "Description of
the Preferred Securities -- Book-Entry Issuance -- The Depository Trust
Company." As of the date of this Prospectus, the description therein of DTC's
book-entry system and DTC's practices as they relate to purchases, transfers,
notices and payments with respect to the Preferred Securities apply in all
material respects to any debt obligations represented by one or more Global
Securities held by DTC. The Company may appoint a successor to DTC or any
successor depository in the event DTC or such successor depository is unable or
unwilling to continue as the depository for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for the Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
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DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debentures in
definitive certificated form registered in the names of persons other than the
depository or its nominee only if (i) the depository notifies the Company that
it is unwilling or unable to continue as a depository for such Global Security
and no successor depository shall have been appointed, (ii) the depository, at
any time, ceases to be a clearing agency registered under the Exchange Act at
which time the depository is required to be so registered to act as such
depository and no successor depository shall have been appointed, or (iii) the
Company, in its sole discretion, determines that such Global Security shall be
so exchangeable. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for Subordinated Debentures registered
in such names as the depository shall direct. It is expected that such
instructions will be based upon directions received by the depository from its
Participants with respect to ownership of beneficial interests in such Global
Security.
MISCELLANEOUS
The Indenture will provide that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Subordinated
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Trustees and (iv) the enforcement by the Property
Trustee of the rights of the holders of the Preferred Securities.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED
DEBENTURES AND THE TRUST GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to (i)
issue the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust, (ii) invest the proceeds from such issuance and sale in the
Subordinated Debentures and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because: (i) the aggregate principal
amount of Subordinated Debentures will be equal to the sum of the aggregate
stated liquidation amount of the Trust Securities; (ii) the interest rate and
the interest and other payment dates on the Subordinated Debentures will match
the distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) the Company 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 the Company does not make interest and/or
principal payments on the Subordinated Debentures purchased by the Trust, 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 Trust Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except those made pari passu or subordinate by their
terms, (ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Company and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock of any
affiliate of the Company and (iii) senior to the Company's common stock.
The Trust Guarantee, when taken together with the back-up undertakings,
consisting of obligations of the Company as set forth in the Declaration
(including the obligation to pay expenses of the Trust), the Indenture
45
<PAGE> 47
and the Subordinated Debentures issued to the Trust, provide a full and
unconditional guarantee by the Company of the Preferred Securities. If the
Preferred Securities Guarantee Trustee fails to enforce the Trust Guarantee, any
record holder of Preferred Securities may institute a legal proceeding directly
against the Company to enforce the Preferred Securities Guarantee Trustee's
rights under the Trust Guarantee without first instituting a legal proceeding
against the Trust, the Preferred Securities Guarantee Trustee or any other
person or entity. In addition, if the Company has failed to make a Trust
Guarantee Payment, a record holder of Preferred Securities may directly
institute a proceeding against the Company for enforcement of the Trust
Guarantee for such payment to the record holder of the Preferred Securities of
the principal of or interest on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures, and the amount of
the payment will be based on the holder's pro rata share of the amount due and
owing on all of the Preferred Securities. The Company has waived any right or
remedy to require that any action be brought first against the Trust or any
other person or entity before proceeding directly against the Company. The
record holder in the case of the issuance of one or more global Preferred
Securities certificates will be DTC acting at the direction of its Direct
Participants, who in turn will be acting at the direction of the beneficial
owners of the Preferred Securities.
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 the Company 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 the
Company to pay interest, principal or other required payment on the Subordinated
Debentures issued to the Trust on the date such interest, principal or other
payment is otherwise payable, then a record holder of Preferred Securities may
institute Direct Action against the Company for enforcement of payment on the
Subordinated Debentures on or after the respective due dates specified in the
Subordinated Debentures. To the extent the Company makes a payment to a record
holder of Preferred Securities in connection with proceedings by such record
holder directly against the Company, the Company will be subrogated to the
rights of the record holder of Preferred Securities to the extent of payments
made by the Company to the record holder. The record holder in the case of the
issuance of one or more global Preferred Securities certificates will be DTC
acting at the direction of its Direct Participants, who in turn will be acting
at the direction of the beneficial owners of the Preferred Securities. If
another Indenture Event of Default occurs and is continuing, the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities -- Voting
Rights," may direct the Property Trustee to enforce its rights under the
Subordinated Debentures.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders who purchase the Preferred
Securities upon original issuance ("Initial Holders"). It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not address
the tax consequences to persons that have a functional currency other than the
U.S. dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of Preferred Securities. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities. This summary is based on the Code, U.S. Treasury
regulations thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis. Any such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
46
<PAGE> 48
consequences described below, possibly adversely affecting a beneficial owner of
the Preferred Securities. In particular, legislation has been proposed that
could adversely affect the Company's ability to deduct interest on the
Subordinated Debentures, which may in turn permit the Company to cause a
redemption of the Preferred Securities prior to 2001. See "-- Proposed Tax Law
Changes."
CLASSIFICATION OF THE SUBORDINATED DEBENTURES AND THE TRUST
In connection with the issuance of the Subordinated Debentures, Akin, Gump,
Strauss, Hauer & Feld, L.L.P. ("Tax Counsel"), tax counsel for the Company and
the Trust, will render its opinion generally to the effect that, although not
entirely free from doubt, under current law and assuming full compliance with
the terms of the Indenture (and certain other documents), and based upon certain
facts and assumptions contained in such opinion, the Subordinated Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company.
In connection with the issuance of the Preferred Securities, Tax Counsel
will render its opinion generally to the effect that under current law and
assuming full compliance with the terms of the Declaration and other documents,
and based upon certain facts and assumptions contained in such opinion, the
Trust will be classified for United States federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for United States federal income tax purposes, each holder of Preferred
Securities generally will be considered the owner of an undivided interest in
the Subordinated Debentures. Each holder will be required to include in its
gross income its allocable share of income on the Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued income tax regulations applicable to all debt
instruments that, like the Subordinated Debentures, are issued on or after
August 13, 1996, remote contingencies that stated interest will not be timely
paid are ignored in determining whether a debt instrument is issued with OID.
OID must be included in income by all holders as it accrues economically on a
daily basis, without regard to when it is paid in cash or whether a particular
holder generally uses the cash method of accounting. The Company has concluded
that the likelihood of its exercising its option to defer payments of interest
is remote because exercising that option would prevent the Company from
declaring dividends on its stock. Based upon this conclusion, and although not
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.
Under the new regulations, however, if the Company exercises its right to
defer payments of interest, the Subordinated Debentures will become OID
instruments, and all holders of the Preferred Securities will be required to
accrue interest on a daily basis during any Extension Period even though the
Company will not pay the interest in cash until the end of the Extension Period,
and even though a holder may use the cash method of accounting. A holder who
disposes of the Preferred Securities during such an Extension Period may suffer
a loss because the market value of the Trust Securities will likely fall if the
Company exercises its option to defer payments of interest on the Subordinated
Debentures. Furthermore, the market value of the Preferred Securities may not
reflect the accumulated distribution that will be paid at the end of the
Extension Period, and a holder who sells the Preferred Securities during the
Extension Period will not receive from the Company any cash related to the
interest income the holder accrued and included in its taxable income under the
OID rules (because that cash will be paid to the holder of record at the end of
the Extension Period).
If the Subordinated Debentures become OID instruments (i.e., if the Company
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.
47
<PAGE> 49
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 the
Company does not defer interest on the Subordinated Debentures by extending the
interest payment period, a holder's adjusted tax basis in the Preferred
Securities generally will equal its initial purchase price. Subject to the
market discount rules described above and the discussion below regarding accrued
and unpaid interest, such gain or loss generally will be a capital gain or loss
and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. If the Company exercises its right to defer payments of
interest, a holder who disposes of Preferred Securities between record dates for
payments of distributions thereon will be required to include in income as
ordinary income, 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 its pro rata share of the underlying Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include 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 the Company's election to defer.
48
<PAGE> 50
UNITED STATES ALIEN HOLDERS
Prospective purchasers of Preferred Securities that are United States Alien
Holders should consult their tax advisor with respect to the United States
federal tax consequences, including in particular, potential withholding tax
consequences, as well as any tax consequences that may arise under the laws of
any U.S. state, local or other U.S. or non-U.S. tax jurisdiction. For purposes
of this discussion, a "United States Alien Holder" is any corporation,
individual, partnership, estate or trust that is, as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership, or
a non-resident fiduciary of a foreign estate or trust.
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to holders on Forms
1099, which forms should be mailed to holders of Preferred Securities by January
31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld 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"),
the revenue portion of President Clinton's fiscal 1997 budget proposal, was
released. The Bill would, among other things, generally deny interest deductions
for interest or OID on an instrument issued by a corporation that has a maximum
weighted average maturity of more than 40 years. The Bill would also treat as
equity, instruments issued by a corporation that have a maximum term of more
than 20 years and that are not shown as indebtedness on the consolidated balance
sheet of the issuer. For purposes of determining the weighted average maturity
or the term of an instrument, any right to extend would be treated as exercised.
The above-described provisions of the Bill were proposed to be effective
generally for instruments issued on or after December 7, 1995. However, on March
29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees
issued a joint statement (the "Joint Statement") to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, would be no earlier than the date of appropriate Congressional action.
In addition, subsequent to the publication of the Joint Statement, Senator
Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel
wrote letters to Treasury Department officials concurring with the views
expressed in the Joint Statement. Under current law, it is likely that the
Subordinated Debentures will be treated as indebtedness of the Company and the
Company will be able to deduct interest on the Subordinated Debentures
beneficially held by the holders of the Preferred Securities. The terms of the
Subordinated Debentures limit the right to extend the maturity of the
Subordinated Debentures to a date which is six months shorter than any
legislative limit on the length of debt securities for which interest is
deductible. Based on the advice of Tax Counsel, the Company believes this will
allow it an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, the Company will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no assurance
that current or future legislative proposals, adverse judicial decisions, final
legislation or official administrative pronouncements will not affect the
ability of the Company to deduct interest on the Subordinated Debentures, giving
rise to a Tax Event which would permit the Company to cause the redemption of
the Preferred Securities prior to July 30, 2001 (the first date on which the
Company would otherwise be able to cause a redemption of Preferred Securities)
as described more fully under "Description of Preferred Securities -- Special
Event Redemption."
49
<PAGE> 51
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.
50
<PAGE> 52
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named herein, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated, . are acting as
representatives (the "Representatives"), has severally agreed to purchase the
number of Preferred Securities set forth opposite its name below. In the
Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Preferred Securities
offered hereby if any of the Preferred Securities are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
---------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
---------------------
Total.......................................... 4,000,000
==============
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such price
less a concession not in excess of $ per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per Preferred Security to certain brokers and dealers. After the
Preferred Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of the Company,
the Underwriting Agreement provides that the Company will agree to pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds, an amount of $ per Preferred Security
(or $ in the aggregate) for the accounts of the several Underwriters,
provided that such compensation for sales of 10,000 or more Preferred Securities
to any single purchaser will be $ per Preferred Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will be
less than the aggregate amount specified in the preceding sentence.
Pursuant to the Underwriting Agreement, the Trust and the Company have
granted to the Underwriters an option exercisable for 30 days to purchase up to
an additional 600,000 Preferred Securities at the offering price per Preferred
Security set forth on the cover page hereof, solely to cover over-allotments, if
any, in the sale of the Preferred Securities. The Company will pay Underwriters'
Compensation in the amounts per Preferred Security set forth above with respect
to such additional Preferred Securities. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional Preferred
Securities as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of Preferred Securities offered by the
Underwriters hereby.
During a period of 90 days from the date of this Prospectus, neither the
Trust nor the Company will, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
any equity securities substantially similar to the Preferred Securities (except
for the Subordinated Debentures and the Preferred Securities offered hereby).
Application will be made to list the Preferred Securities on the NYSE. If
approved, trading of the Preferred Securities on the NYSE is expected to
commence within a 30-day period after the initial delivery of
51
<PAGE> 53
the Preferred Securities. The Representatives have advised the Trust that, if
approved, they intend to make a market in the Preferred Securities prior to the
commencement of trading on the NYSE. The Representatives have no obligation to
make a market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
The Company and the Trust have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
The validity of the Securities offered hereby other than the Preferred
Securities will be passed upon for the Company 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 the Company and the Trust
by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, D.C. Attorneys in the
Keating, Muething & Klekamp P.L.L., law firm and Akin, Gump, Strauss, Hauer &
Feld, L.L.P. law firm hold shares of common stock of the Company. Certain
matters of Delaware law relating to the validity of the Preferred Securities
will be passed upon for the Trust by Morris, Nichols, Arsht & Tunnell,
Wilmington, Delaware. Certain legal matters in connection with the Securities
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom, New York, New York, and Taft, Stettinius & Hollister, Cincinnati, Ohio.
EXPERTS
The consolidated financial statements of AFG appearing in AFG's Annual
Report (Form 10-K) for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such report is based in
part on the reports of Deloitte & Touche LLP, independent auditors, relating to
the consolidated financial statements of American Premier Underwriters, Inc. for
the years ended December 31, 1994 and 1993 and of Deloitte & Touche, independent
auditors, relating to the consolidated financial statements of General Cable
Corporation for the year ended December 31, 1993. AFG's financial statements
referred to above are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
52
<PAGE> 54
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR
THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 4
Information of Certain Documents by
Reference............................. 4
Prospectus Summary...................... 6
Risk Factors............................ 10
The Trust............................... 19
The Company............................. 20
Capitalization.......................... 23
Ratio of Earnings to Fixed Charges...... 24
Use of Proceeds......................... 24
Description of the Preferred
Securities............................ 24
Description of Trust Guarantee.......... 35
Description of the Subordinated
Debentures............................ 38
Effect of Obligations Under the
Subordinated Debentures and the Trust
Guarantee............................. 45
United States Federal Income Taxation... 46
Underwriting............................ 51
Legal Matters........................... 52
Experts................................. 52
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
4,000,000
PREFERRED SECURITIES
AMERICAN FINANCIAL
CAPITAL TRUST I
% TRUST ORIGINATED
PREFERRED SECURITIESSM ("TOPRSSM")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
AMERICAN FINANCIAL GROUP, INC.
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the offering
described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee*............................... $39,655
NYSE listing fee...................................................................
Legal fees and expenses............................................................
Accounting fees and expenses.......................................................
Printing and engraving expenses....................................................
Trustee's fees and expenses........................................................
Rating Agencies' fees..............................................................
Blue Sky fees and expenses.........................................................
Miscellaneous......................................................................
-------
TOTAL............................................................................ $
=======
</TABLE>
- ---------------
*Actual; other expenses are to be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Ohio Revised Code, Section 1701.13(E), allows indemnification by the
Company of any person made or threatened to be made a party to any proceedings,
other than a proceeding by or in the right of the Company, by reason of the fact
that he is or was a director, officer, employee or agent of the Company, 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 the
Company 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 the Company, 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 the Company unless deemed
otherwise by the court. Indemnifications are 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. The Company's Code of Regulations
extends such indemnification.
The Company maintains, at its expense, Directors and Officers Liability and
Company Reimbursement Liability Insurance. The Directors and Officers Liability
portion of such policy covers all directors and officers of the Company and of
the companies which are, directly or indirectly, more than 50% owned by the
Company. The policy provides for payment on behalf of the directors and
officers, up to the policy limits and after expenditure of a specified
deductible, of all Loss (as defined) from claims made against them during the
policy period for defined wrongful acts, which include errors, misstatements or
misleading statements, acts or omissions and neglect or breach of duty by
directors and officers in the discharge of their individual or collective duties
as such. The insurance includes the cost of investigations and defenses, appeals
and bonds and settlements and judgments, but not fines or penalties imposed by
law. The insurance does not cover any claims arising out of acts alleged to have
been committed prior to November 24, 1978. The insurer limit of liability under
the policy is $50,000,000 in the aggregate for all losses each year subject to
certain individual and aggregate deductibles. The policy contains various
exclusions and reporting requirements.
The Company also has entered into indemnification agreements with its
executive officers and directors providing for indemnification (and advancement
of expenses) against certain liabilities to the fullest extent provided by Ohio
law.
II-1
<PAGE> 56
The Declaration provides that, to the fullest extent permitted by
applicable law, the Trust shall indemnify and hold harmless each of the
Trustees, any affiliate of the Trustees, any officer, director, shareholder,
member, partner, employee, representative or agent of the Trustees, or any
employee or agent of the Trust or its affiliates (each a "Trust Indemnified
Person"), from and against any loss, damage or claim incurred by such Trust
Indemnified Person by reason of any act or omission performed or omitted by such
Trust Indemnified Person in good faith on behalf of the Trust and in a manner
such Trust Indemnified Person reasonably believed to be within the scope of
authority conferred on such Trust Indemnified Person by the Declaration, except
that no Trust Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Trust Indemnified Person by reason
of gross negligence (or, in the case of the Property Trustee, negligence) or
willful misconduct with respect to such acts or omissions. The Declaration also
provides that, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Trust Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be advanced
by the Trust prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Trust of an undertaking by or on behalf of the
Trust Indemnified Person to repay such amount if it shall be determined that the
Trust Indemnified Person is not entitled to be indemnified as authorized in the
Declaration. The Declaration further provides that no Trust Indemnified Person
shall be liable, responsible or accountable in damages or otherwise to the Trust
or any Covered Person (as defined therein) or for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such Trust
Indemnified Person in good faith on behalf of the Trust and in a manner such
Trust Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Trust Indemnified Person by the Declaration or by
law, except that a Trust Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Trust Indemnified Person's gross
negligence or willful misconduct with respect to acts or omissions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- ------------------------------------------------------------------------------
<C> <S>
1.1 * Form of Underwriting Agreement for Preferred Securities
4.1 Form of Indenture
4.2 Certificate of Trust of American Financial Capital Trust I
4.3 * Declaration of Trust of American Financial Capital Trust I
4.4 Form of Preferred Securities Guarantee Agreement
4.5 Form of Common Securities Guarantee Agreement
4.6 Form of Subordinated Debenture (contained in Exhibit 4.1)
4.7 Form of Preferred Security
4.8 Form of Common Security
5.1 * Opinion of Keating, Muething & Klekamp, P.L.L.
5.2 * Opinion of Morris, Nichols, Arsht & Tunnell
8.1 * Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1 Consents of Independent Auditors.
23.2 * Consent of Keating, Muething & Klekamp, P.L.L. (Contained on Exhibit 5.1)
23.3 * Consent of Morris, Nichols, Arsht & Tunnell (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 page).
25.1 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee under the Indenture
</TABLE>
II-2
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- ------------------------------------------------------------------------------
<C> <S>
25.2 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee under the Declaration of American
Financial Capital Trust I
25.3 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee of the Trust Preferred Securities
Guarantee for the benefit of the holders of Preferred Securities of American
Financial Capital Trust I
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The Company and the Trust hereby undertake that:
(1) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company and the Trust pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Cincinnati, State of Ohio, as of the 24th day of
September, 1996
AMERICAN FINANCIAL GROUP, INC.
By: 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
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person below whose signature is
preceded by an (*) hereby constitutes and appoints each of Fred J. Runk, James
C. Kennedy and Karl J. Grafe, his true and lawful attorney and agent, to do any
and all acts and instruments for him and in his name in the capacity indicated
below, which said attorneys and agents, or any of them, may deem necessary or
advisable to enable American Financial Group, Inc. to comply with the Securities
Act of 1933, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign amendments
(including post effective amendments).
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- -------------------------------------------- ------------------------------------------------------------
<S> <C> <C>
* CARL H. LINDNER Chairman of the Board and Chief September 24, 1996
Carl H. Lindner Executive Officer and a Director
(Principal Executive Officer)
* CARL H. LINDNER III Director September 24, 1996
Carl H. Lindner III
* S. CRAIG LINDNER Director September 24, 1996
S. Craig Lindner
* KEITH E. LINDNER Director September 24, 1996
Keith E. Lindner
* JAMES E. EVANS Director September 24, 1996
James E. Evans
* Theodore H. Emmerich Director September 24, 1996
Theodore H. Emmerich
* THOMAS M. HUNT Director September 24, 1996
Thomas M. Hunt
* WILLIAM R. MARTIN Director September 24, 1996
William R. Martin
FRED J. RUNK Senior Vice President and Treasurer September 24, 1996
Fred J. Runk (Principal Financial and Accounting
Officer)
</TABLE>
II-4
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, American
Financial Capital Trust I certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Cincinnati, State of Ohio, as of the
24th day of September, 1996
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person below whose signature is
preceded by an (*) hereby constitutes and appoints each of Fred J. Runk, James
C. Kennedy and Karl J. Grafe, his true and lawful attorney and agent, to do any
and all acts and instruments for him and in his name in the capacity indicated
below, which said attorneys and agents, or any of them, may deem necessary or
advisable to enable American Financial Capital Trust I to comply with the
Securities Act of 1933, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign amendments (including post effective amendments) and any related
Registration Statement, or amendment thereto, filed pursuant to Rule 462(b)
promulgated under the Securities Act of 1933.
AMERICAN FINANCIAL CAPITAL TRUST I
By: * JAMES E. EVANS
James E. Evans, as Trustee
By: * THOMAS E. MISCHELL
Thomas E. Mischell, as Trustee
II-5
<PAGE> 1
EXHIBIT 4.1
AMERICAN FINANCIAL GROUP, INC.
TO
THE BANK OF NEW YORK
a New York banking corporation, Trustee
-------------------
Indenture
Dated as of September __, 1996
$[103,092,784]
___% Subordinated Debentures
<PAGE> 2
RECITALS OF THE COMPANY...........................................1
ARTICLE ONE.......................................................1
Definitions and Other Provisions of General Application...........1
SECTION 101. Definitions.........................................1
Act............................................................2
Affiliate......................................................2
Authenticating Agent...........................................2
Board of Directors.............................................2
Board Resolution...............................................2
Business Day...................................................2
Commission.....................................................2
Common Securities..............................................3
Company........................................................3
Company Request................................................3
Corporate Trust Office.........................................3
Covenant Defeasance............................................3
Declaration....................................................3
Defaulted Interest.............................................3
Defeasance.....................................................3
Depositary.....................................................3
Event of Default...............................................3
Exchange Act...................................................3
Expense Agreement..............................................3
Extension Period...............................................3
Global Security................................................3
Holder.........................................................3
Indenture......................................................3
Institutional Trustee..........................................4
Interest Payment Date..........................................4
Investment Company Act Event...................................4
Maturity.......................................................4
Officers' Certificate..........................................4
Opinion of Counsel.............................................4
Outstanding....................................................4
Parent Guarantees..............................................5
Paying Agent...................................................5
Person.........................................................5
Predecessor Security...........................................5
Preferred Securities...........................................5
Redemption Date................................................5
Redemption Price...............................................5
Regular Record Date............................................5
Responsible Officer............................................5
Securities.....................................................5
Security Register..............................................5
Senior Indebtedness............................................5
Special Event..................................................6
Special Record Date............................................6
Stated Maturity................................................6
<PAGE> 3
Subsidiary.......................................................6
Tax Event........................................................6
Trust............................................................7
Trustee..........................................................7
Trust Indenture Act..............................................7
U.S. Government Obligations......................................7
Vice President...................................................7
SECTION 102. Compliance Certificates and Opinions..................7
SECTION 103. Form of Documents Delivered to Trustee................7
SECTION 104. Acts of Holders; Record Dates.........................8
SECTION 105. Notices, Etc. to Trustee and the Company..............8
SECTION 106. Notice to Holders; Waiver.............................9
SECTION 107. Conflict with Trust Indenture Act.....................9
SECTION 108. Effect of Headings and Table of Contents..............9
SECTION 109. Separability Clause...................................9
SECTION 110. Benefits of Indenture................................10
SECTION 111. Governing Law........................................10
SECTION 112. Legal Holidays.......................................10
ARTICLE TWO........................................................10
Security Forms.....................................................10
SECTION 201. Forms Generally......................................10
SECTION 202. Form of Face of Security.............................11
SECTION 203. Form of Reverse of Security..........................13
SECTION 204. Form of Trustee's Certificate of Authentication......15
ARTICLE THREE......................................................15
The Securities.....................................................15
SECTION 301. Title and Terms......................................15
SECTION 302. Denominations........................................17
SECTION 303. Execution, Authentication, Delivery and Dating.......17
SECTION 304. Temporary Securities.................................18
SECTION 305. Registration; Registration of Transfer and Exchange..18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....19
SECTION 307. Payment of Interest; Interest Rights Preserved.......20
SECTION 308. Persons Deemed Owners................................21
SECTION 309. Cancellation.........................................21
SECTION 310. Computation of Interest..............................21
SECTION 311. Right of Set-Off.....................................21
SECTION 312. CUSIP Numbers........................................21
SECTION 313. Global Securities....................................21
ARTICLE FOUR.......................................................23
Satisfaction and Discharge; Defeasance.............................23
SECTION 401. Satisfaction and Discharge of Indenture..............23
SECTION 402. Defeasance and Discharge............................24
SECTION 403. Covenant Defeasance..................................24
SECTION 404. Conditions to Defeasance or Covenant Defeasance......25
SECTION 405. Application of Trust Money...........................25
SECTION 406. Indemnity for U.S. Government Obligations............26
ARTICLE FIVE.......................................................26
Remedies...........................................................26
SECTION 501. Events of Default....................................26
<PAGE> 4
<TABLE>
<S> <C>
Event of Default..................................................................26
SECTION 502. Acceleration of Maturity; Rescission and Annulment.....................27
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee........27
SECTION 504. Trustee May File Proofs of Claim.......................................28
SECTION 505. Trustee May Enforce Claims Without Possession of Securities............28
SECTION 506. Application of Money Collected.........................................29
SECTION 507. Limitation on Suits....................................................29
SECTION 508. Unconditional Right of Holders to Receive Principal and Interest.......29
SECTION 509. Restoration of Rights and Remedies.....................................30
SECTION 510. Rights and Remedies Cumulative.........................................30
SECTION 511. Delay or Omission Not Waiver...........................................30
SECTION 512. Control by Holders.....................................................30
SECTION 513. Waiver of Past Defaults................................................30
SECTION 514. Undertaking for Costs..................................................31
SECTION 515. Waiver of Stay or Extension Laws.......................................31
SECTION 516. Preferred Security Holders Rights......................................31
ARTICLE SIX..........................................................................31
Trustee..............................................................................32
SECTION 601. Certain Duties and Responsibilities....................................32
SECTION 602. Notice of Defaults.....................................................32
SECTION 603. Certain Rights of Trustee..............................................32
SECTION 604. Not Responsible for Recitals or Issuance of Securities.................33
SECTION 605. May Hold Securities....................................................33
SECTION 606. Money Held in Trust....................................................33
SECTION 607. Compensation; Reimbursement; and Indemnity.............................33
SECTION 608. Disqualification; Conflicting Interests................................34
SECTION 609. Corporate Trustee Required; Eligibility................................34
SECTION 610. Resignation and Removal; Appointment of Successor......................34
SECTION 611. Acceptance of Appointment by Successor.................................35
SECTION 612. Merger, Conversion, Consolidation or Succession to Business............36
SECTION 613. Preferential Collection of Claims Against Company......................36
ARTICLE SEVEN........................................................................36
Holders' Lists and Reports by Trustee and Company....................................36
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders..............36
SECTION 702. Preservation of Information; Communications to Holders.................36
SECTION 703. Reports by Trustee.....................................................37
SECTION 704. Reports by Company.....................................................37
ARTICLE EIGHT........................................................................37
Consolidation, Merger, Conveyance, Transfer or Lease.................................37
SECTION 801. Successor Substituted..................................................37
ARTICLE NINE.........................................................................38
Supplemental Indentures..............................................................38
SECTION 901. Supplemental Indentures Without Consent of Holders.....................38
SECTION 902. Supplemental Indentures with Consent of Holders........................38
SECTION 903. Execution of Supplemental Indentures...................................39
SECTION 904. Effect of Supplemental Indentures......................................39
SECTION 905. Conformity with Trust Indenture Act....................................39
SECTION 906. Reference in Securities to Supplemental Indentures.....................39
ARTICLE TEN..........................................................................40
Covenants; Representations and Warranties............................................40
</TABLE>
<PAGE> 5
SECTION 1001. Payment of Principal and Interest............................40
SECTION 1002. Maintenance of Office or Agency..............................40
SECTION 1003. Money for Security Payments to Be Held in Trust..............40
SECTION 1004. Statement by Officers as to Default..........................41
SECTION 1005. Existence....................................................41
SECTION 1006. Maintenance of Properties....................................41
SECTION 1007. Payment of Taxes and Other Claims............................42
SECTION 1008. Additional Covenants.........................................42
SECTION 1009. Waiver of Certain Covenants..................................42
ARTICLE ELEVEN..............................................................42
Subordination of Securities.................................................43
SECTION 1101. Securities Subordinate to Senior Indebtedness................43
SECTION 1102. Default on Senior Indebtedness...............................43
SECTION 1103. Liquidation; Dissolution; Bankruptcy.........................43
SECTION 1104. Subrogation..................................................45
SECTION 1105. Trustee to Effectuate Subordination..........................45
SECTION 1106. Notice by the Company........................................46
SECTION 1107. Rights of the Trustee; Holders of Senior Indebtedness........46
SECTION 1108. Subordination May Not be Impaired............................47
ARTICLE TWELVE..............................................................47
Redemption of Securities....................................................47
SECTION 1201. Optional Redemption; Conditions to Optional Redemption.......47
SECTION 1202. Applicability of Article.....................................47
SECTION 1203. Election to Redeem; Notice to Trustee........................48
SECTION 1204. Selection by Trustee of Securities to Be Redeemed............48
SECTION 1205. Notice of Redemption.........................................48
SECTION 1206. Deposit of Redemption Price..................................49
SECTION 1207. Securities Payable on Redemption Date........................49
SECTION 1208. Securities Redeemed in Part..................................49
<PAGE> 6
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ------------------- -------
<S> <C>
Section 310(a)(1)....................................... 609
(a)(2)............................................. 609
(a)(3)............................................. Not Applicable
(a)(4)............................................. Not Applicable
(b) ............................................... 608, 610
Section 311(a).......................................... 613
(b) .............................................. 613
Section 312(a).......................................... 701
(b) .............................................. 702(b)
(c) ............................................... 702(c)
Section 313(a).......................................... 703(a)
(a)(4)............................................. 101, 1004
(b) ............................................... 703(a)
(c) ............................................... 703(a)
(d) ............................................... 703(b)
Section 314(a).......................................... 704
(b) ............................................... Not Applicable
(c)(1)............................................. 102
(c)(2)............................................. 102
(c)(3)............................................. Not Applicable
(d) ............................................... Not Applicable
(e) ............................................... 102
Section 315(a).......................................... 601
(b) ............................................... 602
(c) ............................................... 601
(d) ............................................... 601
(e) ............................................... 514
Section 316(a).......................................... 101
(a)(1)(A).......................................... 502
(a)(1)(B).......................................... 513
(a)(2)............................................. Not Applicable
(b) ............................................... 508
(c) ............................................... 104(c)
Section 317(a)(1)...................................... 503
(a)(2)............................................. 504
(b) ............................................... 1003
Section 318(a)......................................... 107
</TABLE>
-viii-
<PAGE> 7
This INDENTURE is dated as of September __, 1996, between American
Financial Group, Inc., a corporation duly organized and existing under the laws
of the State of Ohio (herein called the "Company"), having its principal office
at One East Fourth Street, Cincinnati, Ohio 45202, and The Bank of New York, a
New York banking corporation, as Trustee (herein called the "Trustee"). Unless
otherwise defined herein, all capitalized items used herein shall have the
meanings ascribed to them in the Amended and Restated Declaration of Trust
between the Company, as Depositor, and The Bank of New York, The Bank of New
York (Delaware), James E. Evans and Thomas E. Mischell, as trustees, dated as of
September __, 1996 (the "Declaration"), as in effect on the date hereof, and
which is incorporated herein by reference.
RECITALS OF THE COMPANY
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its ___% Subordinated Debentures due 2026 (the "Securities").
WHEREAS, American Financial Capital Trust I (the "Trust") has offered
to the public $[ ] aggregate liquidation amount of its ___% Trust Originated
Preferred Securities (the "Preferred Securities") representing undivided
beneficial interests in the assets of the Trust and proposes to invest the
proceeds from such offering in $[ ] aggregate principal amount of the
Securities.
WHEREAS, to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture.
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holder thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE> 8
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(5) a reference to any Person shall include its successors and assigns;
(6) a reference to any agreement or instrument shall mean such
agreement or instrument as supplemented, modified, amended or amended and
restated and in effect from time to time;
(7) a reference to any statute, law, rule or regulation, shall include
any amendments thereto applicable to the relevant Person, and any successor
statute, law, rule or regulation; and
(8) a reference to any particular rating category shall be deemed to
include any corresponding successor category, or any corresponding rating
category issued by a successor or subsequent rating agency.
"Act," when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board as the context requires.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed or a day on which the Corporate Trust
Office of the Trustee, or the principal office of the Property Trustee, under
the Trust Agreement, is closed for business.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
2
<PAGE> 9
"Common Securities" means the common securities issued by the Trust.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, a President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in
the City of New York, at which at any particular time its corporate trust
business shall be administered and which at the date of this Indenture is The
Bank of New York.
"Covenant Defeasance" has the meaning specified in Section 403.
"Declaration" has the meaning specified in the Recitals.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 402.
"Depositary" means, with respect to Securities issuable in whole or in
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated to act as Depositary for such
Securities.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor legislation.
"Expense Agreement" means the Expense Agreement contemplated by Section
607.
"Extension Period" has the meaning specified in Section 301.
"Global Security" means a Security that evidences all or part of the
Securities and is authenticated and delivered to, and registered in the name of,
the Depositary for such Securities or a nominee thereof.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
3
<PAGE> 10
"Institutional Trustee" has the meaning set forth in the Declaration.
"Interest Payment Date," when used with respect to any installment of
interest on a Security, means the date specified in such Security as the fixed
date on which an installment of interest with respect to the Securities is due
and payable.
"Investment Company Act Event" means the receipt by the Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than insubstantial risk that the
Trust is or will be considered an "investment company" which is required to be
registered under the Investment Company Act of 1940.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company (and who may be an employee of the Company), and who
shall be reasonably acceptable to the Trustee. An opinion of counsel may rely on
certificates as to matters of fact.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities authenticated and delivered under this
Indenture, except: (i) Securities cancelled by the Trustee or delivered to the
Trustee for cancellation; (ii) Securities for whose payment or redemption money
in the necessary amount has been deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holder of
such Securities; provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and (iii) Securities which
have been paid pursuant
4
<PAGE> 11
to Section 306, or in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company.
"Parent Guarantees" has the meaning specified in the Recitals to this
instrument.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the Recitals to
this instrument.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the Business Day next preceding such Interest Payment Date or, if the
Securities are no longer in the form prescribed by Section 313, the date
selected by the Company which shall be more than one Business Day but less than
60 Business Days prior to the relevant Interest Payment Date.
"Responsible Officer," when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Securities" has the meaning specified in the Recitals to this
instrument.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of the
Company, for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by the Company, (ii) all
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capital lease obligations of the Company, (iii) all obligations of the Company
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of the Company and all obligations of the Company under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of the Company 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
the Company is responsible or liable as obligor, guarantor or otherwise 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 the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Securities and (2) any indebtedness in respect of debt securities, issued to any
trust, or a trustee of such trust, partnership or other entity affiliated with
the Company that is a financing entity of the Company (a "financing entity") in
connection with the issuance by such financing entity of securities that are
similar to the Preferred Securities. Such Senior Indebtedness shall continue
to be Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of such Senior Indebtedness.
"Special Event" means either an Investment Company Event or a Tax
Event.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the date on which the principal, together with any accrued and unpaid interest,
of such Security or such installment of interest is due and payable (whether the
initial such date or, if pursuant to Section 301 the Company elects to extend
the Stated Maturity, such later date as is chosen by the Company pursuant to
Section 301).
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or (b) as a result of any amendment to, or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority which
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is taken,
in each case on or after the date of issuance of the Preferred Securities),
there is more than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date thereof, subject to United States Federal income tax
with respect to interest received on the Securities, (ii) interest payable by
the Company on the Securities is not, or within 90 days of the date thereof will
not be, deductible, in whole or in part, for United States Federal income tax
purposes or (iii) the Trust is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
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"Trust" means the statutory business trust the American Financial
Capital Trust I declared and established pursuant to the Delaware Business Trust
Act by the Declaration.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"U.S. Government Obligations" has the meaning specified in Section 404.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee at the address specified in Section 105 and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section .
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be.
With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. NOTICES, ETC. TO TRUSTEE AND THE COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
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<PAGE> 15
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, Attention: Institutional Trust Group;
or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the provision of the Trust Indenture Act shall control.
If any provision of this Indenture modifies or excludes any provision of the
Trust Indenture Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Indenture as so modified or to be excluded, as
the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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<PAGE> 16
SECTION 110. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness, the holders of Preferred
Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE PROVISIONS OF THE
TRUST INDENTURE ACT THAT ARE REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO
THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
SECTION 112. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal of the Securities need not be made on such date, but may be made on
the next succeeding Business Day (except that, if such Business Day is in the
next succeeding calendar year, such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, shall be the immediately preceding Business
Day) with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these or other methods, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
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SECTION 202. FORM OF FACE OF SECURITY.
AMERICAN FINANCIAL GROUP, INC.
__% Subordinated Debenture, Due __________ __, 2026
$_________
No.______
CUSIP No. _________
AMERICAN FINANCIAL GROUP, INC., a corporation duly organized and
existing under the laws of the State of Ohio (herein called the "Company", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to
______________________________, or registered assigns, the principal sum of
________ DOLLARS ($_____) on ____ __, 2026, provided that the Company may extend
the maturity date subject to certain conditions specified in Section 301 of the
Indenture, which extended maturity date shall in no case be later than ____ __,
2045, and to pay interest on said principal sum from __________ __, 1996 or from
the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly (subject
to deferral as set forth herein) in arrears on January 15, April 15, July 15 and
October 15 of each year, commencing January 15, 1997, at the rate of __% per
annum until the principal hereof shall have become due and payable, and on any
overdue principal and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum. The amount of interest payable for any
period will be computed on the basis of twelve 30-day months and a 360-day year.
The amount of interest payable for any period shorter than a full quarterly
period for which interest is computed, will be computed on the basis of actual
number of days elapsed in such 90-day quarter. In the event that any date on
which interest is payable on this Security is not a Business Day, then a payment
of the interest payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date the
payment was originally payable. A "Business Day" shall mean any day other than a
day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the Property
Trustee under the Trust Agreement, is closed for business. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name the Securities (or one or more Predecessor Securities, as defined
in the Indenture) is registered at the close of business on the Regular Record
Date for such interest installment, which shall be the close of business on the
Business Day next preceding such Interest Payment Date. Any such interest
installment not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name the Securities (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
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<PAGE> 18
The Company shall have the right at any time during the term of this
Security, from time to time, to defer payment of interest on such Security for
up to 20 consecutive quarters (an "Extension Period"), provided that no
Extension Period may extend past the Maturity of this Security. There may be
multiple Extension Periods of varying lengths during the term of this Security.
At the end of each Extension Period, if any, the Company shall pay all interest
then accrued and unpaid, together with interest thereon, compounded quarterly at
the rate specified on this Security to the extent permitted by applicable law;
provided that during any such Extension Period, (a) the Company shall not
declare or pay any dividends on, or make a distribution with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) repurchases or acquisitions of shares of
the Common Stock of the Company 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
capital stock for the Company's Common Stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such Company capital stock or the security being
converted or exchanged, or (iv) the payment of any stock dividend by the Company
payable in the Company's Common Stock) or make any guarantee payments with
respect to the foregoing and (b) the Company shall not directly or indirectly,
and shall not allow any of its 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 that rank pari passu with or junior to this
Security. Prior to the termination of any such Extension Period, the Company may
further defer payments of interest by extending the payment period, provided
that such Extension Period together with all such previous and further
extensions thereof shall not exceed 20 consecutive quarters or extend beyond the
Maturity of this Security. Upon the termination of any such Extension Period and
upon the payment of all accrued and unpaid interest then due, the Company may
select a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Trustee notice of its selection of an Extension
Period at least one Business Day prior to the earlier of (i) the Interest
Payment Date or (ii) the date the Trust is required to give notice to the New
York Stock Exchange (or other applicable self-regulatory organization) or to
holders of the Preferred Securities of the record date or the date such
distributions are payable, but in any event not less than one Business Day prior
to such record date.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Paying Agent maintained for that purpose in the
United States, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company, payment of interest may be
made (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the Security Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior
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<PAGE> 19
Indebtedness, whether now outstanding or hereafter incurred, and waives reliance
by each such holder upon said provisions.
Reference is hereby made to the further provisions of the Indenture
summarized on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, American Financial Group, Inc. has caused this
instrument to be duly executed under its corporate seal.
Dated:____________, 1996
AMERICAN FINANCIAL GROUP, INC.
By:_______________________________
Name:
Title:
Attest:
_____________________________________
SECTION 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of Securities of
American Financial Group, Inc. (the "Company"), designated as its __%
Subordinated Debentures, due ____ __, 20__ (herein called the "Securities"),
limited in aggregate principal amount to $___________ issued under an Indenture,
dated as of __________, 1996 (herein called the "Indenture"), between the
Company and The Bank of New York, a New York banking corporation, as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Trustee, the Company and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
All terms used in this Security which are defined in the Indenture or
in the Declaration attached as Annex A thereto shall have the meanings assigned
to them in the Indenture or the Declaration, as the case may be.
At any time on or after ____ __, ____, the Company shall have the
right, subject to the terms and conditions of Article Twelve of the Indenture,
to redeem this Security at the option of the Company, without premium or
penalty, in whole or in part, at a Redemption Price equal to 100% of the
principal amount to be redeemed plus accrued but unpaid interest to the
Redemption Date. If a Special Event as defined in Article Twelve of the
Indenture shall occur and be continuing, the Company shall have the right,
subject to the terms and conditions of Article Twelve of the Indenture,
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<PAGE> 20
to redeem this Security at the option of the Company, without premium or
penalty, in whole but not in part, at a Redemption Price equal to 100% of the
principal amount thereof plus accrued but unpaid interest to the Redemption
Date. Any redemption pursuant to this paragraph will be made upon not less than
30 nor more than 60 days notice, at the Redemption Price. If the Securities are
only partially redeemed by the Company, the Securities will be redeemed pro
rata. If a partial redemption of the Preferred Securities resulting from a
partial redemption of the Securities would result in the delisting of the
Preferred Securities from the securities exchange or quoting service on which
the Preferred Securities are then listed or quoted, the Company may only redeem
the Securities in whole. In the event of redemption of this Security in part
only, a new Security or Securities for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof. If an
Event of Default with respect to the Securities shall occur and be continuing,
the principal of the Securities may be declared due and payable in the manner,
with the effect and subject to the conditions provided in the Indenture. The
Indenture contains provisions for satisfaction and discharge at any time of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of Holders of not less than a majority in principal
amount of the Outstanding Securities affected by such modification, to modify
the Indenture in a manner affecting the rights of the Holders of the Securities;
provided that no such modification may, without the consent of the Holder of
each Outstanding Security affected thereby, (i) except to the extent permitted
and subject to the conditions set forth in the Indenture with respect to the
extension of the Maturity of the Security, change the maturity of, the principal
of, or any installment of interest on, the Security or reduce the principal
amount thereof, or the rate of payment of interest thereon, or change the place
of payment where, or the coin or currency in which, this Security or interest
thereon is payable, or impair the right to institute suit for the enforcement of
such payment on or after the Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or modify the provisions of the Indenture with
respect to the subordination of the Securities in a manner adverse to the
Holders, (ii) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for such supplemental
Indenture or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of the Indenture or certain defaults
hereunder and their consequences) provided for in the Indenture, or (iii) modify
any of the provisions of Section 513, Section 903 or Section 1009 of the
Indenture, except to increase any such percentage or to provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby; provided,
that, so long as any of the Preferred Securities remains outstanding, no such
amendment shall be made that adversely affects the holders of the Preferred
Securities, and no termination of the Indenture shall occur, and no waiver of an
Event of Default or compliance with any covenant under this Indenture shall be
effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation preference of the outstanding Preferred Securities
unless and until the principal of and any premium on the Securities and all
accrued and unpaid interest thereon have been paid in full.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in New York, New York, duly endorsed by, or
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accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Securities are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK
as Trustee
By: ___________________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $____________ except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306,
906 or 1208.
The Securities shall be known and designated as the "__% Subordinated
Debentures, Due ____ __, ____" of the Company. Their initial Stated Maturity
shall be __________ __, 2026. Not more than one year or less than one month
prior to the initial Stated Maturity, the Company may, in its sole discretion,
extend the Stated Maturity no more than one time for one or more periods, but in
no event
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later than the earlier of (i) ___________, 2045 or (ii) the Interest Deduction
Date. The "Interest Deduction Date" shall mean the date which is six months
earlier than the ending of the maximum term (beginning on the date of issue of
the Securities and including any extensions thereof), as determined under any
federal statute applicable by its terms to the Securities which is enacted at
any time after the issuance of the Securities (including, but not limited to, at
any time after an extension of the Stated Maturity), of a debt instrument for
which interest is deductible for federal income tax purposes. In no event shall
the extended Stated Maturity be later than the Interest Deduction Date even if
the Stated Maturity has previously been extended to a date beyond the Interest
Deduction Date up to an additional 19 years from the initial Maturity Date,
provided that all of the following conditions are satisfied at the time the
Company elects to extend the stated maturity: (i) the Company is not in
bankruptcy, insolvent or in liquidation, (ii) the Company is not in default in
the payment of any interest or principal, on any Security, (iii) the Company has
made timely payments on the Securities for the immediately preceding six
quarters without deferrals or extensions of the interest payment period, (iv)
the Trust is not in arrears on payments of distributions on the Preferred
Securities, (v) the Securities or Preferred Securities are rated not less than
BBB or better by any one of Standard & Poors Ratings Services or Baa2 or better
by Moody's Investors Service, Inc. or the equivalent by any other nationally
recognized statistical rating organization, and (vi) the extended Stated
Maturity is no later than the 49th anniversary of the issuance of the Preferred
Securities.
The Securities shall bear interest at the rate of __% per annum, from
_______, 1996 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, as the case may be, payable quarterly
(subject to deferral as set forth herein), in arrears, on January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1997 until the
principal thereof is paid or made available for payment. Interest will compound
quarterly and will accrue at the rate of __% per annum on any interest
installment in arrears for more than one quarter or during an extension of an
interest payment period as set forth below in this Section 301. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then a payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (except that, if such Business Day
is in the next succeeding calendar year, such Interest Payment Date shall be the
immediately preceding Business Day) (and without any interest or other payment
in respect of any such delay).
The Company shall have the right, at any time during the term of the
Securities, from time to time, to defer payment of interest on such Security for
up to 20 consecutive quarters (an "Extension Period") provided that no Extension
Period may extend past the Maturity of the Security. There may be multiple
Extension Periods of varying lengths during the term of the Securities. At the
end of each Extension Period, if any, the Company shall pay all interest then
accrued and unpaid, together with interest thereon, compounded quarterly at the
rate specified on this Security to the extent permitted by applicable law;
provided, that during any such Extension Period, (a) the Company shall not
declare or pay any dividends on or make a distribution with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) repurchases or acquisitions of shares of
the Common Stock of the Company 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
capital stock for the Company's Common Stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such Company capital stock or the security being
converted or exchanged, or (iv) the payment of any stock dividend by the Company
payable in the Company's Common Stock) and (b) the Company shall not, directly
or indirectly, and shall not allow any of its Subsidiaries to, make any
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payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company that rank pari passu with or
junior to this Security. Prior to the termination of any such Extension Period,
the Company may further defer payments of interest by extending the interest
payment period; provided that such Extension Period together with all such
previous and further extensions thereof shall not exceed 20 consecutive quarters
or extend beyond the Maturity of this Security. Upon the termination of any such
Extension Period and upon the payment of all accrued and unpaid interest then
due, the Company may select a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company shall give the Trustee notice of its
selection of an Extension Period at least one Business Day prior to the earlier
of (i) the Interest Payment Date or (ii) the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or the
date such distributions are payable, but in any event not less than one Business
Day prior to such record date.
The Trustee shall promptly give notice of the Company's selection of
such Extension Period to the holders of the Preferred Securities.
The principal of and interest on the Securities shall be payable at the
office or agency of the Paying Agent in the United States maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Security Register.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Eleven.
The Securities shall be redeemable as provided in Article Twelve.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form, without
coupons, and only in denominations of $25 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, a President or one of its
Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
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At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. the Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the
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<PAGE> 25
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Sections 304, 906 or 1208 not involving any transfer.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption under Section 1203 and ending at the close of business on the day of
such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section , the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not
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the destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. the Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and, if so listed, upon such notice as
may be required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee. Subject to the foregoing provisions
of this Section , each Security delivered under this Indenture upon registration
of transfer of or in exchange for or
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in lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee shall treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section ,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
SECTION 310. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months. The amount of interest payable for any period
shorter than a full quarterly period for which interest is computed will be
computed on the basis of actual number of days elapsed in such 90-day quarter.
SECTION 311. RIGHT OF SET-OFF.
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
thereunder to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Parent Guarantees.
SECTION 312. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
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SECTION 313. GLOBAL SECURITIES.
If the Securities are distributed to holders of Preferred Securities in
liquidation of such holder's interests in the Trust, such Securities will
initially be issued as a Global Security. If the Company shall establish that
the Securities are to be issued in the form of one or more Global Securities,
then the Company shall execute and the Trustee shall, in accordance with Section
303 and the Company Order, authenticate and deliver one or more Global
Securities that (i) shall represent and shall be denominated in an amount equal
to the aggregate principal amount of all of the Securities to be issued in the
form of Global Securities and not yet cancelled, (ii) shall be registered in the
name of the Depositary for such Global Security or Securities or the nominee of
such Depositary, and (iii) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions. Global Securities shall bear a
legend substantially to the following effect:
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Global Security is exchangeable for Securities
registered in the name of a Person other than the Depositary or its nominee only
in the limited circumstances described in the Indenture, and no transfer of this
Security (other than a transfer of this Security as a whole by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary) may be registered except in such limited
circumstances. Every Security delivered upon registration of transfer of, or in
exchange for, or in lieu of, this Global Security shall be a Global Security
subject to the foregoing, except in the limited circumstances described above.
Unless this certificate is presented by an authorized representative of The
Depositary Trust Company, a New York corporation ("DTC"), to the Company or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is to be made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein. Notwithstanding the provisions of
Section 305, unless and until it is exchanged in whole or in part for Securities
in definitive registered form, a Global Security representing all or a part of
the Securities may not be transferred in the manner provided in Section 305
except as a whole by the Depositary to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
If at any time the Depositary for any Securities represented by one or
more Global Securities notifies the Company that it is unwilling or unable to
continue as Depositary for such Securities or if at any time the Depositary for
such Securities shall no longer be eligible under this Section 313, the Company
shall appoint a successor Depositary with respect to such Securities. If a
successor Depositary for such Securities is not appointed by the Company within
90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company's election that such Securities be represented by one
or more Global Securities shall no longer be effective and the Company shall
execute, and the Trustee, upon receipt of a Company Order for the authentication
and delivery of definitive Securities, will authenticate and deliver Securities
in definitive registered form, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Securities in exchange for such Global Security or
Securities.
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The Company may at any time and in its sole discretion determine that
the Securities issued in the form of one or more Global Securities shall no
longer be represented by a Global Security or Securities. In such event the
Company shall execute, and the Trustee, upon receipt of a Company Order or an
Officers' Certificate for the authentication and delivery of definitive
Securities, shall authenticate and deliver, Securities in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
If specified by the Company with respect to Securities represented by a
Global Security, the Depositary for such Global Security may surrender such
Global Security in exchange in whole or in part for Securities in definitive
registered form on such terms as are acceptable to the Company and such
Depositary. Thereupon, the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge, (i) to the Person specified by
such Depositary, a new Security or Securities, of any authorized denominations
as requested by such Person, in an aggregate principal amount equal to and in
exchange for such Person's beneficial interest in the Global Security; and (ii)
to such Depositary a new Global Security in a denomination equal to the
difference, if any, between the principal amount of the surrendered Global
Security and the aggregate principal amount of Securities authenticated and
delivered pursuant to clause (i) above. Upon the exchange of a Global Security
for Securities in definitive registered form in authorized denominations, such
Global Security shall be cancelled by the Trustee or an agent of the Company or
the Trustee. Securities in definitive registered form issued in exchange for a
Global Security pursuant to this Section 313 shall be registered in such names
and in such authorized denominations as the Depositary for such Global Security,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee or an agent of the Company or the Trustee. the
Trustee or such agent shall deliver at its office such Securities to or as
directed by the Persons in whose names such Securities are so registered.
ARTICLE FOUR
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on written demand of and at the
expense of the Company, shall execute instruments supplied by the Company
acknowledging satisfaction and discharge of this Indenture, when (1) either (A)
All Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or (B) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, or (ii) will become
due and payable at their Stated Maturity within one year, or (iii) if redeemable
at the option of the Company, are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company and
the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal and
interest to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated
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Maturity or Redemption Date, as the case may be; (2) the Company has paid or
caused to be paid all other sums payable hereunder by the Company; and (3) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. DEFEASANCE AND DISCHARGE.
The following provisions shall apply to the Securities unless
specifically otherwise provided in a Board Resolution, Officers' Certificate or
indenture supplemental hereto provided pursuant to Section 301. In addition to
discharge of this Indenture pursuant to Sections 401 and 403, in the case of any
Securities with respect to which the exact amount described in subparagraph (a)
of Section 404 can be determined at the time of making the deposit referred to
in such subparagraph (a), the Company shall be deemed to have paid and
discharged the entire indebtedness on all the Securities as provided in this
Section on and after the date the conditions set forth in Section 404 are
satisfied, and the provisions of this Indenture with respect to the Securities
shall no longer be in effect (except as to (i) rights of registration of
transfer and exchange of Securities, (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to
receive, solely from the trust fund described in subparagraph (a) of Section
404, payments of principal thereof and interest, if any, thereon upon the
original stated due dates therefor (but not upon acceleration), (iv) the rights,
obligations, duties and immunities of the Trustee hereunder, (v) this Section
402 and (vi) the rights of the Holders of Securities as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or any
of them) (hereinafter called "Defeasance"), and the Trustee at the cost and
expense of the Company, shall execute proper instruments acknowledging the same.
SECTION 403. COVENANT DEFEASANCE.
In the case of any Securities with respect to which the exact amount
described in subparagraph (a) of Section 404 can be determined at the time of
making the deposit referred to in such subparagraph (a), (i) the Company shall
be released from its obligations under any covenants specified in or pursuant to
this Indenture (except as to (i) rights of registration of transfer and exchange
of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities, (iii) rights of Holders of Securities to receive, from the
Company pursuant to Section 1001, payments of principal thereof and interest, if
any, thereon upon the original stated due dates therefor (but not upon
acceleration), (iv) the rights, obligations, duties and immunities of the
Trustee hereunder and (v) the rights of the Holders of Securities as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them), and (ii) the occurrence of any event specified
in Section 501(3) (with respect to any of the covenants specified in or pursuant
to this Indenture) shall be deemed not to be or result in an Event of Default,
in each case with respect to the Outstanding Securities as provided in this
Section on and after the date the conditions set forth in Section 404 are
satisfied (hereinafter called "Covenant Defeasance"), and the Trustee, at the
cost and expense of the Company, shall execute proper instruments acknowledging
the same. For this purpose, such Covenant Defeasance means that the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant (to the extent so
specified in the case of Section 501(4)), whether directly or indirectly by
reason of any reference elsewhere herein to any such covenant or by
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reason of any reference in any such covenant to any other provision herein or in
any other document, but the remainder of this Indenture and the Securities shall
be unaffected thereby.
SECTION 404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
402 or 403 to the Outstanding Securities:
(a) with reference to Section 402 or 403, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of Securities (i) cash in an amount, (ii) direct
obligations of the United States of America, backed by its full faith and credit
("U.S. Government Obligations"), maturing as to principal and interest, if any,
at such times and in such amounts as will insure the availability of cash, (iii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, or (iv) a combination thereof, in each case sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge the principal of and interest, if any, on all Securities on each
date that such principal or interest, if any, is due and payable;
(b) in the case of Defeasance under Section 402, the Company has
delivered to the Trustee an Opinion of Counsel based on the fact that (x) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (y), since the date hereof, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and such opinion shall confirm that, the Holders of the Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit, Defeasance and discharge and will be subject to
federal income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit, Defeasance and discharge had
not occurred;
(c) in the case of Covenant Defeasance under Section 403, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that, and such
opinion shall confirm that, the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and Covenant Defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the case
if such deposit and Covenant Defeasance had not occurred;
(d) such Defeasance or Covenant Defeasance will not result in a breach
or violation of, or constitute a default under, any agreement or instrument to
which the Company is a party or by which it is bound; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent contemplated by this provision have been complied with.
SECTION 405. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations deposited with the Trustee pursuant to
Section 401 shall be held in trust and
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such money and all money from such U.S. Government Obligations shall be applied
by it, in accordance with the provisions of the Securities and this Indenture,
to the payment, either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal and interest for whose payment such
money and U.S. Government Obligations has been deposited with the Trustee.
SECTION 406. INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 or the principal or interest received in
respect of such obligations other than any such tax, fee or other charge that by
law is for the account of the Holders of Outstanding Securities.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of DefaultEvent of Default" wherever used herein, means any one
of the following events that has occurred and is continuing (whatever the reason
for such Event of Default and whether it shall be occasioned by the provisions
of Article Eleven or be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(1) failure for thirty days to pay any interest on the Securities when
due (subject to the deferral of any due date in the case of an Extension
Period); or
(2) failure to pay any principal on the Securities when due, whether at
Stated Maturity, following notice of redemption, by declaration of acceleration
or otherwise; or
(3) failure to observe or perform in any material respect any other
covenant herein for 90 days after written notice to the Company from the Trustee
or the holders of at least 25% in principal amount of the outstanding
Securities; or
(4) default under any bond, debenture or any other evidence of
Indebtedness for money borrowed by the Company having an aggregate outstanding
principal amount in excess of $15 million, at maturity or which default shall
have resulted in such Indebtedness being accelerated, without such Indebtedness
being discharged or such acceleration having been rescinded or annulled within
30 days after receipt of notice thereof by the Company from the Trustee; or
(5) the voluntary or involuntary dissolution or winding up of the
business of the Trust or other termination of the existence of the Trust, other
than in connection with (i) the distribution of the Securities to holders of the
Preferred Securities in liquidation of their interests in the Trust, (ii) the
redemption of all outstanding Preferred Securities or (iii) certain mergers,
consolidations or amalgamations of the Trust, each as permitted by the
Declaration; or
(6) entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State
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bankruptcy, insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of substantially all of the property of
the Company, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 90 consecutive days; or
(7) (A) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or (B) the consent by the Company or to the
entry of a decree or order for relief in respect of itself in an involuntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Company, or (C) the filing by the
Company of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or (D) the consent by the Company to
the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of all or substantially all of the property
of the Company, or (E) the making by the Company of an assignment for the
benefit of creditors.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have the right to declare the principal of and the
interest on all the Securities and any other amounts payable hereunder to be due
and payable immediately, provided, however, that if upon an Event of Default,
the Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Securities fail to declare the payment of all amounts on the
Securities to be immediately due and payable, the holders of at least 50% in
aggregate liquidation preference of Preferred Securities then outstanding shall
have such right, by a notice in writing to the Company (and to the Trustee if
given by Holders or the holders of Preferred Securities) and upon any such
declaration such principal and all accrued interest shall become immediately due
and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if (1) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Securities, (B) the principal
of (and premium, if any, on) any Securities which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Securities, (C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and (D) all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; (2)
all Events of Default, other than the non-payment of the principal of Securities
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513. No such rescission shall affect any
subsequent default or impair any right consequent thereon.
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SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period of
30 days, or
(2) default is made in the payment of the principal of any Security at
the Maturity thereof, the Company will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal and interest, and, to the extent that
payment thereof shall be legally enforceable, interest on any overdue principal
and on any overdue interest, at the rate borne by the Securities, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company (or any other obligor upon the Securities),
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee shall
be authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607. No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Eleven, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
and
SECOND: To the payment of the amounts then due and unpaid for principal
of and interest on the Securities in respect of which or for the benefit of
which such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities for
principal and interest, respectively.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities; it being understood and intended
that no one or more Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 307) interest on
such Security on the Stated Maturity expressed in such Security (or, in the case
of redemption, on the Redemption Date) and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder.
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SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture; and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
Subject to Sections 902 and 1009 hereof, the Holders of not less than a
majority in principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of or interest on any Security
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee); or
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(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected; provided, however, that such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation preference of Preferred Securities shall have consented
to such waiver or modification to such waiver; provided further, that if the
consent of the Holder of each of the Outstanding Securities is required, such
waiver shall not be effective until each Holder of the Preferred Securities
shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist, effective as
of the date specified in such waiver (and effective retroactively to the date of
default, if so specified) and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee or in
any suit for the enforcement of the right to receive the principal of and
interest on any Security.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 516. PREFERRED SECURITY HOLDERS RIGHTS.
If an Event of Default constituting the failure to pay interest or
principal on the Securities on the date such interest or principal is otherwise
payable has occurred and is continuing, then a holder of Preferred Securities
may directly institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on the Securities having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities or
such holder on or after the respective due date specified in the Securities.
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ARTICLE SIX
TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
except in the case of a default in the payment of the principal of or interest
on any Security, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
of Securities; provided, further, that in the case of any default of the
character specified in Section 501(3), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default. For purposes of this Section,
the Trustee shall not be deemed to have knowledge of a default unless the
Trustee has actual knowledge of such default or has received written notice of
such default in the manner contemplated by Section 105.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
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(d) the Trustee may consult with counsel of its choice and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
the Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. the Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar, or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent. Money held
by the Trustee in trust hereunder shall not be invested by the Trustee pending
distribution thereof to the holders of the Securities.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. the Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. COMPENSATION; REIMBURSEMENT; AND INDEMNITY.
The Company agrees
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(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim, liability or
expense, including taxes (other than taxes based on the income of the Trustee)
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust or the trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any, on) or interest
on particular Securities.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 and has its Corporate Trust
Office in New York, New York. If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
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(b) the Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) the Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (i) the Company by a Board
Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; provided that, on request of the Company or
the successor Trustee,
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such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than February 15 and August 15 in each
year, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders to the extent the Company has knowledge thereof as
of a date not more than 15 days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such, a list of similar form and
content as of a date not more than 15 days prior to the time such list is
furnished; excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) the Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section
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701 supplied to the Trustee by the Depository at the Trustee's request, and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. the Trustee may destroy any list furnished to it as provided
in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
(a) the Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 shall
be filed with the Trustee within 15 days after the same is so required to be
filed with the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and in
the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company;
or
(3) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided that such action pursuant to this clause (3) shall not adversely affect
the interests of the Holders of the Securities or, so long as any of the
Preferred Securities shall remain outstanding, the holders of the Preferred
Securities; or
(4) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) except to the extent permitted and subject to the conditions set
forth in Section 301 with respect to the extension of the Stated Maturity of the
Securities, change the Stated Maturity of, the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the rate
of interest thereon, or change the place of payment where, or the coin or
currency in which, any Security or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
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(3) modify any of the provisions of this Section, Section 513 or
Section 1010, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby; provided,
that, so long as any of the Preferred Securities remains outstanding, no such
amendment shall be made that adversely affects the holders of the Preferred
Securities, and no termination of this Indenture shall occur, and no waiver of
any Event of Default or compliance with any covenant under this Indenture shall
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation preference of the outstanding Preferred Securities
unless and until the principal of and any premium on the Securities and all
accrued and unpaid interest thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. the Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
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ARTICLE TEN
COVENANTS; REPRESENTATIONS AND WARRANTIES
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Company will duly and punctually pay the principal of and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange, where Securities
may be surrendered for conversion and where notices and demands to or upon the
Company in respect of the Securities and this Indenture 63 may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in the United States for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or at the option of the Company on or before each due date of the principal
of or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act. In such case the Company shall not invest the
amount so segregated and held in trust pending the distribution thereof.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act; provided, however, that any such deposit on a due date shall
be initiated prior to 1:00 p.m. (New York time) in same-day funds.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the
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Company (or any other obligor upon the Securities) in the making of any payment
in respect of the Securities, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders and, while
any Preferred Securities are outstanding, the holders of the Preferred
Securities.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
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SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary that
comprise more than 10% of the assets of the Company and its Subsidiaries taken
as a whole; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 1008. ADDITIONAL COVENANTS.
The Company covenants (i) to maintain 100%, direct or indirect,
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company hereunder may succeed to the Company's
ownership of such Common Securities, (ii) not to voluntarily dissolve, wind-up
or terminate the Trust, except in connection with a distribution of the
Securities or certain mergers, consolidations or amalgamations, (iii) to timely
perform its duties as sponsor of the Trust, (iv) to use its reasonable efforts,
to cause the Trust (A) to remain a business trust except in connection with the
distribution of the Securities to the holders of the Preferred Securities in
liquidation of the Trust, the redemption of all Preferred Securities and Common
Securities of the Trust or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (B) to continue not to be treated as
an association taxable as a corporation for United States federal income tax
purposes other than in connection with a distribution of Securities to the
holders of Preferred Securities in liquidation of the Trust and (v) to use its
reasonable efforts to cause each holder of Preferred Securities and Common
Securities to be treated as owning an undivided beneficial interest in the
Securities.
SECTION 1009. WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified as contemplated by Section 301 for
Securities, the Company may, with respect to the Securities, omit in any
particular instance to comply with any term, provision or condition set forth in
any covenant provided pursuant to Section 901(2) for the benefit of the Holders
if before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
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ARTICLE ELEVEN
SUBORDINATION OF SECURITIES
SECTION 1101. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article (subject to Article Four), the
payment of the principal of and interest on each and all of the Securities are
hereby expressly made subordinate and subject in right of payment to the prior
payment in full in cash of all Senior Indebtedness.
This Article Eleven shall constitute a continuing offer to all persons
who become holders of, or continue to hold, Senior Indebtedness, and such
provisions are made for the benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any one or more of them may enforce
such provisions. Holders of Senior Indebtedness need not prove reliance on the
subordination provisions hereof.
SECTION 1102. DEFAULT ON SENIOR INDEBTEDNESS.
In the event and during the continuation of any default in the payment
of principal, premium, interest or any other payment due on any Senior
Indebtedness (and any applicable grace period with respect to such default has
ended and such default has not been cured or waived) or in the event that the
maturity of any Senior Indebtedness has been accelerated because of a default,
then, in either case, no payment shall be made by the Company with respect to
the principal (including redemption payments) of, or interest on, the
Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Holder when such payment is prohibited by the
preceding paragraph of this Section 1102, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee within 90 days of such payment
of the amounts then due and owing on the Senior Indebtedness and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness.
SECTION 1103. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due upon all Senior Indebtedness (including interest
after the commencement of any bankruptcy, insolvency, receivership or other
proceedings at the rate specified in the applicable Senior Indebtedness, whether
or not such interest is an allowable claim in any such proceeding) shall first
be paid in full, or payment thereof provided for in money in accordance with its
terms, before any payment is made on account of the principal or interest on the
Securities; and upon any such dissolution or winding-up or liquidation or
reorganization any payment by the Company, or
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distribution of substantially all of the assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the
Security or the Trustee would be entitled, except for the provisions of this
Article Eleven, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders of the Securities or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all Senior Indebtedness in full (including interest after the
commencement of any bankruptcy, insolvency, receivership or other proceedings at
the rate specified in the applicable Senior Indebtedness, whether or not such
interest is an allowable claim in any such proceeding) or to provide for such
payment in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the Holders of Securities or to
the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the Holders of the Securities before all Senior Indebtedness is paid
in full (including interest after the commencement of any bankruptcy,
insolvency, receivership or other proceedings at the rate specified in the
applicable Senior Indebtedness, whether or not such interest is an allowable
claim in any such proceeding), or provision is made for such payment in money in
accordance with its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the holders of Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in money in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
Any holder of Senior Indebtedness may file any proof of claim or
similar instrument on behalf of the Trustee and the Holders if such instrument
has not been filed by the date which is 30 days prior to the date specified for
filing thereof.
For purposes of this Article Eleven, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Eleven with
respect to the Securities to the payment of all Senior Indebtedness that may at
the time be outstanding, provided, however, that (i) the Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such reorganization
or readjustment, and (ii) the rights of the holders of the Senior Indebtedness
are not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article Eight hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 1103 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Eight hereof. Nothing in
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<PAGE> 51
Section 1102 or in this Section 1103 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607.
SECTION 1104. SUBROGATION.
Subject to the payment in full of all Senior Indebtedness, the rights
of the Holders of the Securities shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Indebtedness
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article Eleven, and no payment over
pursuant to the provisions of this Article Eleven, to or for the benefit of the
holders of Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness. It is understood that
the provisions of this Article Eleven are and are intended solely for the
purposes of defining the relative rights of the Holders of the Securities, on
the one hand, and the holders of the Senior Indebtedness on the other hand.
Nothing contained in this Article Eleven or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of (and premium, if any)
and interest on the Securities as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article Eleven of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Eleven, the Trustee, subject to the provisions of Section 601,
and the Holders of the Securities, shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Eleven.
SECTION 1105. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Eleven and
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes.
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SECTION 1106. NOTICE BY THE COMPANY.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Eleven. Notwithstanding the
provisions of this Article Eleven or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provisions of this Article Eleven,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office of the Trustee from the
Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Section 601, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section 1106 at least two
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (or premium, if any) or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purposes for which they were received, and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.
The Trustee, subject to the provisions of Section 601, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Eleven, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Eleven, and if such evidence is not furnished the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1107. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Eleven in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. the Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 601, the Trustee shall not be liable to any holder of
Senior Indebtedness if it shall pay over or deliver to holders of Securities,
the Company or any other Person money or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article Eleven or otherwise.
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<PAGE> 53
SECTION 1108. SUBORDINATION MAY NOT BE IMPAIRED.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
ARTICLE TWELVE
REDEMPTION OF SECURITIES
SECTION 1201. OPTIONAL REDEMPTION; CONDITIONS TO OPTIONAL REDEMPTION.
At any time on or after __________ __, 2001, the Company shall have the
right, subject to the last paragraph of this Section 1201, to redeem the
Securities, in whole or in part, from time to time, at a Redemption Price equal
to 100% of the principal amount of Securities to be redeemed plus any accrued
but unpaid interest to the Redemption Date.
If a Special Event shall occur and be continuing, the Company shall
have the right, subject to the last paragraph of this Section 1201 to redeem,
upon not less than 30 days nor more than 60 days notice, the Securities in
whole, but not in part, at a Redemption Price equal to 100% of the principal
amount of Securities then outstanding plus accrued but unpaid interest to the
Redemption Date.
For so long as the Trust is the Holder of all Securities Outstanding,
the proceeds of any redemption described in this Section 1201 shall be used by
the Trust to redeem Preferred Securities in accordance with their terms. The
Company shall not redeem the Securities in part unless all accrued and unpaid
interest has been paid in full on all Securities Outstanding for all quarterly
interest periods terminating on or prior to the Redemption Date.
SECTION 1202. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company, as permitted
by Section 1201, shall be made in accordance with such provision and this
Article.
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<PAGE> 54
SECTION 1203. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem Securities pursuant to Section
1201 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 30 days and no more than 60
days prior to the Redemption Date fixed by the Company, notify the Trustee of
such Redemption Date and of the principal amount of Securities to be redeemed
and provide a copy of the notice of redemption given to Holders of Securities to
be redeemed pursuant to Section 1204.
SECTION 1204. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected by lot, at the Trustee's discretion (or such other
method of selection as the Trustee may customarily employ) not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1205. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest thereon
will cease to accrue on and after said date, and
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<PAGE> 55
(4) the place or places where such Securities are to be surrendered for
payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1206. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date; provided, however, that any such deposit
on a Redemption Date shall be initiated prior to 1:00 p.m. (New York time) in
same-day funds.
SECTION 1207. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate borne by the Security.
SECTION 1208. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at a place of payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
-----------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
AMERICAN FINANCIAL GROUP, INC.
By:____________________________________
Name:
Title:
Attest:___________________________
THE BANK OF NEW YORK
By:____________________________________
Name:
Title:
Attest:___________________________
STATE OF __________________)
) ss:
COUNTY OF _________________)
On the __ day of ___________ 1996, before me personally came
__________, to me known, who, being by me duly sworn, did depose and say that
he/she is the __________ of American Financial Group, Inc., one of the
corporations described in and which executed the foregoing instrument; and that
he/she signed his/her name thereto by authority of the Board of Directors of
such corporation.
_______________________________________
STATE OF __________________)
) ss:
COUNTY OF _________________)
On the __ day of __________, 1996, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he/she is a ______________________ of The Bank of New York, a New York
banking association described in and which executed the foregoing instrument;
and that he/she signed his/her name thereto by authority of the Board of
Directors of such corporation.
_______________________________________
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<PAGE> 1
Exhibit 4.2
CERTIFICATE OF TRUST
OF
AMERICAN FINANCIAL CAPITAL TRUST I
This Certificate of Trust is being executed as of September 13, 1996
for the purpose of organizing a business trust pursuant to the Delaware
Business Trust Act, 12 DEL. C. Section 3801 ET SEQ. (the "Act").
The undersigned hereby certifies as follows:
1) NAME. The name of the business trust is "American Financial
Capital Trust I" (the "Trust").
2) DELAWARE TRUSTEE. The name and business address of the
Delaware resident trustee of the Trust meeting the requirements of Section 3807
of the Act are as follows:
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711.
3) EFFECTIVE. This Certificate of Trust, which may be executed in
counterparts, shall be effective immediately upon filing in the Office of the
Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the
Trust, have duly executed this Certificate of Trust as of the day and year
first above written.
THE BANK OF NEW YORK (Delaware),
as Delaware Trustee
By:
------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:
------------------------------
Name:
Title:
/s/ James E. Evans
---------------------------------
JAMES E. EVANS, as Trustee
/s/ Thomas E. Mischell
---------------------------------
THOMAS E. MISCHELL, as Trustee
<PAGE> 1
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of September __, 1996, is executed and delivered by
American Financial Group, Inc., an Ohio corporation (the "Guarantor"), and
_______________, as trustee (the "Preferred Guarantee Trustee"), for the benefit
of the Holders (as defined herein) of the Preferred Securities (as defined
herein) of American Financial Capital Trust I, a Delaware statutory business
trust (the "Issuer").
WHEREAS, pursuant to the Declaration (as defined herein), the
Issuer is issuing on the date hereof 4,000,000 preferred securities, having an
aggregate liquidation amount of $100,000,000, designated the ___% Trust
Originated Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Preferred Securities Guarantee, to pay to
the Holders of the Preferred Securities the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set forth
herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (as amended, modified or supplemented from time to time, the
"Common Securities Guarantee") in substantially identical terms to this
Preferred Securities Guarantee for the benefit of the holders of the Common
Securities (as defined herein), except that if an Event of Default (as defined
in the Declaration), has occurred and is continuing, the rights of holders of
the Common Securities to receive payments under the Common Securities Guarantee
are subordinated to the rights of Holders of Preferred Securities to receive
Guarantee Payments under this Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Preferred
Securities Guarantee for the benefit of the Holders.
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Interpretation and Definitions.
In this Preferred Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Preferred Securities
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
<PAGE> 2
(b) a term defined anywhere in this Preferred Securities
Guarantee has the same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from
time to time;
(d) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Preferred Securities Guarantee,
unless otherwise defined in this Preferred Securities
Guarantee or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Preferred
Guarantee Trustee at which the corporate trust business of the Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Preferred Securities Guarantee is
located at _____________________, Attention: Corporate Trust Services Division;
telecopy no. ________________.
"Covered Person" means any Holder or beneficial owner of
Preferred Securities.
"Debentures" means the series of subordinated deferrable
interest debentures to be issued by the Guarantor designated the ____% Junior
Subordinated Debentures due 2026 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Declaration" means the Declaration of Trust, dated as of
September __,1996, as amended, modified or supplemented from time to time, among
the trustees of the Issuer named therein, the Guarantor, as sponsor, and the
Holders from time to time of undivided beneficial interests in the assets of the
Issuer.
2
<PAGE> 3
"Guarantee Event of Default" means a default by the Guarantor
on any of its payment or other obligations under this Preferred Securities
Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Preferred Securities to the extent the Issuer shall have funds available
therefor, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price") to the extent
the Issuer has funds available therefor, with respect to any Preferred
Securities called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the Holders in exchange for
Preferred Securities as provided in the Declaration or the redemption of all the
Preferred Securities upon maturity or redemption of the Debentures as provided
in the Declaration), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid Distributions on the Preferred Securities to the date
of payment, to the extent the Issuer shall have funds available therefor, and
(b) the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution"). If an Event of Default (as defined in the Declaration) has
occurred and is continuing, the rights of holders of the Common Securities to
receive payments under the Common Securities Guarantee are subordinated to the
rights of Holders of Preferred Securities to receive Guarantee Payments under
this Preferred Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor; and provided
further, that in determining whether the Holders of the requisite liquidation
amount of Preferred Securities have voted on any matter provided for in this
Preferred Securities Guarantee, then for the purpose of such determination only
(and not for any other purpose hereunder), if the Preferred Securities remain in
the form of one or more Global Certificates (as defined in the Declaration), the
term "Holders" shall mean the holder of the Global Certificate acting at the
direction of the Preferred Security Beneficial Owners (as defined in the
Declaration).
"Indemnified Person" means the Preferred Guarantee Trustee,
any Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of September __,
1996, among the Guarantor (the "Debenture Issuer") and _________________, as
trustee, and any indenture supplemental thereto pursuant to which the Debentures
are to be issued to the Property Trustee (as defined in the Declaration) of the
Issuer.
3
<PAGE> 4
"Majority in Liquidation Amount of the Preferred Securities"
means, except as provided in the terms of the Preferred Securities or by the
Trust Indenture Act, Holder(s) of outstanding Preferred Securities, voting
separately as a class, who are the record holders of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Preferred Securities. In determining whether the Holders of the requisite amount
of Preferred Securities have voted, Preferred Securities which are owned by the
Guarantor or any Affiliate of the Guarantor or any other obligor on the
Preferred Securities shall be disregarded for the purpose of any such
determination.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers (as defined in the Declaration) of
such Person. Any Officers' Certificate delivered with respect to compliance with
a condition or covenant provided for in this Preferred Securities Guarantee
shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means _______________, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Guarantee Trustee. including any vice-president, any assistant
vice-president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer or other officer of the Corporate Trust Office of the
Preferred Guarantee
4
<PAGE> 5
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee
Trustee with a list, in such form as the Preferred Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders"), (i) within one Business Day after January 1 and
June 30 of each year and current as of such date, and (ii) at any other time,
within 30 days of receipt by the Guarantor of a written request from the
Preferred Guarantee Trustee for a List of Holders as of a date no more than 14
days before such List of Holders is given to the Preferred Guarantee Trustee;
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The
Preferred Guarantee Trustee shall preserve, in as current a form as is
reasonably practicable, all information contained in Lists of Holders given to
it, provided that it may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Section 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
5
<PAGE> 6
SECTION 2.3 Reports by Preferred Guarantee Trustee.
Within 60 days after May 15 of each year (commencing with the
year of the first anniversary of the issuance of the Preferred Securities), the
Preferred Guarantee Trustee shall provide to the Holders of the Preferred
Securities such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Preferred Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee
such documents, reports and information as required by Section 314 (if any) of
the Trust Indenture Act and the compliance certificate required by Section 314
of the Trust Indenture Act in the form, in the manner and at the times required
by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this Preferred Securities Guarantee that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6 Guarantee Event of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Guarantee Event of Default and its
consequences. Upon such waiver, any such Guarantee Event of Default shall cease
to exist, and any Guarantee Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Preferred Securities Guarantee,
but no such waiver shall extend to any subsequent or other default or Guarantee
Event of Default or impair any right consequent thereon.
SECTION 2.7 Guarantee Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days
after the occurrence of a Guarantee Event of Default, transmit by mail, first
class postage prepaid, to the Holders of the Preferred Securities, notices of
all Guarantee Events of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee, unless such defaults have been cured before the
giving of such notice; provided, that the Preferred Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of
the Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Preferred Securities.
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(b) The Preferred Guarantee Trustee shall not be deemed to
have knowledge of any Guarantee Event of Default unless the Preferred Guarantee
Trustee shall have received written notice thereof or a Responsible Officer of
the Preferred Guarantee Trustee charged with the administration of the
Declaration shall have obtained actual knowledge thereof.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described
in this Preferred Securities Guarantee for the purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
SECTION 2.9 Disclosure of Information.
The disclosure of information as to the names and addresses of
the Holders of the Preferred Securities in accordance with Section 312 of the
Trust Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or any law
hereafter enacted which does not specifically refer to Section 312 of the Trust
Indenture Act, nor shall the Preferred Guarantee Trustee be held accountable by
reason of mailing any material pursuant to a request made under Section 312(b)
of the Trust Indenture Act.
SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim.
Upon the occurrence of a Guarantee Event of Default, the
Preferred Guarantee Trustee is hereby authorized to (a) recover judgment, in its
own name and as trustee of an express trust, against the Guarantor for the whole
amount of any Guarantee Payments remaining unpaid and (b) file such proof of
claim and other papers or documents as may be necessary or advisable in order to
have its claims and those of the Holders of the Preferred Securities allowed in
any judicial proceedings relative to the Guarantor, its creditors or its
property.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of Preferred Guarantee Trustee.
(a) The Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee on behalf of the Issuer for the benefit of the
Holders of the Preferred Securities, and the Preferred Guarantee Trustee shall
not transfer this Preferred Securities Guarantee to any Person except a Holder
of Preferred Securities exercising his or her rights pursuant to Section 5.4(b)
or to a Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee of its appointment to act as Successor Preferred
Guarantee Trustee. The right, title and interest of the Preferred Guarantee
Trustee in and to this
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Preferred Securities Guarantee shall automatically vest in any Successor
Preferred Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Preferred Guarantee Trustee.
(b) If a Guarantee Event of Default actually known to a
Responsible Officer of the Preferred Guarantee Trustee has occurred and is
continuing, the Preferred Guarantee Trustee shall enforce this Preferred
Securities Guarantee for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of
any Guarantee Event of Default of all Guarantee Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Preferred Securities Guarantee, and no implied covenants shall be
read into this Preferred Securities Guarantee against the Preferred Guarantee
Trustee. In case a Guarantee Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee
shall exercise such of the rights and powers vested in it by this Preferred
Securities Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall
be construed to relieve the Preferred Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Guarantee Event of Default
and after the curing or waiving of all such Guarantee Events of Default
that may have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the
express provisions of this Preferred Securities
Guarantee, and the Preferred Guarantee Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set forth
in this Preferred Securities Guarantee. and no
implied covenants or obligations shall be read into
this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof
are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee shall be
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under a duty to examine the same to determine whether
or not they conform to the requirements of this
Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee unless it shall be
proved that the Preferred Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of
not less than a Majority in Liquidation Amount of the
Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any
of its rights or powers, if the Preferred Guarantee Trustee
shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it
under the terms of this Preferred Securities Guarantee or
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against such risk or liability is not reasonably
assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action
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hereunder, the Preferred Guarantee Trustee (unless other
evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and conclusively
rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or
any rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with respect
to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with such
advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its
employees. The Preferred Guarantee Trustee shall have the
right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any
court of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have
provided to the Preferred Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Preferred Guarantee
Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or
direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided, that
nothing contained in this Section 3.2(a)(vi) shall be taken to
relieve the Preferred Guarantee Trustee, upon the occurrence
of a Guarantee Event of Default, of its obligation to exercise
the rights and powers vested in it by this Preferred
Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper
or document, but the Preferred Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians
or attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
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(ix) Any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective
to perform any such action. No third party shall be required
to inquire as to the authority of the Preferred Guarantee
Trustee to so act or as to its compliance with any of the
terms and provisions of this Preferred Securities Guarantee,
both of which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
instructions from the Holders of a Majority in Liquidation
Amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in accordance
with such instructions.
(b) No provision of this Preferred Securities Guarantee shall
be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal or
in which the Preferred Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Preferred Securities Guarantee
shall be taken as the statements of the Guarantor, and the Preferred Guarantee
Trustee does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
ARTICLE 4
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall be at all times be a Preferred Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
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(ii) be a corporation organized and doing business
under the laws of the United States of America or any
State or Territory thereof or of the District of
Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus
of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal,
State, Territorial or District of Columbia authority.
If such corporation publishes reports of condition at
least annually, pursuant to law or to the
requirements of the supervising or examining
authority referred to above, then, for the purposes
of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease
to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustee.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee
may be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall
hold office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
by instrument in writing executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
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(d) If no Successor Preferred Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts owing for fees and reimbursement of expenses which have accrued to the
date of such termination, removal or resignation.
ARTICLE 5
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this
Preferred Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to (i) extend the
interest payment period on the Debentures and the Guarantor shall not be
obligated hereunder to make any Guarantee Payments during any Extended Interest
Payment Period (as defined in the Indenture) with respect to the Distributions
(as defined in the Declaration) on the Preferred Securities, and (ii) change the
maturity date of the Debentures to the extent permitted by the Indenture.
SECTION 5.3 Obligations Not Affected.
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The obligations, covenants, agreements and duties of the
Guarantor under this Preferred Securities Guarantee shall be absolute and
unconditional and shall remain in full force and effect until the entire
liquidation amount of all outstanding Preferred Securities shall have been paid
and such obligation shall in no way be affected or impaired by reason of the
happening from time to time of any event, including without limitation, the
following, whether or not with notice to, or the consent of the Guarantor:
(a) The release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express
or implied agreement, covenant, term or condition relating to
the Preferred Securities to be performed or observed by the
Issuer;
(b) The extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price,
Liquidation Distribution or any other sums payable under the
terms of the Preferred Securities or the extension of time for
the performance of any other obligation under, arising out of,
or in connection with, the Preferred Securities (other than an
extension of time for payment of Distributions, Redemption
Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on
the Debentures or any change to the maturity date of the
Debentures permitted by the Indenture);
(c) Any failure, omission, delay or lack of diligence on the
part of the Property Trustee or the Holders to enforce, assert
or exercise any right, privilege, power or remedy conferred on
the Property Trustee or the Holders pursuant to the terms of
the Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) The voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization
arrangement, composition or readjustment of debt of, or other
similar proceedings affecting, the Issuer or any of the assets
of the Issuer;
(e) Any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) The settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) Any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a
guarantor, it being the intent of this Section 5.3 that the
obligations of the Guarantor hereunder shall be absolute and
unconditional under any and all circumstances.
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There shall be no obligation of the Preferred Guarantee
Trustee or the Holders to give notice to, or obtain consent of the Guarantor or
any other Person with respect to the happening of any of the foregoing.
No setoff, counterclaim, reduction or diminution of any
obligation, or any defense of any kind or nature that the Guarantor has or may
have against any Holder shall be available hereunder to the Guarantor against
such Holder to reduce the payments to it under this Preferred Securities
Guarantee.
SECTION 5.4 Rights of Holders.
(a) The Holders of a Majority in Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce this
Preferred Securities Guarantee, then any Holder of Preferred Securities may
institute a legal proceeding directly against the Guarantor to enforce the
Preferred Guarantee Trustee's rights under this Preferred Securities Guarantee
without first instituting a legal proceeding against the Issuer, the Preferred
Guarantee Trustee or any other person or entity. Notwithstanding the foregoing,
if the Guarantor has failed to make a Guarantee Payment, a Holder of Preferred
Securities may directly institute a proceeding against the Guarantor for
enforcement of the Preferred Securities Guarantee for such payment to the Holder
of the Preferred Securities of the principal of or interest on the Debentures on
or after the respective due dates specified in the Debentures, and the amount of
the payment will be based on the Holder's pro rata share of the amount due and
owing on all of the Preferred Securities. The Guarantor hereby waives any right
or remedy to require, that any action on this Preferred Securities Guarantee be
brought first against the Issuer or any other person or entity before proceeding
directly against the Guarantor.
SECTION 5.5 Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of
the Holders of Preferred Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Preferred
Securities Guarantee, if, at
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the time of any such payment, any amounts are due and unpaid under this
Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount in
trust for the Holders and to pay over such amount to the Preferred Guarantee
Trustee for the benefit of the Holders.
SECTION 5.7 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if
there shall have occurred a Guarantee Event of Default or an event of default
under the Declaration, then (a) the Guarantor shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock,
(b) the Guarantor shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Guarantor which rank pari passu with or junior to the
Debentures and (c) the Guarantor shall not make any guarantee payments with
respect to the foregoing (other than pursuant to this Preferred Securities
Guarantee); provided, however, the Guarantor may declare and pay a stock
dividend where the dividend stock is the same stock as that on which the
dividend is being paid.
SECTION 6.2 Ranking.
This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank: (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor, except those
liabilities of the Guarantor made pari passu or subordinate by their terms, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock of any Affiliate
of the Guarantor, and (iii) senior to the Guarantor's common stock.
If an Event of Default has occurred and is continuing under
the Declaration, the rights of the holders of the Common Securities to receive
any payments under the Common Securities Guarantee Agreement shall be
subordinated to the rights of the Holders of Preferred Securities to receive
Guarantee Payments hereunder.
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ARTICLE 7
TERMINATION
SECTION 7.1 Termination.
This Preferred Securities Guarantee shall terminate upon (i)
full payment of the Redemption Price of all Preferred Securities, (ii) upon the
distribution of the Debentures to the Holders of all of the Preferred Securities
or (iii) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Preferred Securities
might properly be paid.
SECTION 8.2 Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection
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with the exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 8.2 shall survive the
termination of this Preferred Securities Guarantee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely
affect the rights of the Holders (in which case no consent of the Holders will
be required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in Liquidation Amount of
the Preferred Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of, and action by written consent of the Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by registered or certified mail, as
follows:
(a) If given to the Preferred Guarantee Trustee, at the
Preferred Guarantee Trustee's mailing address set forth below
(or such other address as the Preferred Guarantee Trustee may
give notice of to the Guarantor and the Holders of the
Preferred Securities):
________________________
________________________
________________________
________________________
(b) If given to the Guarantor, at the Guarantor's mailing
addresses set forth below (or such other address as the
Guarantor may give notice of to the Preferred Guarantee
Trustee and the Holders of the Preferred Securities):
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American Financial Group, Inc.
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Secretary
Telecopy No. (513) 579-2113
(c) If given to any Holder of Preferred Securities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by: first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to Section 3.1(a), is
not separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF OHIO.
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IN WITNESS WHEREOF, this Preferred Securities Guarantee is executed as
of the day and year first above written.
AMERICAN FINANCIAL GROUP, INC.,
as Guarantor
By:_______________________________________
Name:_____________________________________
Title:____________________________________
________________________________________,
as Preferred Guarantee Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
(Signature Page to the Preferred Securities Guarantee Agreement)
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- --------------------------------------------------------------------------------
PREFERRED SECURITIES GUARANTEE AGREEMENT
AMERICAN FINANCIAL CAPITAL TRUST I
Dated as of September __, 1996
- --------------------------------------------------------------------------------
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 INTERPRETATION AND DEFINITIONS..................................................................1
SECTION 1.1 Interpretation and Definitions................................................1
ARTICLE 2 TRUST INDENTURE ACT.............................................................................5
SECTION 2.1 Trust Indenture Act; Application..............................................5
SECTION 2.2 Lists of Holders of Securities................................................5
SECTION 2.3 Reports by Preferred Guarantee Trustee........................................6
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee...............................6
SECTION 2.5 Evidence of Compliance with Conditions Precedent..............................6
SECTION 2.6 Guarantee Event of Default; Waiver............................................6
SECTION 2.7 Guarantee Event of Default; Notice............................................6
SECTION 2.8 Conflicting Interests.........................................................7
SECTION 2.9 Disclosure of Information.....................................................7
SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim..........................7
ARTICLE 3 POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE.....................................................................7
SECTION 3.1 Powers and Duties of Preferred Guarantee Trustee..............................7
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.................................9
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee........................11
ARTICLE 4 PREFERRED GUARANTEE TRUSTEE....................................................................11
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.....................................11
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee
Trustee......................................................................12
ARTICLE 5 GUARANTEE......................................................................................13
SECTION 5.1 Guarantee....................................................................13
SECTION 5.2 Waiver of Notice and Demand..................................................13
SECTION 5.3 Obligations Not Affected.....................................................13
SECTION 5.4 Rights of Holders............................................................15
SECTION 5.5 Guarantee of Payment.........................................................15
SECTION 5.6 Subrogation..................................................................15
SECTION 5.7 Independent Obligations......................................................16
ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION......................................................16
SECTION 6.1 Limitation of Transactions...................................................16
SECTION 6.2 Ranking......................................................................16
</TABLE>
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ARTICLE 7 TERMINATION.......................................17
SECTION 7.1 Termination............................17
ARTICLE 8 INDEMNIFICATION...................................17
SECTION 8.1 Exculpation............................17
SECTION 8.2 Indemnification........................17
ARTICLE 9 MISCELLANEOUS.....................................18
SECTION 9.1 Successors and Assigns.................18
SECTION 9.2 Amendments.............................18
SECTION 9.3 Notices................................18
SECTION 9.4 Benefit................................19
SECTION 9.5 Governing Law..........................19
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CROSS REFERENCE TABLE*
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
310(a)..........................................................4.1(a)
310(b)..........................................................4.1(c)
310(c)....................................................Inapplicable
311(a)..........................................................2.2(b)
311(b)..........................................................2.2(b)
311(c)....................................................Inapplicable
312(a)..........................................................2.2(a)
312(b)..........................................................2.2(b)
312(c).............................................................2.9
313(a).............................................................2.3
313(b).............................................................2.3
313(c).............................................................2.3
313(d).............................................................2.3
314(a).............................................................2.4
314(b)....................................................Inapplicable
314(c).............................................................2.5
314(d)....................................................Inapplicable
314(e).............................................................2.5
314(f)....................................................Inapplicable
315(a)..................................................3.1(d); 3.2(a)
315(b)..........................................................2.7(a)
315(c)..........................................................3.1(c)
315(d)..........................................................3.1(d)
316(a).....................................................2.6; 5.4(a)
317(a).......................................................2.10; 5.4
318(a)..........................................................2.1(b)
- ------------------------------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not have any bearing upon the interpretation of any
of its terms or provisions.
iii
<PAGE> 1
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated
as of _________, 1996, is executed and delivered by American Financial Group,
Inc., an Ohio corporation (the "Guarantor"), and _______________, as trustee
(the "Common Guarantee Trustee"), for the benefit of the Holders (as defined
herein) of the Common Securities (as defined herein) of American Financial
Capital Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to the Declaration (as defined herein), the Issuer
is issuing on the date hereof 4,000,000 preferred securities, having an
aggregate liquidation amount of $100,000,000, designated the ____% Trust
Originated Preferred Securities (the "Preferred Securities") and ______ common
securities, having an aggregate liquidation amount of $________, designated the
___% Trust Originated Common Securities (the "Common Securities");
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Common Securities Guarantee, to pay to the Holders
of the Common Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (as amended, modified or supplemented from time to time, the
"Preferred Securities Guarantee") in substantially identical terms to this
Common Securities Guarantee for the benefit of the holders of the Preferred
Securities, except that if an Event of Default (as defined in the Declaration)
has occurred and is continuing, the rights of Holders of the Common Securities
to receive Guarantee Payments under this Common Securities Guarantee are
subordinated to the rights of holders of the Preferred Securities to receive
payments under the Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Common Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Common Securities Guarantee
for the benefit of the Holders.
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Interpretation and Definitions.
In this Common Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Common Securities Guarantee but
not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
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(b) a term defined anywhere in this Common Securities Guarantee has the
same meaning throughout;
(c) all references to "the Common Securities Guarantee" or "this Common
Securities Guarantee" are to this Common Securities Guarantee as
modified, supplemented or amended from time to time;
(d) all references in this Common Securities Guarantee to Articles and
Sections are to Articles and Sections of this Common Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Common Securities Guarantee, unless otherwise defined in
this Common Securities Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Common Guarantee Trustee" means _____________________, until a
Successor Common Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Common Securities Guarantee and
thereafter means each such Successor Common Guarantee Trustee.
"Corporate Trust Office" means the office of the Common Guarantee
Trustee at which the corporate trust business of the Common Guarantee Trustee
shall at any particular time, be principally administered, which office at the
date of execution of this Common Securities Guarantee is located at
_______________________________, Attention: Corporate Trust Services Division;
telecopy no. ___________________.
"Covered Person" means any Holder or beneficial owner of Common
Securities.
"Debentures" means the series of subordinated deferrable interest
debentures to be issued by the Guarantor designated the ____% Junior
Subordinated Debentures due 2026 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Declaration" means the Declaration of Trust, dated as of September __,
1996, as amended, modified or supplemented from time to time, among the trustees
of the Issuer named therein, the Guarantor, as sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Issuer.
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<PAGE> 3
"Guarantee Event of Default" means a default by the Guarantor on any
of its payment or other obligations under this Common Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Common Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) that are required to be paid on such Common Securities to
the extent the Issuer shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds available therefor,
with respect to any Common Securities called for redemption by the Issuer, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Issuer (other than in connection with the distribution of Debentures to the
Holders in exchange for Common Securities as provided in the Declaration or the
redemption of all the Common Securities upon maturity or redemption of the
Debentures as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Common
Securities to the date of payment, to the extent the Issuer shall have funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution"). If an Event of Default (as defined in the
Declaration) has occurred and is continuing, the rights of Holders of the Common
Securities to receive Guarantee Payments under this Common Securities Guarantee
are subordinated to the rights of holders of the Preferred Securities to receive
payments under the Preferred Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Common Securities.
"Indemnified Person" means the Common Guarantee Trustee, any
Affiliate of the Common Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Common Guarantee Trustee.
"Indenture" means the Indenture dated as of _____, 1996, among the
Guarantor (the "Debenture Issuer") and ____________________, as trustee, and any
indenture supplemental thereto pursuant to which the Debentures are to be issued
to the Property Trustee (as defined in the Declaration) of the Issuer.
"Majority in Liquidation Amount of the Common Securities" means,
except as provided in the terms of the Common Securities or by the Trust
Indenture Act, Holder(s) of outstanding Common Securities, voting separately as
a class, who are the record holders of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Common Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers (as defined in the Declaration) of
such Person. Any Officers' Certificate
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delivered with respect to compliance with a condition or covenant provided for
in this Common Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion,
is necessary to enable such officer to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Common Guarantee
Trustee, any officer within the Corporate Trust Office of the Common Guarantee
Trustee, including any vice president, any assistant vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer or
other officer of the Corporate Trust Office of the Common Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Successor Common Guarantee Trustee" means a successor Common
Guarantee Trustee possessing the qualifications to act as Common Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
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ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Common Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Common Securities
Guarantee and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Common Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Common Guarantee Trustee with a
list, in such form as the Common Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Common Securities ("List of
Holders"), (i) within one Business Day after January 1 and June 30 of each year
and current as of such date, and (ii) at any other time, within 30 days of
receipt by the Guarantor of a written request from the Common Guarantee Trustee
for a List of Holders as of a date no more than 14 days before such List of
Holders is given to the Common Guarantee Trustee; provided, that the Guarantor
shall not be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most recent List of Holders given to the Common
Guarantee Trustee by the Guarantor. The Common Guarantee Trustee shall preserve,
in as current a form as is reasonably practicable, all information contained in
Lists of Holders given to it, provided that it may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Common Guarantee Trustee shall comply with its obligations
under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by Common Guarantee Trustee.
Within 60 days after May 15 of each year (commencing with the year of
the first anniversary of the issuance of the Common Securities), the Common
Guarantee Trustee shall provide to the Holders of the Common Securities such
reports as are required by Section 313 of the Trust Indenture Act; if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Common Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Common Guarantee Trustee.
The Guarantor shall provide to the Common Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) of the
Trust Indenture Act and the compliance
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certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Common Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Common Securities Guarantee that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)( 1) may be given in the
form of an Officers' Certificate.
SECTION 2.6 Guarantee Event of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Guarantee Event of Default and its consequences. Upon
such waiver, any such Guarantee Event of Default shall cease to exist, and any
Guarantee Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Common Securities Guarantee, but no such waiver shall
extend to any subsequent or other default or Guarantee Event of Default or
impair any right consequent thereon.
SECTION 2.7 Guarantee Event of Default; Notice.
(a) The Common Guarantee Trustee shall, within 90 days after the
occurrence of a Guarantee Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Common Securities, notices of all
Guarantee Events of Default actually known to a Responsible Officer of the
Common Guarantee Trustee, unless such defaults have been cured before the giving
of such notice; provided, that the Common Guarantee Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer of the Common
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders of the Common Securities.
(b) The Common Guarantee Trustee shall not be deemed to have
knowledge of any Guarantee Event of Default unless the Common Guarantee Trustee
shall have received written notice thereof or a Responsible Officer of the
Common Guarantee Trustee charged with the administration of the Declaration
shall have obtained actual knowledge thereof.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described in this
Common Securities Guarantee for the purposes of clause (i) of the first
provision contained in Section 310(b) of the Trust Indenture Act.
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SECTION 2.9 Disclosure of Information.
The disclosure of information as to the names and addresses of the
Holders of the Common Securities in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such information was derived,
shall not be deemed to be a violation of any existing law, or any law hereafter
enacted which does not specifically refer to Section 312 of the Trust Indenture
Act, nor shall the Common Guarantee Trustee be held accountable by reason of
mailing any material pursuant to a request made under Section 312(b) of the
Trust Indenture Act.
SECTION 2.10 Common Guarantee Trustee May File Proofs of Claim.
Upon the occurrence of a Guarantee Event of Default, the Common
Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name
and as trustee of an express trust, against the Guarantor for the whole amount
of any Guarantee Payments remaining unpaid and (b) file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have its
claims and those of the Holders of the Common Securities allowed in any judicial
proceedings relative to the Guarantor, its creditors or its property.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF
COMMON GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of Common Guarantee Trustee.
(a) This Common Securities Guarantee shall be held by the Common
Guarantee Trustee on behalf of the Issuer for the benefit of the Holders of the
Common Securities, and the Common Guarantee Trustee shall not transfer this
Common Securities Guarantee to any Person except a Holder of Common Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor Common
Guarantee Trustee on acceptance by such Successor Common Guarantee Trustee of
its appointment to act as Successor Common Guarantee Trustee. The right, title
and interest of the Common Guarantee Trustee in and to this Common Securities
Guarantee shall automatically vest in any Successor Common Guarantee Trustee,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Common Guarantee Trustee.
(b) If a Guarantee Event of Default actually known to a Responsible
Officer of the Common Guarantee Trustee has occurred and is continuing, the
Common Guarantee Trustee shall enforce this Common Securities Guarantee for the
benefit of the Holders of the Common Securities.
(c) The Common Guarantee Trustee, before the occurrence of any
Guarantee Event of Default and after the curing of all Guarantee Events of
Default that may have occurred, shall undertake to perform only such duties as
are specifically set forth in this Common Securities Guarantee, and no implied
covenants shall be read into this Common Securities Guarantee against
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<PAGE> 8
the Common Guarantee Trustee. In case a Guarantee Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) and is actually
known to a Responsible Officer of the Common Guarantee Trustee, the Common
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Common Securities Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Common Securities Guarantee shall be
construed to relieve the Common Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Guarantee Event of
Default and after the curing or waiving of all such
Guarantee Events of Default that may have occurred:
(A) the duties and obligations of the Common
Guarantee Trustee shall be determined solely by the
express provisions of this Common Securities
Guarantee, and the Common Guarantee Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set
forth in this Common Securities Guarantee, and no
implied covenants or obligations shall be read into
this Common Securities Guarantee against the Common
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Common Guarantee Trustee, the Common Guarantee
Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon any certificates or
opinions furnished to the Common Guarantee Trustee
and conforming to the requirements of this Common
Securities Guarantee; but in the case of any such
certificates or opinions that by any provision
hereof are specifically required to be furnished to
the Common Guarantee Trustee, the Common Guarantee
Trustee shall be under a duty to examine the same
to determine whether or not they conform to the
requirements of this Common Securities Guarantee;
(ii) the Common Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer of the Common Guarantee Trustee, unless it shall be
proved that the Common Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Common Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders
of not less than a Majority in Liquidation Amount of the
Common Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Common Guarantee Trustee, or
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exercising any trust or power conferred upon the Common
Guarantee Trustee under this Common Securities Guarantee;
and
(iv) no provision of this Common Securities Guarantee shall
require the Common Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of
any of its rights or powers, if the Common Guarantee Trustee
shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably
assured to it under the terms of this Common Securities
Guarantee or indemnify, reasonably satisfactory to the
Common Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2 Certain Rights of Common Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Common Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor contemplated by
this Common Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Common
Securities Guarantee, the Common Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder,
the Common Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad
faith on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Common Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof).
(v) The Common Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Common Guarantee Trustee
shall have the
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right at any time to seek instructions concerning the
administration of this Common Securities Guarantee from any
court of competent jurisdiction.
(vi) The Common Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Common Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have
provided to the Common Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Common Guarantee
Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Common Guarantee
Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request
or direction, including such reasonable advances as may be
requested by the Common Guarantee Trustee; provided, that
nothing contained in this Section 3.2(a)(vi) shall be taken
to relieve the Common Guarantee Trustee, upon the occurrence
of a Guarantee Event of Default, of its obligation to
exercise the rights and powers vested in it by this Common
Securities Guarantee.
(vii) The Common Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Common Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(viii) The Common Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees,
custodians or attorneys, and the Common Guarantee Trustee
shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by
it hereunder.
(ix) Any action taken by the Common Guarantee Trustee or its
agents hereunder shall bind the Holders of the Common
Securities, and the signature of the Common Guarantee
Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall
be required to inquire as to the authority of the Common
Guarantee Trustee to so act or as to its compliance with any
of the terms and provisions of this Common Securities
Guarantee, both of which shall be conclusively evidenced by
the Common Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Common Securities
Guarantee the Common Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder,
the Common Guarantee Trustee (i) may request instructions
from the Holders of a Majority in Liquidation Amount of the
Common Securities, (ii) may refrain from enforcing such
remedy or right or taking such other action until such
instructions
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<PAGE> 11
are received, and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(b) No provision of this Common Securities Guarantee shall be deemed
to impose any duty or obligation on the Common Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Common Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Common Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Common Securities Guarantee shall be
taken as the statements of the Guarantor, and the Common Guarantee Trustee does
not assume any responsibility for their correctness. The Common Guarantee
Trustee makes no representation as to the validity or sufficiency of this Common
Securities Guarantee.
ARTICLE 4
COMMON GUARANTEE TRUSTEE
SECTION 4.1 Common Guarantee Trustee; Eligibility.
(a) There shall be at all times be a Common Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital
and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section
4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition
so published.
(b) If at any time the Common Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Common Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
11
<PAGE> 12
(c) If the Common Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Common Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Common Guarantee Trustee.
(a) Subject to Section 4.1(b), the Common Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Common Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Common Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Common Guarantee Trustee and delivered to the Guarantor.
(c) The Common Guarantee Trustee appointed to office shall hold
office until a Successor Common Guarantee Trustee shall have been appointed or
until its removal or resignation. The Common Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Common Guarantee Trustee and delivered to the Guarantor,
which resignation shall not take effect until a Successor Common Guarantee
Trustee has been appointed and has accepted such appointment by instrument in
writing executed by such Successor Common Guarantee Trustee and delivered to the
Guarantor and the resigning Common Guarantee Trustee.
(d) If no Successor Common Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Common Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Common Guarantee Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor Common Guarantee Trustee.
(e) No Common Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Common Guarantee Trustee.
(f) Upon termination of this Common Securities Guarantee or removal
or resignation of the Common Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Common Guarantee Trustee all amounts owing for fees
and reimbursement of expenses which have accrued to the date of such
termination, removal or resignation.
12
<PAGE> 13
ARTICLE 5
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full
to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Common
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to (i) extend the
interest payment period on the Debentures and the Guarantor shall not be
obligated hereunder to make any Guarantee Payments during any Extended Interest
Payment Period (as defined in the Indenture) with respect to the Distributions
(as defined in the Declaration) on the Common Securities, and (ii) change the
maturity date of the Debentures to the extent permitted by the Indenture.
SECTION 5.3 Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Common Securities Guarantee shall be absolute and unconditional and
shall remain in full force and effect until the entire liquidation amount of all
outstanding Common Securities shall have been paid and such obligation shall in
no way be affected or impaired by reason of the happening from time to time of
any event, including without limitation, the following, whether or not with
notice to, or the consent of, the Guarantor:
(a) The release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Common
Securities to be performed or observed by the Issuer;
(b) The extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Common
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with the Common
Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment
13
<PAGE> 14
period on the Debentures or any change to the maturity date of the
Debentures permitted by the Indenture);
(c) Any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise
any right, privilege, power or remedy conferred on the Property
Trustee or the Holders pursuant to the terms of the Common
Securities, or any action on the part of the Issuer granting
indulgence or extension of any kind;
(d) The voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) Any invalidity of, or defect or deficiency in, the Common
Securities;
(f) The settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) Any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Common Guarantee Trustee or the
Holders to give notice to, or obtain consent of the Guarantor or any other
Person with respect to the happening of any of the foregoing.
No setoff, counterclaim, reduction or diminution of any obligation,
or any defense of any kind or nature that the Guarantor has or may have against
any Holder shall be available hereunder to the Guarantor against such Holder to
reduce the payments to it under this Common Securities Guarantee.
SECTION 5.4 Rights of Holders.
(a) The Holders of a Majority in Liquidation Amount of the Common
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Common Guarantee Trustee in respect
of this Common Securities Guarantee or exercising any trust or power conferred
upon the Common Guarantee Trustee under this Common Securities Guarantee.
(b) If the Common Guarantee Trustee fails to enforce this Common
Securities Guarantee, then any Holder of Common Securities may, subject to the
subordination provisions of Section 6.2, institute a legal proceeding directly
against the Guarantor to enforce the Common
14
<PAGE> 15
Guarantee Trustee's rights under this Common Securities Guarantee without first
instituting a legal proceeding against the Issuer, the Common Guarantee Trustee
or any other person or entity. Notwithstanding the foregoing, if the Guarantor
has failed to make a Guarantee Payment, a Holder of Common Securities may,
subject to the subordination provisions of Section 6.2, directly institute a
proceeding against the Guarantor for enforcement of the Common Securities
Guarantee for such payment to the Holder of the Common Securities of the
principal of or interest on the Debentures on or after the respective due dates
specified in the Debentures, and the amount of the payment will be based on the
Holder's pro rata share of the amount due and owing on all of the Common
Securities. The Guarantor hereby waives any right or remedy to require that any
action on this Common Securities Guarantee be brought first against the Issuer
or any other person or entity before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment.
This Common Securities Guarantee creates a guarantee of payment and
not of collection.
SECTION 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Common Securities against the Issuer in respect of any amounts paid
to such Holders by the Guarantor under this Common Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Common
Securities Guarantee, if at the time of any such payment, any amounts are due
and unpaid under this Common Securities Guarantee. If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Common Guarantee Trustee for the benefit of the Holders.
SECTION 5.7 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Common
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections 5.3(a) through 5.3(g), inclusive, hereof.
15
<PAGE> 16
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Common Securities remain outstanding, if there shall
have occurred a Guarantee Event of Default or an event of default under the
Declaration, then (a) the Guarantor shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, (b) the Guarantor
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Guarantor which rank pari passu with or junior to the Debentures and (c) the
Guarantor shall not make any guarantee payments with respect to the foregoing
(other than pursuant to this Common Securities Guarantee); provided, however,
the Guarantor may declare and pay a stock dividend where the dividend stock is
the same stock as that on which the dividend is being paid.
SECTION 6.2 Ranking.
This Common Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, except those liabilities of
the Guarantor made pari passu or subordinate by their terms, (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
If an Event of Default has occurred and is continuing under the
Declaration, the rights of the Holders of the Common Securities to receive
Guarantee Payments under this Common Securities Guarantee shall be subordinated
to the rights of the holders of the Preferred Securities to receive payment of
all amounts due and owing under the terms of the Preferred Securities Guarantee.
ARTICLE 7
TERMINATION
SECTION 7.1 Termination.
This Common Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Common Securities, (ii) upon the
distribution of the Debentures to the Holders of all of the Common Securities or
(iii) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Common Securities Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any Holder of Common Securities must restore
payment of any sums paid under the Common Securities or under this Common
Securities Guarantee.
16
<PAGE> 17
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Common
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Common Securities Guarantee or by law, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason of
such Indemnified Person's negligence or willful misconduct with respect to such
acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Common Securities might properly be paid.
SECTION 8.2 Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Common Securities Guarantee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Common Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Common Securities then outstanding.
17
<PAGE> 18
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely affect the
rights of the Holders (in which case no consent of the Holders will be
required), this Common Securities Guarantee may only be amended with the prior
approval of the Holders of at least a Majority in Liquidation Amount of the
Common Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of, and action by written consent of the Holders of the
Common Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Common Securities Guarantee shall be
in writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Common Guarantee Trustee, at the Common Guarantee
Trustee's mailing address set forth below (or such other address as
the Common Guarantee Trustee may give notice of to the Guarantor and
the Holders of the Common Securities):
___________________
___________________
___________________
___________________
___________________
(b) If given to the Guarantor, at the Guarantor's mailing addresses
set forth below (or such other address as the Guarantor may give
notice of to the Common Guarantee Trustee and the Holders of the
Common Securities):
American Financial Group, Inc.
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Secretary
Telecopy No. (513) 579-2113
(c) If given to any Holder of Common Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
18
<PAGE> 19
SECTION 9.4 Benefit.
This Common Securities Guarantee is solely for the benefit of the
Holders of the Common Securities and, subject to Section 3.1(a), is not
separately transferable from the Common Securities.
SECTION 9.5 Governing Law.
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF OHIO.
IN WITNESS WHEREOF, this Common Securities Guarantee is executed as
of the day and year first above written.
AMERICAN FINANCIAL GROUP, INC.,
as Guarantor
By:______________________________
Name:____________________________
Title:___________________________
________________________________,
as Common Guarantee Trustee
By:______________________________
Name:____________________________
Title:___________________________
19
<PAGE> 20
- --------------------------------------------------------------------------------
COMMON SECURITIES GUARANTEE AGREEMENT
AMERICAN FINANCIAL CAPITAL TRUST I
Dated as of September __, 1996
- --------------------------------------------------------------------------------
<PAGE> 21
CROSS REFERENCE TABLE*
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
310(a).............................................4.1(a)
310(b).............................................4.1(c)
310(c).......................................Inapplicable
311(a).............................................2.2(b)
311(b).............................................2.2(b)
311(c).......................................Inapplicable
312(a).............................................2.2(a)
312(b).............................................2.2(b)
312(c)................................................2.9
313(a)................................................2.3
313(b)................................................2.3
313(c)................................................2.3
313(d)................................................2.3
314(a)................................................2.4
314(b).......................................Inapplicable
314(c)................................................2.5
314(d).......................................Inapplicable
314(e)................................................2.5
314(f).......................................Inapplicable
315(a).....................................3.1(d); 3.2(a)
315(b).............................................2.7(a)
315(c).............................................3.1(c)
315(d).............................................3.1(d)
316(a)........................................2.6; 5.4(a)
317(a)..........................................2.10; 5.4
318(a).............................................2.1(b)
- ------------------------------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not have any bearing upon the interpretation of
any of its terms or provisions.
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 INTERPRETATION AND DEFINITIONS................................................................1
SECTION 1.1 Interpretation and Definitions.....................................................1
ARTICLE 2 TRUST INDENTURE ACT...........................................................................5
SECTION 2.1 Trust Indenture Act; Application...................................................5
SECTION 2.2 Lists of Holders of Securities.....................................................5
SECTION 2.3 Reports by Common Guarantee Trustee................................................5
SECTION 2.4 Periodic Reports to Common Guarantee Trustee.......................................5
SECTION 2.5 Evidence of Compliance with Conditions Precedent...................................6
SECTION 2.6 Guarantee Event of Default; Waiver.................................................6
SECTION 2.7 Guarantee Event of Default; Notice.................................................6
SECTION 2.8 Conflicting Interests..............................................................6
SECTION 2.9 Disclosure of Information..........................................................7
SECTION 2.10 Common Guarantee Trustee May File Proofs of Claim..................................7
ARTICLE 3 POWERS, DUTIES AND RIGHTS OF
COMMON GUARANTEE TRUSTEE......................................................................7
SECTION 3.1 Powers and Duties of Common Guarantee Trustee......................................7
SECTION 3.2 Certain Rights of Common Guarantee Trustee.........................................9
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.............................11
ARTICLE 4 COMMON GUARANTEE TRUSTEE.....................................................................11
SECTION 4.1 Common Guarantee Trustee; Eligibility.............................................11
SECTION 4.2 Appointment, Removal and Resignation of Common Guarantee Trustee..................12
ARTICLE 5 GUARANTEE....................................................................................13
SECTION 5.1 Guarantee.........................................................................13
SECTION 5.2 Waiver of Notice and Demand.......................................................13
SECTION 5.3 Obligations Not Affected..........................................................13
SECTION 5.4 Rights of Holders.................................................................14
SECTION 5.5 Guarantee of Payment..............................................................15
SECTION 5.6 Subrogation.......................................................................15
SECTION 5.7 Independent Obligations...........................................................15
ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION....................................................16
SECTION 6.1 Limitation of Transactions........................................................16
SECTION 6.2 Ranking...........................................................................16
</TABLE>
i
<PAGE> 23
<TABLE>
<S> <C>
ARTICLE 7 TERMINATION..................................................................................16
SECTION 7.1 Termination.......................................................................16
ARTICLE 8 INDEMNIFICATION..............................................................................17
SECTION 8.1 Exculpation.......................................................................17
SECTION 8.2 Indemnification...................................................................17
ARTICLE 9 MISCELLANEOUS................................................................................17
SECTION 9.1 Successors and Assigns............................................................17
SECTION 9.2 Amendments........................................................................18
SECTION 9.3 Notices...........................................................................18
SECTION 9.4 Benefit...........................................................................19
SECTION 9.5 Governing Law.....................................................................19
</TABLE>
ii
<PAGE> 1
This Preferred Security is a Global Certificate within the meaning of the
Declaration hereinafter referred to and is registered in the name of The
Depositry Trust Company, a New York corporation (the "Depositary"), or a nominee
of the Depositary. This Preferred Security is exchangeable for Preferred
Securities registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Declaration and no
transfer of this Preferred Security (other than a transfer of this Preferred
Security as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Preferred Security Certificate is presented by an authorized
representative of the Depositary to the Trust or its agent for registration of
transfer, exchange or payment, and any Preferred Security Certificate issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of the Depositary (and any payment hereon is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
- 1 - - _____________ -
CUSIP NO. ________________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
AMERICAN FINANCIAL CAPITAL TRUST I
____% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRS"SM)
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
AMERICAN FINANCIAL CAPITAL TRUST I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
Cede & Co. (the "Holder") is the registered owner of preferred securities of the
Trust representing undivided beneficial interests in the assets of the Trust
designated the __% Trust Originated Preferred Securities(sm) (liquidation amount
$25 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities represented hereby are issued and shall in all respects by subject to
the provisions of the Declaration of Trust of the Trust dated as of September
__, 1996, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Preferred Securities as set forth
in Annex I to the Declaration. Capitalized terms used herein but not defined
shall have the meaning given them in the
<PAGE> 2
Declaration. The Holder is entitled to the benefits of the Preferred Securities
Guarantee to the extent provided therein. The Sponsor will provide a copy of the
Declaration, the Preferred Securities Guarantee and the Indenture to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred Securities
as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this _______ day of
September, 1996.
AMERICAN FINANCIAL CAPITAL TRUST I
By:______________________
Name:____________________
Title: Regular Trustee
By:______________________
Name:____________________
Title: Regular Trustee
<PAGE> 3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocable appoints
________________________________________________________________________________
________________________________________________________________________________
_________________agent to transfer this Preferred Security Certificate on the
books of the Trust. The agent may substitute another to act for him or her.
Date:_____________
Signature:_______________________________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
<PAGE> 1
Certificate Number Number of Common Securities
-1- -___________-
Certificate Evidencing Common Securities
of
AMERICAN FINANCIAL CAPITAL TRUST I
___% Trust Originated Common Securities
(liquidation amount $25 per Common Security)
American Financial Capital Trust I, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"), hereby
certifies that American Financial Group, Inc. (the "Holder") is the
registered owner of common securities of the Trust representing
undivided beneficial interests in the assets of the Trust designated
the ___% Trust Originated Common Securities (liquidation amount $25 per
Common Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or by a
duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designation, rights,
privileges, restrictions, preferences and other terms and provisions of
the Common Securities represented hereby are issued and shall in all
respects be subject to the provisions of the Declaration of Trust of
the Trust dated as of September __, 1996, as the same may be amended
from time to time (the "Declaration"), including the designation of the
terms of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have
the meaning given them in the Declaration. The Holder is entitled to
the benefits of the Common Securities Guarantee to the extent provided
therein. The Sponsor will provide a copy of the Declaration, the Common
Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of indirect beneficial ownership in the
Debentures.
<PAGE> 2
IN WITNESS WHEREOF, the Trust has executed this certificate
this ______ day of September, 1996.
AMERICAN FINANCIAL CAPITAL
TRUST I
By:______________________
Name:____________________
Title: Regular Trustee
By:______________________
Name:____________________
Title: Regular Trustee
<PAGE> 3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocable appoints
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________agent to transfer this
Common Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date:_________________________
Signature:____________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of American Financial
Group, Inc. for the registration of 4,600,000 Preferred Securities of American
Financial Capital Trust I and to the incorporation by reference therein of our
report dated March 15, 1996, with respect to the consolidated financial
statements and schedules of American Financial Group, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Cincinnati, Ohio
September 20, 1996
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of American Financial Group, Inc. for the registration of 4,600,000
Preferred Securities of American Financial Capital Trust I of (a) the report of
Deloitte & Touche LLP dated February 15, 1995 (March 23, 1995 with respect to
the acquisition of American Financial Corporation as discussed in Note B to the
financial statements) relating to the consolidated financial statements of
American Premier Underwriters, Inc. and (b) the report of Deloitte & Touche
dated February 18, 1994 relating to the consolidated financial statements of
General Cable Corporation, both appearing in the American Financial Group, Inc.
Annual Report on Form 10-K for the year ended December 31, 1995, and to the
reference to Deloitte & Touche LLP and Deloitte & Touche under the heading
"Experts" in the Prospectus, which is part of such Registration Statement.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
September 20, 1996
<PAGE> 1
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
AMERICAN FINANCIAL GROUP, INC.
(Exact name of obligor as specified in its charter)
Ohio 31-1422526
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
% Subordinated Debentures due 2026
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 23rd day of September, 1996.
THE BANK OF NEW YORK
By: /s/ Byron Merino
--------------------------
Name: Byron Merino
Title: Assistant Treasurer
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a
member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS ............................................ in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 2,461,550
Interest-bearing balances ....................... 835,563
Securities:
Held-to-maturity securities ..................... 802,064
Available-for-sale securities ................... 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,820,159
LESS: Allowance for loan and
lease losses ..............509,817
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income, allowance, and reserve ................ 27,309,342
Assets held in trading accounts ................... 837,118
Premises and fixed assets (including
capitalized leases) ............................. 614,567
Other real estate owned ........................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 225,158
Customers' liability to this bank on
acceptances outstanding ......................... 800,375
Intangible assets ................................. 436,668
Other assets ...................................... 1,247,908
-----------
Total assets ...................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ............................. $18,851,327
Noninterest-bearing .......7,102,645
Interest-bearing .........11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing ..........37,855
Interest-bearing .........10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ......................... 1,224,886
Securities sold under agreements
to repurchase ................................. 29,728
Demand notes issued to the U.S. ...................
Treasury ........................................ 118,870
Trading liabilities ............................... 673,944
Other borrowed money:
With original maturity of one year
or less ....................................... 2,713,248
With original maturity of more than
one year ...................................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding ........................... 803,292
Subordinated notes and debentures ................. 1,022,860
Other liabilities ................................. 1,590,564
-----------
Total liabilities ................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... 3,197
Cumulative foreign currency transla-
tion adjustments ................................ ( 5,765)
-----------
Total equity capital .............................. 3,543,579
-----------
Total liabilities and equity
capital ......................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
Exhibit 25.2
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
AMERICAN FINANCIAL CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Delaware Applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
----------------------
% Trust Originated Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 23rd day of September, 1996.
THE BANK OF NEW YORK
By: /s/ Byron Merino
Name: Byron Merino
Title: Assistant Treasurer
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a
member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS ............................................ in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 2,461,550
Interest-bearing balances ....................... 835,563
Securities:
Held-to-maturity securities ..................... 802,064
Available-for-sale securities ................... 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,820,159
LESS: Allowance for loan and
lease losses ..............509,817
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income, allowance, and reserve ................ 27,309,342
Assets held in trading accounts ................... 837,118
Premises and fixed assets (including
capitalized leases) ............................. 614,567
Other real estate owned ........................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 225,158
Customers' liability to this bank on
acceptances outstanding ......................... 800,375
Intangible assets ................................. 436,668
Other assets ...................................... 1,247,908
-----------
Total assets ...................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ............................. $18,851,327
Noninterest-bearing .......7,102,645
Interest-bearing .........11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing ..........37,855
Interest-bearing .........10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ......................... 1,224,886
Securities sold under agreements
to repurchase ................................. 29,728
Demand notes issued to the U.S. ...................
Treasury ........................................ 118,870
Trading liabilities ............................... 673,944
Other borrowed money:
With original maturity of one year
or less ....................................... 2,713,248
With original maturity of more than
one year ...................................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding ........................... 803,292
Subordinated notes and debentures ................. 1,022,860
Other liabilities ................................. 1,590,564
-----------
Total liabilities ................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... 3,197
Cumulative foreign currency transla-
tion adjustments ................................ ( 5,765)
-----------
Total equity capital .............................. 3,543,579
-----------
Total liabilities and equity
capital ......................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
Exhibit 25.3
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
AMERICAN FINANCIAL GROUP, INC.
(Exact name of obligor as specified in its charter)
Ohio 31-1422526
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Preferred Securities of American Financial Capital Trust I
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 23rd day of September, 1996.
THE BANK OF NEW YORK
By: /s/ Byron Merino
--------------------------
Name: Byron Merino
Title: Assistant Treasurer
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a
member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS ............................................ in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 2,461,550
Interest-bearing balances ....................... 835,563
Securities:
Held-to-maturity securities ..................... 802,064
Available-for-sale securities ................... 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,820,159
LESS: Allowance for loan and
lease losses ..............509,817
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income, allowance, and reserve ................ 27,309,342
Assets held in trading accounts ................... 837,118
Premises and fixed assets (including
capitalized leases) ............................. 614,567
Other real estate owned ........................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 225,158
Customers' liability to this bank on
acceptances outstanding ......................... 800,375
Intangible assets ................................. 436,668
Other assets ...................................... 1,247,908
-----------
Total assets ...................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ............................. $18,851,327
Noninterest-bearing .......7,102,645
Interest-bearing .........11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing ..........37,855
Interest-bearing .........10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ......................... 1,224,886
Securities sold under agreements
to repurchase ................................. 29,728
Demand notes issued to the U.S. ...................
Treasury ........................................ 118,870
Trading liabilities ............................... 673,944
Other borrowed money:
With original maturity of one year
or less ....................................... 2,713,248
With original maturity of more than
one year ...................................... 20,780
Bank's liability on acceptances exe-
cuted and outstanding ........................... 803,292
Subordinated notes and debentures ................. 1,022,860
Other liabilities ................................. 1,590,564
-----------
Total liabilities ................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... 3,197
Cumulative foreign currency transla-
tion adjustments ................................ ( 5,765)
-----------
Total equity capital .............................. 3,543,579
-----------
Total liabilities and equity
capital ......................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
